June 1 tax-filing deadline
With all the stress of the Covid-19 pandemic lockdown, you might have taken advantage of the one-month extension of the tax-filing deadline to June 1. Payment of any tax owing has been extended to Sept. 1, but you must still file a return by June 1. Those who are self-employed have until June 15 to file. There is unlikely to be any further extension of the deadline, so you’d better make sure you have all your information slips ready ahead of the filing deadline on June 1 (all those documents prefixed with a “T” are critical). And make sure you’ve reviewed the list of deductions and credits you might be entitled to.
Remember, too, that you are filing taxes for the 2019 tax year. So any benefits you’ve received from Employment Insurance, Canada Emergency Response Benefit, or any other wage subsidy programs as a result of Covid-19 will apply to this year’s (2020) taxes, which you’ll be filing next April.
Here’s a list of tax deductions and credits I’m most often asked about. It’s not exhaustive by any means, but it includes many that are often overlooked.
RRSP deduction. Don’t forget to deduct your RRSP contributions made for 2019. They’re easy to overlook, especially if you’ve been making them through automatic contributions through your payroll or your bank account. Make sure you have the contribution receipts from your RRSP sponsor (bank, brokerage, firm, mutual fund, etc.) and make sure it includes the full amount you’ve contributed through the year. Note that there is no deduction for TFSA contributions.
Employment expenses. You can deduct certain expenses (including any GST/HST) you paid to earn employment income, but only if you were required to pay expenses under the terms of your contract, did not receive an allowance for them, or if an allowance was included in your income. This deduction typically will not apply to most employees, and you cannot deduct the cost of travel to and from work or any other expenses, including tools and clothing. In addition, you can deduct any legal fees paid to collect salary or wages.
However, the Tradesperson’s Tools Deduction lets employed tradespeople deduct the cost of eligible new tools over $1,222 purchased in 2019 to earn employment income as a tradesperson and as an eligible apprentice mechanic. A maximum claim of $500 applies.
Home Buyers’ Tax Credit. You can claim $5,000 for the purchase of a qualifying home in 2019 if you or your spouse or common-law partner acquired a qualifying home and you did not live in another home owned by you or your spouse or common-law partner in the year you bought the home or in any of the four preceding years (first-time home buyer). The maximum tax savings generated by the non-refundable tax credit will be up to $750 (that is, $5,000 x 15%). This is also available to existing homeowners who qualify for the Disability Tax Credit and who purchase a more accessible home.
A qualifying home must be properly registered and must be located in Canada. Both existing homes and homes under construction qualify, and include single and semi-detached family houses, townhouses, mobile homes, condominiums, and apartments in duplexes, triplexes, fourplexes, or apartment buildings.
Medical expense deductions. You may claim only eligible medical expenses if you or your spouse or common-law partner paid for the medical expenses in any 12-month period ending in 2019 and did not claim them in 2018. Generally, you can claim all amounts paid, even if they were not paid in Canada. You can find a list of common medical expenses at the CRA website.
Canada Caregiver Credit. You may be able to claim the CCC if you support your spouse or common-law partner, child, grandchild, parent or other relative with a physical or mental impairment. The amount you can claim depends a variety of factors, including your relationship with the person, your circumstances, the person’s net income, and whether other credits are being claimed for that person.
- Spouse or common-law partner, or eligible dependant 18 years of age or older. You may be entitled to claim $2,230 in the calculation of line 30300 and up to a maximum of $7,140 on line 30425.
- Eligible dependant under 18 years of age at the end of the year. You may be entitled to claim $2,230 in the calculation of line 30400 or on line 30500 for your child.
- Children under 18 at the end of the year. You may be entitled to claim $2,230 on line 30500.
- Dependants 18 or older who is not your spouse or common-law partner or an eligible dependant for whom an amount is claimed on line 30300 or on line 30400, you may be entitled to claim an amount up to a maximum of $7,140 on line 30450.
Annual union, professional, and other dues. You may claim the following amounts if they related to your employment and if you paid them yourself in the year or if they were paid for you and reported as income:
Annual dues for membership in a trade union or an association of public servants.
- Professional board dues required under provincial or territorial law.
- Professional or malpractice liability insurance premiums or professional membership dues required to keep a professional status recognized by law.
- Parity or advisory committee (or similar body) dues required under provincial or territorial law.
- Initiation fees, licences, special assessments, or charges for anything other than the organization’s ordinary operating costs do not count as annual membership dues. Neither do pension plan premiums, even though they may be shown on your annual slips as dues.
Moving expenses. You can claim eligible moving expenses if you moved to a new location for employment or business purposes, or you moved to attend college or university as a full-time student. To be eligible for the deduction, your new home must be at least 40 kilometres (by the shortest usual public route) closer to your new work or school than you were before.
