The CRA has done a lot to mitigate the financial burden on Canadians in 2020. Payment of new benefits, reinforcement of old benefits with more funds, new tax credits. Not all tax credits are available to everyone, Basic personal amount Tax credits are one of the few tax credits that people over the age of 19 can claim.
With taxation in 2019, BPA was $ 12,298. In 2020, the amount increased by about 7.5% to $ 13,229, but only for those with an annual income of $ 150,473 or less. Beyond this threshold, BPA growth begins to decline and will be completely phased out at the $ 214,368 cap. People with incomes above $ 214,368 can only claim $ 12,298 with a BPA tax credit.
A decent tax cut
The new BPA amount of $ 13,229 at 15% offers a tax deduction of nearly $ 2,000 ($ 1,984 to be exact). This is a significant tax cut, especially when combined with similar tax credits at the state level. However, if your income exceeds the threshold, the total tax credit you can get will start to drop, but if you exceed the $ 214,368 threshold, you will still get a $ 1,844 tax credit. And no matter how much you earn above the threshold, this amount remains the same.
Use the saved amount
The best way to spend money saved from taxes is to invest it. In this way, a seemingly small amount can grow into a considerable nest egg, which can be put to good use. Dividend stocks are an option, but $ 1,984 may not be enough to generate significant passive income, and if the stock price is too high, it may not be worth reinvesting dividends.
A Growth stock favorite TerraVest Industries (TSX: TVK) It may be a better choice. Niche infrastructure markets, most notably providing services and products for energy. Create heating, storage and transportation products. Its client list includes national and regional fuel distributors, agricultural service providers, and the residential HVAC industry.
The company has a solid balance sheet, breaking net income and revenue growth only once in the last five years (2016). At the moment, it is highly evaluated, with a price-to-book value ratio of 11.2 and a price-to-book value ratio of 2.4 times. At the time of the crash, stock prices fell by more than 40%, but stock prices have recovered sufficiently.
The company has a solid history of capital growth. Its five-year CAGR is 24%, which is highly sustainable, especially if the service industry continues to recover at a steady pace. If this growth rate can be replicated over the next five years, the company can turn $ 1,984 into $ 5,816. This may be enough for a decently shaped used car.
Tax credits and credits can be seen as part of the basic financial knowledge (ideally) that every successful adult should have. The more deductions and tax credits you can claim, the lighter your tax may be. By lowering your financial obligations, you can find more money for your investment and you may be a little closer to achieving your financial goals.
Stupid contributor Adam Ottoman There are no positions in any of the listed stocks. Motley Fool recommends TerraVest Industries Inc.
CRA $ 2,000 Basic Personal Tax Credit: Canadians won’t be disappointed!
https://www.fool.ca/2021/01/23/cra-2000-basic-personal-amount-tax-credit-canadians-wont-be-disappointed/ CRA $ 2,000 Basic Personal Tax Credit: Canadians won’t be disappointed!