When we think about expenses, we usually look at household budgets, money spent on mortgages or rents, and food and transportation expenses. While these expenses matter, you should always keep income tax in mind as this is the largest expense for most Canadian families.
Many tax changes went into effect in 2019, and the same goes for 2020. With the adverse effects of COVID-19, other tax changes will take effect before the tax return expires. It was extended until June 1, 2020. Keeping more of your money in your pocket can be kept by staying abreast of tax changes.
In this blog, you’ll know about the tax changes for 2020
As awaited, multiple tax rates and limits are transforming in 2020.
In 2020, the yearly contribution limit on the Tax-Free Savings Account (TFSA) is being increased once again. For the first time in 2019, the TFSA yearly contribution limit was increased by $6,000. In 2020 it’s the same as well because the TFSA is increasing by $6,000 again. If you’ve never contributed to the TFSA and have been eligible to contribute since 2009, you’d have $69,500 in total contribution room.
As it is mentioned in the name, your money will grow tax-free in the TFSA. How it is different from the Registered Retirement Savings Plan (RRSP) is that you don’t have to pay income tax when you pay your money.
The national government introduced Canadian training benefits to address workforce disruptions. This refundable tax credit aims to remove the barrier to career development and fund half of the tuition and training fees. If you are an employee, you are entitled to a tax credit of up to $ 250 per year. This amount goes to an unrealized account that the employee can use for qualifying purposes.
It would help if you met the following different criteria to be eligible to collect $250 in a year:
The Home Buyers Plan (HBP) helps people, who are purchasing a home for the first time, get a down payment soon. It allows first-time home-buyers to withdraw money from their RRSPs without paying any tax. Money borrowed under HBP must be repaid over 15 years. Funds in RRSP for at least 90 days can be withdrawn as part of HBP.
The national government has increased the withdrawal limit on the HBP as part of the 2019 national budget. There are special rules in place. If you’re getting a home for an individual eligible for the disability tax credit (DTC). The rules are being upgraded so that the same $35,000 withdrawal limit is given to those buying a home that’s more accessible and suitable for people with disabilities.
All taxpayers are eligible to claim the original personal amount, which is a non-refundable tax credit. The basic personal amount is the amount you can receive without paying any income tax. The amount present at $ 12,069 in 2019, is set to increase yearly with inflation and yet to increase more rapidly. Over the next four years, the basic personal amount will increase by 15% to reach $ 15,000 in 2023.
These days being a parent isn’t inexpensive at all. The national government is looking to give new parents a tax break.
The national government has made a promise that any maternity or parental advantages received through Employment Insurance (EI) will be tax-free at the beginning of 2020. This change means you get an extra $1,800 a year who receives EI benefits and earns $45,000 a year.
The famous Canada Child Benefit is also scheduled for an increase. The tax-free benefit will also increase for new parents with children under one-year-old. However, for parents of disabled children, The Child Disability Benefit is expected to double. The advantage is for families looking after a child under the age of 18 with disabilities.
When you convert a property from a rental property to a residential one. You’re considered to have disposed of and reclaim it. Additionally, when the property is being converted to or from a principal residence. You can select the property as your residence for up to four more years.
A care provider is an alternative to foster care offered by provinces and territories. The Income Tax Act (ITA) is being modified to be qualified for the Canadian workers benefit tax credit, despite whether you get financial support from a kinship care program. Some changes will also be brought in to make clear that payments of financial help from a kinship care program are not taxable.
These are some of the tax changes you need to know about in 2020.