Interest on student loans. Interest paid on your student loan in 2019 or the previous five years may be claimed as a credit by you or a related person. If you have no tax payable for the year, you can carry the interest forward for five years and claim it when you do have tax payable.
Childcare expenses are deductible from income where one or both parents are working or where one spouse is attending school for all or part of the tax year. Childcare expenses can include daycare fees, boarding school, hockey school, or summer camp fees. The maximum you’re allowed to claim under the childcare deduction in 2019 is $8,000 for each child under age seven at the end of the year, and $5,000 for each child over seven and under age 16. The deductions cannot exceed two thirds of your earned income.
Legal fees. Certain kinds of legal fees can be claimed. These include fees paid to respond to or object to or appeal a CRA assessment, legal fees paid to collect a retiring allowance or pension benefit, and fees incurred to try to make child support payments non-taxable. You cannot claim fees you paid to get a separation, divorce, or establish custody of or visitation arrangements for a child.
Transferring tuition, education, and textbook amounts. The education and textbook credit was eliminated as of Jan. 1, 2017; however, you can carry forward unused amounts. The tuition credit is still applicable for tuition fees totalling $100 or more paid to a post-secondary institution. If there is any amount remaining after a student reduced their own tax owing, they may transfer it to a parent, grandparent, spouse, or common-law partner. Note that amounts for transfer cannot be carried forward from previous years and cannot exceed $5,000, less the amount the student used to reduce their own tax owing. Only one person can claim this transfer from the student, and it can be a different person each year.
Charitable Donations Tax Credit. This can be worth up to 29% of your donation on federal tax and up to 24% depending on your province. Federally, the credit is calculated as 15% of the first $200 of donations and 29% for donations above that. Provincial credits range between 4% and 24%. Check the CRA website for more detail on what is eligible and how to calculate your credit.
Political Contribution Tax Credit. This credit is calculated as 75% of the first $400 donation and 50% of amounts between $400 and $750, declining to 33.3% of amounts over $750. The credit is capped at $650.
Climate Action Incentive (CAI) Payment. This is a payment designed to offset the federal carbon tax in Saskatchewan, Manitoba, Ontario, and Alberta. It consists of a basic amount and a 10% supplement for residents of small and rural communities. Only one person per family (you or your spouse or common-law partner) can claim the CAI payment.
You can claim the CAI payment if on Dec. 31, 2019, you lived in one of the four provinces it applies to, and you were over the age of 18. If you were younger than 18, you can claim the CAI if you were married or lived common law, or were a parent living with your child.
You can also claim the CAI for a dependant if on Dec. 31, 2019, your unmarried child or dependant under the age of 18 was dependent on you for support and was not a parent living with their child.
Investment advice. You may deduct fees paid for certain investment advice related to buying or selling a specific investment, or for recording investment income. The CRA says fees paid for advice such as “general financial counselling or planning” are not eligible, even though fees paid to the same advisor for advice on buying and selling investments are. However, it doesn’t actually specify what “general financial counselling or planning” is, but allows that fees paid for an advisor providing the following services generally qualify: the custody of securities; the maintenance of accounting records; the collection and remittance of income; and the right to buy and sell on their own judgement on behalf of some clients without reference to those clients (that is, discretionary portfolio management).
And what about your cable fee to get BNN Bloomberg, or subscription fees paid for financial newspapers, magazines, or newsletters, either digital or physical? Sorry, no dice. CRA says these expenses are not deductible. Likewise, safety-deposit box charges are not deductible.
Investment management. Fees you paid to professional investment managers to manage and administer your investments are deductible. But administration fees paid for your Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) or Tax-Free Savings Account are not. You also cannot deduct mutual fund or ETF management fees or brokerage fees or commissions paid to buy and sell securities. Instead, you may be able to use these costs when you calculate your capital gain or capital loss. Investors who pay fees directly for separately managed accounts (SMAs) or wrap accounts may deduct those fees as carrying charges on their tax return.
Interest charges. Interest on money borrowed for investment purposes is deductible. “Investment purposes” means you’re using the borrowed money to try to earn investment income, including interest and dividends. However, generally you may not deduct interest if you use borrowed funds only for the purpose of generating a capital gain.
Interest on funds borrowed to contribute to an RRSP, a pooled RPP, a specified pension plan, a Registered Education Savings Plan (RESP), a Registered Disability Savings Plan (RDSP), or a Tax-Free Savings Account (TFSA) is not deductible, with one rather complicated exception. If you had previously borrowed money to invest in a non-registered account and then transfer the investment to an RRSP after you’ve repaid the loan in full, you may still deduct the interest.