New Tax Credits You Don’t Want to Miss
Tax season puts money on our minds—occupational hazard of our financial services brain, obviously. It is not only about keeping CRA at bay (okay, it often is); it is also about making sure everyone knows to take advantage of the tax credits available to them. Because no one wants to pay CRA more money than necessary.
Here are the changes you need to know about when filing your taxes this year.
For individuals
Home office deduction increased to $500.
If you once again found yourself transforming part of your home into an office space in 2021, you may be eligible for the temporary home office expense credit first introduced in 2020, as it has been extended into this tax year. Eligible expenses include rent, electricity, internet, and unreimbursed office expenses or cellphone costs. To qualify, you had to work from home more than 50% of the time for at least four consecutive weeks.
There are two different ways to claim this credit:
- Flat rate method: Claim a tax deduction of $2 for each day worked from home in 2021, up to a maximum of $500. There’s no need to show expense receipts to support the claim and your employer does not need to complete form T2200S, Declaration of Conditions of Employment for Working at Home Due to COVID-19.
- Detailed method: Claim the actual amounts you paid by adding up home expenses and unreimbursed home office supplies and then calculate the percentage of costs that can be applied to the square footage of your home office space in comparison to your entire home. For this method, you must keep all supporting documents and you must receive a signed T2200S form from your employer.
The flat rate method is simpler and recommended for straight-forward home office costs. If, for example, you worked from home for a 30-day period (that’s $60 under the flat rate method) but had to buy $100 of office supplies in order to do your job (and the cost was not reimbursed by your employer), then the detailed method will result in a larger tax credit.
Climate action incentive (CAI) no longer claimed on T1 returns
The CAI is a tax-free amount individuals and families living in Alberta, Saskatchewan, Manitoba and Ontario can receive to offset the cost of the federal pollution pricing. It has been available for several years, but can now no longer be claimed annually as a refundable credit on personal income tax refunds. Instead, those eligible will receive quarterly payments through the benefits system. Read more.
For businesses
T2200 form requirements
The need to complete a T2200 or T2200S form is only necessary if an employee chooses to claim their home office deduction using the detailed method. For any employees claiming additional expenses, such as travel expenses or other costs, a regular T2200 form is required. More information is available on the CRA site.
CEBA repayment deadline extended
If your business received a Canadian Emergency Business Account (CEBA) interest-free loan of up to $60,000 at any point during the pandemic, we have good news. The repayment deadline to qualify for partial loan forgiveness has been extended by one year for eligible borrowers in good standing. To keep it interest-free and to get up to $20,000 (33%) of the loan forgiven, the balance must now be repaid by December 31, 2023.
Take note for 2022…
We may be in the thick of the 2021 tax filing season but we want you to be prepared for 2022 as well. Here are two things to remember this year to avoid surprises or mad scrambles next year.
Luxury Tax
Planning to buy a luxury vehicle in 2022? Be prepared for extra sticker shock. Under proposed legislation, cars and aircrafts over $100,000 and boats over $250,000 will be slapped with an additional tax of the lesser of 10% of the total price or 20% of the total price above $100,000 ($250,000 for boats). If passed, the tax will apply to all luxury goods delivered on or after Jan. 1, 2022.
Ontario Staycation Tax Credit
Planning to keep vacations local this year? Keep those receipts! This temporary tax credit will allow Ontario residents to claim 20% (up to $1,000 for an individual and up to $2,000 for families) of accommodation expenses. This includes hotels, cottages, campgrounds, resorts and lodges. Your receipt must show the location of the accommodation, the amount paid, GST/HST paid, date of stays, and name of the payor.
Know your tax deadlines!
Feb. 28, 2022: Sole proprietors and corporations who pay employees via payroll must complete T4 salary declarations.
March 1, 2022: Individual taxpayers’ deadline to contribute to RRSPs for the 2021 calendar year.
May 2, 2022: Individual tax returns for the 2021 calendar year must be filed and paid.
June 15, 2022: Self-employed sole proprietors and partnerships (i.e. unincorporated businesses) must file before penalties apply. But, interest on taxes owed is charged as of May 2, 2022.