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2021 Year-End Tax Tips - Individuals

2021 Tax Updates

Personal tax rates:

  • CRB payments are taxable income for the claimants. The CRB is subject to clawback: to repay some or all of the benefit through their income tax return if their annual net income, excluding the CRB payment, is over $38,000, that is to repay $0.50 of the benefit for each dollar of their annual net income above $38,000 to a maximum of the amount of benefit they received.

  • Must report the sale of principal residence: in personal tax returns (including change of use or deemed dispositions) and designate principal residence for dispositions. Discuss with us for any sale or any change of use of real estate properties.

Ontario budget:

  • A $10,000 Seniors’ Home Safety Tax Credit (SHSTC) at 25% in 2021 and an Ontario staycation tax credit of up to 20% for eligible Ontario tourism expenses in 2022 (TBA).


Year-end tips:

  • COVID-19 Benefits: Individuals ensure to apply for CRB (and CRSB/ CRCB), and other government benefits if you qualify. Consult our practical guides: https://www.impactcpas.ca/post/information-regarding-covid-19 or the government website.

  • Make charitable donations and political contributions before year-end. Take advantage of higher tax credits and first-time donor’s super credit (25% on up to $1,000 donations)

  • Employee gifts and awards – Ask your employer to provide you with non-cash gifts/awards. These will not be taxable to you if you receive non-cash with a total value to you of $500 or less annually.

  • Job-related courses – Ask your employer to pay for job-related courses directly, rather than paying you additional remuneration.

  • Canada training credit – starting 2020, eligible individuals aged 25 to 65 who are enrolled at eligible educational institutions can claim this new federal refundable tax credit on tuition and fees for training (annual allowance of $250 per year; $5,000 maximum lifetime tax credit).

  • Home office expenses – If you work from home for more than six months in 2021, you may be eligible to deduct certain expenses related to your home office. Ask your employer to issue Form T2200. Also, track home office expenses and retain relevant utilities, supplies, and maintenance receipts. Alternatively, you can use the simplified method (proposed to increase in 2021 to $500), if you were required to work from home due to the COVID-19 pandemic.

  • Pay childcare expenses for 2021 by December 31, 2021, and get qualifying receipts. If you reside in Ontario, claim the Ontario childcare access and relief from expenses (CARE) tax credit; a refundable credit of up to 75% of eligible childcare expenses for individuals with family income up to $150,000.

  • Contribute $6,000 TFSA (tax free savings account). If you are planning a withdrawal from your TFSA, consider doing so before the end of 2021 instead of early in 2022 – amounts withdrawn are not added to your TFSA contribution room until the beginning of the year after the withdrawal. Be mindful of the over-contribution penalty of 1% per month for both TFSA and RRSP.

  • Home buyers’ incentives – If you are a first-time homebuyer, consider withdrawing tax-free up to $35,000 from your RRSP, under the Home Buyers’ Plan. Amounts withdrawn must be repaid to your RRSP over 15 years. And claim the first-time home buyers’ tax credits.

  • Sell investments with accrued losses before year-end to offset capital gains realized in the year. Watch for superficial loss rules and consider your tax brackets.

  • Claim Allowable Business Investment Loss (ABIL) with an election under subsection 50(1). Discuss with us the compliance rules.

  • Prescribed rate interest on intra-family loans outstanding in 2021 must be paid on or before January 30, 2022, to avoid attribution of income.

Tax-efficient investments:

  • Hold investments intended for capital growth outside your RRSP and hold interest-generating investments inside RRSP.

  • Contribute to RESP for your child or grandchild. Plan for the RESP to receive the maximum lifetime Canada education savings grant of $7,200. Discuss with us about RESP withdrawing rules.

  • Canada Child Benefit – If you receive this benefit, invest the funds in a separate account in trust for your children. Investment income on these funds will not be taxable to you.

  • For high earners, consider holding investments in a corporation. Discuss the merits with us before setting up an investment holding corporation.

  • Repay debt that has non-deductible interest before other debt that has interest qualifying for deduction (e.g. investment loan) or tax credit (student loan).

International information reporting:

  • T1135: Review your foreign holdings to determine if you have a reporting obligation with a total cost of specified foreign property exceeding $100,000 at any time in the year – required to file Form T1135.

  • T1134: for owning shares in a non-resident corporation that is a foreign affiliate at any time in the year, must file by October 31, 2022 (i.e. due 10 months after a taxpayer’s year-end, instead of 12 months). Watch out for the foreign accrual property income (FAPI) complications. Discuss the implications with us.

  • T1142: for distributions received in the year from a non-resident trust that the taxpayer is a discretionary beneficiary including the relevant distribution information.


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