CRA 2020 updates are now available, and some critical changes could affect your Tax Return; The most significant change is the new deduction for income earned from self-employment. This deduction is meant to help offset the cost of running a business, and it’s available to all taxpayers who earn income from self-employment.
There are also a few other changes that could affect your return, so review the updated information carefully. If you have any questions, don’t hesitate to contact a tax professional for assistance.
Canadian Tax Changes for 2020
Essential Personal Amounts (Federal)
The Canada Revenue Agency (CRA) has announced the updated personal amounts in effect for the 2020 tax year. This means taxpayers will need to account for these changes when preparing their tax returns. The updated unique pieces are designed to reflect the current cost of living and ensure that all Canadians receive the appropriate tax relief.
Some of the fundamental changes include increasing the basic personal amount, which is now set at $12,809. This amount is available to all taxpayers and can be claimed regardless of income level—a new family net income threshold of $150,000, which triggers the reduced spousal credit.
The additional credits for children have also been increased, with the maximum amount per child now set at $2,532. These updates should be taken into account when filing your 2020 tax return.
Tax-free Savings Accounts (TFSAs)
Did you know that the CRA has been making updates to the Tax-Free Savings Account (TFSA)? As a result, as of January 1, 2020, some new rules are in place.
Here’s what you need to know:
- The maximum annual contribution limit has increased from $5,500 to $6,000. This means that you can save even more each year!
- If you have unused contribution room from previous years, you can carry it over and add it to your current total. For example, if you only contributed $2,000 in 2019, you could contribute $4,000 in 2020.
- The TFSA is now available for those aged 18 and over. Previously, it was only available for those aged 19 and above.
- You can no longer contribute to a TFSA if you have reached the age of 71. make sure to check your CRA My Account for your contribution balance limit.
Income Tax Brackets
Income tax brackets are set to change for the 2020 tax year. The CRA has released updates on what these changes mean for your tax return. The federal government has announced that the income tax brackets will be changing for the 2020 tax year. This means that the tax you pay will be different depending on your income level.
The lowest income bracket will remain at $12,000, but the next frame will increase from $48,000 to $50,000. After that, the next bracket will rise again, from $150,000 to $200,000. Finally, the highest income bracket will increase from $220,000 to $250,000.
These changes mean that people who earn between $12,001 and $50,000 will pay a little more in taxes in 2020 than they did in 2019. check out our current overview. Stay tuned for updates each year.
Digital News Subscriptions Tax Credit
The CRA has announced that it will be updating its policies regarding digital news subscriptions and how they are treated for tax purposes. Starting in 2020, these subscriptions will be considered a taxable benefit and must be included on your tax return. This change is likely to affect many Canadians as more people subscribe to digital news services.
What does this mean for you? If you have subscribed to a digital news service in 2019, you will need to include the cost of that subscription on your tax return.
The CRA has not released any specific details yet, but we can expect more information to be released in the coming weeks. In the meantime, it is crucial to start gathering your receipts and other documentation related to your subscriptions. This change is likely to cause some confusion for taxpayers, so if you have any questions or concerns, please get in touch with us.
RRSP Contributions
The Canada Revenue Agency (CRA) has announced the updated contribution limits for Registered Retirement Savings Plans (RRSPs) for the 2020 tax year. The maximum amount that can be contributed to an RRSP is now $27,230, up from $26,500 for 2019. This increase is in line with the annual rate of inflation.
There is no need to do anything else for those who have already filed their 2019 tax return; the increased limit will automatically be reflected on your return. However, if you have not yet filed your return and are expecting a refund, you may want to consider contributing some or all of that refund to your RRSP. This will help lower your taxable income and result in a smaller tax bill for 2020. check your My Account for your current available contribution balance.
CPP Contribution Rates
In October 2019, the Canada Revenue Agency (CRA) released its updated 2020 tax brackets, contribution rates, and deduction limits for Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs). There are a few fundamental changes to be aware of when completing your 2019 tax return for those nearing retirement or already in it.
The first change is that the maximum allowable RRSP contribution has been lowered from $27,230 to $26,000. This may come as a surprise to some who had planned on contributing the maximum amount this year. However, the good news is that the TFSA contribution limit has been increased from $5,500 to $6,000.
Home Buyers’ Tax Credit (HBTC) & Home Buyers’ Plan (HBP)
The HBTC is a tax credit for first-time homebuyers in Canada. The distinction is worth up to $5,000 on your purchase, and it can be used towards the purchase of a home, the cost of renovations, or land. To qualify for the credit, you must have purchased a home that costs less than $500,000.
The HBP is a program that allows you to borrow money from your RRSP to buy or build a qualifying home. The amount you can borrow depends on how much you have saved in your RRSP, and the interest charged on loan is tax-deductible.
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