The CRA tax filing changes for 2020 shouldn’t keep you up at night. The goal is to keep more of your money by planning before you file.
Firstly, this year, the income tax package has changed its look to include the return, schedules, and worksheets plus the Federal Income Tax and Benefit Guide, and a Provincial or Territorial Information Guide. Secondly, CRA has changed most of the 3 and 4 digit line numbers are now 5 digits, too. For example, Line 150 is now Line 15000.
The new package tries to use more plain language, bigger font size and more white space. There are fewer forms since Schedule 1 and its Worksheet are gone. The charts from the forms are now on the Income Tax and Benefit Return and its Worksheet. Then, several updated worksheets simplify calculations. Outlined below are some tax filing changes for this year.
Basic Personal Amount (BPA)
The basic personal amount is how much you can earn without paying tax. So, it’s a non-refundable tax credit. The Liberal Government is increasing this with inflation to $15,000 for 2023, but it is currently $12,069 for 2019. If you earn more than $147,667, your BPA reduces, and if you earn more than $210,371, your BPA disappears completely.
Tax Changes for Parents
Tax filing changes for 2020 focus on giving Canadian parents a break, especially new parents and those with disabled children.
- The federal Liberal government changed EI maternity and parental benefits, so you don’t pay any taxes on that money as of 2020. That means $1,800 more a year if you are on EI benefits and earn $45,000 when you are working. This works the same for adoptive parents, too.
- The Canada Child Benefit increases 15% for new parents with babies under a year old. You could get up to $1,000 more. By July 2020, the base benefit is $7,750.
- The Child Disability Benefit doubles for parents with disabled children, which means $2,800 more for each child.
2020 Tax Filing Changes for Seniors
This next year sees some positive tax filing changes for seniors, too.
- Old Age Security (OAS) increases 10%, or $729 annually, in July 2020, for seniors over 75 years old with less than $77,580 in earnings.
- The CPP pensionable earnings maximums increase from $57,400 to $58,700.
- The CPP survivor benefit increases in 2020, too. As a surviving spouse, over age 65, not otherwise receiving CPP, you’ll get 60% of your deceased spouse’s pension. This is an annual increase of $2,080. If you are a surviving spouse between 60 and 64 years old, you are eligible for 37.5%.
Advanced Life Deferred Annuities (ALDA)
Advanced Life Deferred Annuities (ALDA) now qualify as annuities for your RRSP, RRIF, DPSP, PRPP or defined contribution registered pension plan.
Registered Disability Savings Plan (RDSP)
The time limit is eliminated that an RDSP stays open after a beneficiary is not eligible. There is also no further need for ongoing medical certificates stating the beneficiary may be eligible again to keep the plan open.
Tax Rates and limits – Tax filing changes for 2020
Several tax rates and limits are changing with the 2020 tax year.
- Both federal and provincial income tax brackets increase along with inflation.
- Employment Insurance (EI) premiums decrease to 1.58% in 2020 from 1.62% in 2019.
- Pensionable earnings increase from $57,400 in 2019 to $58,700 in 2020.
- CPP employee and employer contribution rates increase to 5.25%, from 5.1% in 2019.
- The Canada Child Benefit continues to be tied to inflation. In 2020, the maximum is $6,639 (up from $6,496 last year) for children under 6 years old and $5,602 (up from $5,481) for children from 6 to 17 years old.
- The Tax-Free Savings Account Contribution Limit increased by $6,000 again in 2020. If you have been eligible for 10 years but never contributed to a TFSA, you would currently have a total of $69,500 in contribution room.
The Canada Training Benefit provides financial support pay for half of any tuition or training fees. Workers are eligible for up to a $250 annual tax credit if you:
- File a tax return
- Are 26 years old and not over 65 years old at the end of the tax year
- Are a Canadian resident
- Have a minimum of $10,000 and maximum of $150,000 eligible earnings, including employment, self-employment, and parental benefits.
Home Buyers Plan CRA Tax filing changes for 2020
The Home Buyers’ Plan (HBP) assists first-time homebuyers to get a down payment quicker. If you are buying your first home, you can withdraw from your RRSP without paying income tax. The money must be paid back into your RRSP over 15 years, starting the second year after the initial withdrawal. You can only take out money that has been in your RRSP for at least 90 days. You can now withdraw up to $35,000, up $10,000 over previous years. As a couple, together, you could combine withdrawals for a total of $70,000 to buy your first property.
- Special rules apply if you buy a home for someone eligible for the disability tax credit (DTC). The same $35,000 RRSP withdrawal limit applies to buying a home better suited for people with disabilities, even if it is not your first home.
- After the breakdown of a marriage or common-law relationship, if you are living apart for at least 90 days, you may be eligible for the HBP withdrawal. You are not eligible though if you are living with a new spouse or common-law partner. If you to participate in the HBP after a breakup, you have two years to sell your previous principal residence. If you are buying out the share of your former spouse or common-law partner, this is waived.
Employee Stock Options
The new 2020 rules cap employee stock options at $200,000 at fair market value for large, long-established businesses. This doesn’t affect your start-up nor fast-growing Canadian firms.
Kinship Care Providers
Kinship care program amendments, as an alternative to foster care, mean you could qualify for the Canada workers benefit tax credit. If you get financial help from your province under a kinship care program, those funds not taxable and not included in your income to determine tax benefits and credits.
Cannabis as a Medical Expense
Since cannabis is now legal in Canada, you can deduct any cannabis products you purchased as a patient. All purchases after October 16, 2018, count as a medical expense.
Canada Workers Benefit (CWB)
The CWB replaces the working income tax benefit (WITB). The CWB strengthens and enhances the old refundable tax credit, making it more accessible for workers. So, for more information, see Schedule 6, Canada Workers Benefit.
Exempt income under the Indian Act
The new “Indian Act – Exempt income” on page 2 with a new form (Form T90) allows CRA to calculate your 2020 Canada Training Credit Limit and your CWB for 2019, if applicable.
Donations and gifts
Donations and gifts are now on line 34900 of your return. So, after March 18, 2019, the enhanced tax incentives for donating cultural property don’t require it to be of national importance.
MLA and municipal officers
Starting in the 2019 tax year, non-accountable allowances paid to MLAs, municipal officers, and members of school boards become income.
Starting in the 2019 tax year, you can claim a temporary first-year 100% capital cost allowance for eligible zero-emission vehicles if you claim employment expenses. Vehicles acquired after March 18, 2019, and used before 2024 are eligible for the full allowance. The allowance decreases when the vehicle is not available until between 2023 and 2028. For more information about the vehicles, see Guide T4002
Interest and investments
Line 41200, the Investment tax credit outlines how eligibility for mineral exploration tax credits extends to flow-through share agreements. The agreements for individuals (not trusts) must be signed before April 2024.
These are important tax filing changes for 2020. But remember, CloudTax keeps track of all the details, so you don’t have to.