Business & Investment

Canada Revenue Agency: Two major changes with the 2020 tax bill

The tax year of 2020 will be different from the previous year as COVID-19 caused havoc around the world.In the light of the pandemic, the Canada Revenue Agency (CRA) Cash benefits Introduced new tax incentives. There are some temporary items in the 2020 tax bill, so we need to start calculating taxable income early.

What are the changes in the 2020 tax bill?

CERB: Last year, the CRA donated $ 2,000 a month to Canada Emergency Response Benefit (CERB) to help Canadians who lost their jobs due to a pandemic. Subjects received CERB between March 15, 2020 and September 26, 2020. You can get up to $ 14,000 on CERB. Must be included in taxable income for 2020.

CRB: The CRA offers CRBs to people who have lost their jobs or have had wage cuts due to a pandemic. These people are not eligible for employment insurance (EI) benefits. Eligible Canadians can apply for benefits between September 27, 2020 and September 25, 2021. You can receive a $ 1,000 pre-tax CRB payment every two weeks for up to 26 weeks.

Tax credit for working from home: With CRA, you can deduct $ 2 per day up to $ 400. Home office costs For the day I was working from home last year. $ 400 is equivalent to 200 days of working from home. Business days do not include sick leave, vacations or legal holidays. You can claim this tax credit only if you have worked at home for more than half of your working hours for four consecutive weeks. In addition, you can only deduct expenses that are incurred to work from home and are not reimbursed by your employer.

The impact of one-time items on taxes

Let’s understand this with an example. Nils is a chef and lives in Toronto. He was fired in September because his company was cutting costs due to a pandemic loss. In my spare time, I started baking cakes as a hobby. He supplied cakes to an online bakery shop in the last quarter of 2020. He got his job back in January. So he stopped supplying cakes to online bakeries.

Nils worked at home for 60 days (20 days a month for 3 months), so he can claim a $ 120 tax credit for working from home. Nils can also receive a 12-week CRB payment for serving cakes to an online bakery. He receives $ 5,400 after tax on CRB payments.

How to Maximize the Benefits of CRA

Part of the CRA benefits can be included in the Registered Retirement Savings Plan (RRSP). With CRA, you can put 18% of your revenue or $ 27,230, whichever is lower, into your RRSP. You can donate to RRSP until March 1, 2021 and deduct the donation from your taxable income.

CRA may charge up to 30% of the withdrawn amount, so it is not recommended to withdraw from RRSP. RRSP is a long-term investment plan, so you can invest in dividend aristocrats Embridge (TSX: ENB)(NYSE: ENB).. The company has built a reputation by increasing dividends, even during a pandemic. We’ve been building pipeline infrastructure for years and we’ve been able to do so.

Enbridge is one of North America’s leading oil and gas pipeline operators. We continue to expand our pipeline infrastructure, with three new projects likely to go live between 2021 and 2023. The company will continue to pay dividends as long as there is demand for natural gas and oil. Even if renewables replace oil and natural gas, Embridge is expanding into renewables and gas storage, so it can generate cash.

Investing $ 2,000 from Enbridge’s CRA benefits will result in an annual dividend of over $ 152 in 2021. If the company increases its dividend per share at an annual compound interest growth rate of 8%, this amount will increase to approximately $ 330 over the next decade. Growth rate.

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Canada Revenue Agency: Two major changes with the 2020 tax bill Canada Revenue Agency: Two major changes with the 2020 tax bill

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