2020 is coming to an end and we feel it’s best that you set aside some time for year-end tax planning.
We’re here to help! Here are a few important tax planning considerations to get you started:
- Those who have received CERB (Canada Emergency Response Benefit) of $2,000 a month were not subject to any tax deduction at source. This means, if you took CERB for the 7 months it was offered, you received $14,000 for which you may have to pay tax when you file your 2020 personal tax return. It all depends on what your taxable income is for 2020. To avoid any surprise, add up your income from all sources for 2020 and calculate how much you will owe in taxes. Feel free to use our tax estimate calculator on our Resources page of our website.
- There are other government benefits that were offered after CERB ended which were subject to 10% withholding taxes. Again, whether this is sufficient deduction depends on your total taxable income for 2020.
- If you worked from home during COVID-19, you should ask your employer to issue you a T2200 – Declaration of Conditions of Employment. Be sure to record any home office expenses that you have incurred in 2020. You may be eligible to claim some of these home office expenses on your 2020 personal tax return.
- Did you incur any losses in your investment in 2020? If any of your investments took a loss, you should consider crystalizing those losses by selling it. If you decide to sell it, it will result in capital loss. You can, 1) use those capital losses to offset any capital gains in the current year, or 2) it can be carried back 3 calendar years to reduce capital gains reported and get a refund, or 3) carry it forward indefinitely. When you sell a security at a loss, you or people connected to you (spouse, your RRSP, your TFSA, your Corporation) cannot buy the same security within 30 days. Otherwise, the loss is denied. This is referred to as a superficial loss.
- If your earnings in 2020 will be less than in 2021, consider asking your clients to pay your bills before the end of the year.
- If your earnings in 2020 will be more than in 2021, consider postponing your year-end bonus or billings to your clients until 2021.
- You may be eligible to claim the Canada Training Credit if you are 25 to 65 years old and enrolled in an eligible educational institution.
- It’s a great time to think about making year-end donations. You must make donations by December 31, 2020 in order to claim the donation credits for the year.
- Investment management fees, childcare expenses, alimony, medical expenses, interest, professional dues must be paid before December 31, 2020 to be deducted in your 2020 tax return.
- Consider making RRSP contributions to reduce your tax bill. You have 60 days after the year end (March 1, 2021) to make RRSP contributions.
- If you plan on withdrawing from your TFSA in the near future, consider doing so before December 31, 2020. This way, the withdrawn amount will be added to your contribution room on January 1, 2021.
- Work-related expenses me be eligible for a rebate for the GST/HST paid on them.
The information contained within this blog is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Please contact Book an Appointment to discuss how information contained here pertains to you.
About Oasis LLP – Advisors and CPAs
At Oasis LLP we help business owners find what is at the end of the rainbow. With over 25 years of expertise in business advisory, accounting & auditing, and tax, we can help you navigate the accounting and tax world. We are located in Richmond Hill serving Greater Toronto Area.
