Many Canadians lost their jobs last year, but the pandemic stagnated the global economy and some others cut wages. Over the years of the pandemic, your increments may become sloppy. Your employer may decide on your income, but the Canada Revenue Agency (CRA) has made some changes to your payroll deduction in 2021.
CRA Change Three deductions: income tax, unemployment insurance (EI) premiums, and contributions to the Canadian Pension Plan (CPP). Here’s what these deductions are and how these changes affect your salary.
What are the changes in payroll deductions?
Canadian Pension Program: The CPP program aims to save for retirement from the day you start working. 2021, Service Canada Increased employee CPP contributions It increased from 5.25% in 2020 to 5.45%. In addition, maximum pension income increased from $ 58,700 in 2020 to $ 61,600.
Employment Insurance Premiums: The government deducts EI premiums from your salary and collects money to assist you when you are unemployed. For 2021, the Canadian Employment Insurance Commission (CEIC) has not changed employee EI premium rates due to a pandemic. It continues to be 1.58%. However, CEIC has increased its maximum insurance revenue from $ 54,200 in 2020 to $ 56,300.
Income tax: In 2021, the CRA expanded the range of taxable income, but maintained the tax rate. A minimum federal tax rate of 15% applies to incomes of up to $ 49,020. The maximum rate of 33% applies to incomes in excess of $ 216,511. These numbers were $ 48,535 and $ 214,368, respectively, in 2020.
How do these changes affect my salary?
The increased rate and the amount of maximum insurance income will reduce the net salary after deduction. Let’s explain the calculation using an example. Sarah earned $ 63,000 in 2020, and her employer did not give her an increment in 2021 due to a pandemic. Her employer made the following deductions from her salary in 2020:
- $ 2,898 against CPP ($ 55,200 x 5.25%)
- $ 856.4 against EI Premium ($ 54,200 x 1.58%)
- And her deductible income tax.
Now, in 2021, the percentage and amount of maximum insurance income for these three deductions changed. Therefore, Sarah’s salary remains the same, but the amount deducted from Sarah’s salary also changes.
- $ 3,166 against CPP ($ 58,100 x 5.45%)
- $ 889.5 against EI Premium ($ 56,300 x 1.58%)
- And her deductible income tax.
The salary deduction change will reduce Sarah’s annual net salary in 2021 by approximately $ 300.
How should you increase your bottom line in 2021?
The pandemic has highlighted the importance of having multiple sources of income. Another source of income helps you survive a year with no increments and high salary deductions. Dividend stocks are a good way to earn alternative income through a Duty Free Savings Account (TFSA). CRA exempts TFSA withdrawals from taxes.
Embridge (TSX: ENB)(NYSE: ENB) It is one of the essential dividend stocks in the TFSA portfolio. We increased dividends even during pandemics where other stocks stopped or reduced dividends. The company has the largest oil and natural gas pipeline infrastructure in North America. Inventories fell by 35% in March 2020 as many countries announced national blockades to reduce air and road travel. However, the economy gradually resumed and the vehicle collided with the road again. Air travel was slightly better than the April-June 2020 blockade, but well below 2019 levels.
Embridge’s share price surged 20% from the pandemic’s lows as oil demand surged. However, due to weak demand for jet fuel, it is still below pre-pandemic levels. Inventories could increase as demand for jet fuel surges. Enbridge’s share price was also released in mid-February, so it could rise if it reports a recovery in fourth-quarter performance.
In the third quarter, Embridge paid a $ 1.6 billion dividend to common shareholders. The dividend yield is 7.5%, which has been increasing for 25 years, which is unusual. For long-term players, you can consider investing in Embridge shares, which are trading at a 20% discount from pre-pandemic levels.
Stupid contributor Puja Tayal There are no positions in any of the listed stocks. Motley Fool owns and recommends a stake in Enbridge.
CRA: Three major changes to your salary in 2021
https://www.fool.ca/2021/01/21/cra-3-huge-changes-coming-in-your-paycheck-in-2021/ CRA: Three major changes to your salary in 2021