TAX TIPS

The 2020 tax filing season comes with several new changes which can impact your tax return. Here are some of the important updates that you should be aware of
 

New measures affecting first-time home buyers

The Home Buyer’s Plan (HBP) allows first-time home buyers to make tax-free RRSP withdrawals to purchase a home. The CRA has increased the HBP limit for 2019 from $25,000 to $35,000for withdrawals made after March 19, 2019. To prevent income inclusion, amounts withdrawn must be repaid in equal instalments over a 15-year period, starting in the second year following the year in which the withdrawal was made. First-time home buyers who purchased a home during the year may also qualify for the first-time home buyers’ amount, which is a $5,000 federal non-refundable tax credit.

Canada workers benefit

Prior to 2019, the earnings of low-income individuals and families in the workforce were supplemented through the Working Income Tax Benefit (WITB). Effective for 2019 and subsequent taxation years, the WITB has been replaced and enhanced by the Canada Workers Benefit (CWB), which is a federal refundable tax credit. The CWB has two parts: a basic amount and a disability supplement for individuals who have an approved Form T2201, Disability Tax Credit Certificate, on file with the CRA. You may choose to include or not include tax-exempt income when you compute the CWB. In addition, in 2019, the government clarified that kinship care providers would be considered the parents of a child in their care for the purposes of the CWB.

Donations of cultural property

In order to encourage donations of certified cultural property, the Government of Canada provides enhanced tax incentives through Form T871, Cultural Property Income Tax Certificate, to donors.

For 2019, the government further loosened the conditions for donations to be eligible for this benefit. For donations made on or after March 19, 2019, it is no longer required that the property donated be of national importance to qualify as a donation of cultural property.
 

Impact of coronavirus and main concerns from clients
 

Impact of coronavirus on this year’s tax season

• Federal budget which was to be tabled on March 30th has been delayed 
• Will the government postpone the March 30 (trust deadline), March 31 (Non-resident return reporting) and April 30th personal tax filing deadlines, given what is happening and the fact that so many people will be self-isolating and working from home.

My clients, who are generally high-net worth individuals and corporations, are concerned about minimizing their taxes.  For individuals, especially those with their own corporate businesses, want to explore ways of income splitting with other family members under the new tax on split income (“TOSI”) rules.  There are still ways that you can accomplish income splitting using family trusts and we are actively exploring these for our clients.

Tax loss selling

I would speak to tax losses in general here.  Capital losses triggered on the sale  “loser” assets can be used to reduce or eliminate capital gains realized on those assets with accrued gains.  Capital losses can be carried back three years to recover taxes paid in respect of capital gains in those years, and can be carried forward indefinitely.  There are certain stop loss rules to take into consideration – you or your spouse/common-law partner cannot repurchase the “loser” asset within 30 days from the date of sale.