Taking care of our client’s accounting and taxation compliance needs and provide planning to minimize tax and maximize wealth creation.
(A publication for the clients and contacts of Gary S. Aslett Professional Corporation)
2020 PERSONAL INCOME TAX CHANGES
Charitable Donations Credits:For an individual resident in Ontario, the tax credit for charitable donations is as follows:
Eligible vs. Other Than Eligible Taxable Dividends:What is the difference between these two types of taxable dividends which you will see on T5 and other income tax slips? ‘Eligible’ taxable dividends are eligible for an enhanced dividend tax credit on your personal tax return resulting in lower personal income tax compared to ‘Other than eligible’ taxable dividends. Taxable dividends qualify as Eligible if the corporate income from which they were generated was taxed at higher corporate tax rates, that is, the income was not taxed at preferential small business rates.
Child Care Expenses:The maximum deduction per child is as follows:
Medical Expenses:Medical expenses (which have not been reimbursed or covered by a medical insurance plan) can be claimed if they exceed the threshold of 3% of your net income or $2,397, whichever is less. In Ontario, the claim results in a tax credit of approximately 20% of the amount claimed in excess of the threshold. Taxpayers can refer to the CRA Income Tax Folio S1-F1-C1 which lists eligible expenses. As a reminder, most pharmacies can provide an annual list of prescriptions paid instead of you accumulating receipts for each purchase.
Automobile Limits:The following limits are effective for 2020 for residents of Ontario:
Tax Instalments:CRA will send instalment reminders if your personal tax owing in the prior calendar year (before reflecting instalments paid for that year) exceeded $3,000.00. Instalment reminders are usually sent by CRA in February (for the March 15 and June 15 instalment) and August (for the September 15 and December 15 instalment). Interest (and possibly penalties) will apply if instalments are paid late. If you expect your current year’s taxes payable to be less than the prior year, you may base your instalments on the estimated tax payable, however, interest will be charged if your estimate is too low.
Foreign Reporting Form:Given the significant penalties for failure to submit these forms on time, this is a reminder that separate tax forms must be filed with CRA at the time of filing your tax return if you own certain foreign property or foreign investments with a combined cost exceeding $100,000 CAD at any time during the year.
Sale of Principal Residence:Prior to 2016, CRA’s administrative position did not require reporting the sale of a principal residence when there was no gain to include in income. Starting in 2016, you were required to report on Schedule 3 of your personal income tax return the sale of your principal residence, even if the gain is fully exempt. Commencing in 2017, certain information is also required to be reported on form T2091 (Designation of a Property as a Principal Residence by an Individual). Taxpayers failing to report this information may not be eligible to claim the principal residence exemption to offset the gain.
Tuition Credits:Tuition fees can only be claimed as a credit towards Federal income taxes; they are no longer claimable against Ontario provincial income taxes except for Ontario tuition credits carried forward from prior years. Most schools no longer mail tuition tax receipts. If you have paid post-secondary tuition, please visit the school's website to download the official T2202 tuition tax credit form. If you paid tuition to post-secondary schools outside Canada, you will require form TL11A to be completed by that school. Statements of account or other fee receipts cannot be used to claim tuition tax credits - only form T2202 and TL11A are acceptable.
COVID-19 Tax Measures:
Canada Emergency Response Benefit ("CERB"):This is a reminder that CERB and certain other benefits received will be taxable on your 2020 personal income tax return. Recipients should receive a T4A slip. If no tax or insufficient tax was withheld from some of these payments when they were paid to you, tax will be calculated and payable on your 2020 personal income tax return.
$500 Work from Home Reimbursement:As many employees have been required to work from home in 2020 as a result of COVID-19, CRA has announced that up to $500 received by employees from their employer/company as a reimbursement for home office equipment to enable the employee to carry out their employment duties will not be taxable. Note, this is not a payment from the government of Canada; this is a payment from your employer/company to employees for the personal purchase of home office equipment. If your employer or company purchased the equipment, then no reimbursement is applicable.
Home Office Deduction:CRA has announced two temporary options for deducting home office expenses for those employees working from home in 2020. These temporary measures apply only to 'employees', not self-employed individuals. The pre-existing regular detailed method for claiming home office expenses continues to be available.
Please contact Gary Aslett at (905) 465-3313 or firstname.lastname@example.org if you require further information on the above.
The material provided is believed to be accurate and reliable as of the date it is written. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements.
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