The last date to file your taxes for the year 2020 is just a few weeks away. The Canada Revenue Agency (CRA) has opened online tax filing. If you typically file your taxes offline, switching to online method can help you file tax faster and receive direct deposit. After the unprecedented 2020 that hit finances of several individuals, the CRA has introduced different tax benefits to help residents lower their tax liability.
Top 3 Tax Breaks for Canadians by the CRA in 2021
Basic Personal Amount
The Basic Personal Amount (BPA) is the tax credit that Canadian taxpayers can claim every year. The figures are revised every year to account for inflation. The BPA figure for 2020 stands at $13,229.
You can claim 15% of your non-refundable tax credits i.e. $1,984.35. So, your total tax bill is reduced by $1,984.35. E.g., if your total tax liability in 2020 is $10,000, your tax liability will reduce to $8,015.65 after applying BPA tax credit.
Registered Retirement Savings Plan (RRSP)
Retirement Planning is an integral part of financial planning as it can help you live a comfortable life after retirement. The government is also serious about helping individuals save for their retirement. Registered Retirement Savings Plan(RRSP) is a registered retirement account where you can contribute a maximum of 18% of your year’s pre-tax income or up to $27,830 to avail tax deductions. The contribution limit keeps on changing every year. The CRA can reduce your contribution limit if you have made any contributions to a sponsor or any pension plan.
So, if your total income in 2020 was $50,000, you can contribute up to $9,000 to your registered retirement plan to avail tax deductions.
The last day to make contributions to avail tax benefits for 2020 was March 1, 2021. However, you don’t need to worry if you miss the deadline, as your unused contribution limit will move ahead.
Digital news tax credit
The consumption of digital media has shot up tremendously in the last few years. Many publications have introduced paid subscription to their readers. To encourage the use of digital media, the CRA has started non-refundable tax credit for periods between 2019 and 2025.
Through the digital news tax credit, you can get a 15% waiver on digital news subscriptions. You can claim a maximum tax credit of $75 if you pay $500 for online news subscriptions.
Basic Personal Amount (BPA), Registered Retirement Savings Plan (RRSP) and digital news tax credit are the top three tax breaks given by the CRA to Canadian taxpayers.