Canada Revenue Agency: 3 Major CRA Updates for 2020

Know the deductions and tax credits available to lighten your financial burden in 2020.

| More on:
Person Hands Opening Mailbox To Remove Newspaper

Image source: Getty Images

The COVID-19 pandemic has completely changed the business and economic scenario in the last two months. As businesses have closed down, the unemployment rate has touched unprecedented levels. The Canada Revenue Agency (CRA) also had to step in to provide residents and enterprises with relief.

One Statistics Canada report states that over a million people have lost jobs in Canada during March. Canada’s unemployment rates have risen from 5.6% in February to 7.8% in March. The federal government is trying to boost the economy and announced billion-dollar relief packages.

Here let’s take a look at three Canada Revenue Agency changes that will impact the taxpayer in 2020.

The Canada Revenue Agency extends tax-filing and payment deadlines

The Canada Revenue Agency has provided an extension to taxpayers in terms of filing and paying taxes. The standard deadline for filing personal tax returns was April 30, 2020. This date has now been extended to June 1, 2020.  The CRA has also extended the deadline to pay the taxes to September 30, 2020.

These extended deadlines will provide Canadians will short-term liquidity during the current uncertain times.

The Canada Revenue Agency enhances CPP

The Canada Revenue Agency is gradually enhancing the Canadian Pension Plan (CPP). This means Canadians will receive higher benefits in exchange for higher contributions. The CPP aimed to replace about 25% of your average work earnings until 2019. The CPP enhancement should replace about 33% of the average work earnings.

This means the total contribution rate for employees will gradually increase from 4.95% to 5.95% between 2019 and 2023.

Basic Personal Amount

In late 2019, the federal government proposed to amend the Income Tax Act and increase the basic personal amount (BPA) to $15,000 by 2023. The basic personal amount is a non-refundable tax credit that can be claimed by all residents. The CRA will provide a full reduction from federal income tax to individuals with taxable income below the BPA.

It also provides a partial reduction to taxpayers with taxable income that’s around the BPA. In 2020, the Canada Revenue Agency increased the BPA from $12,298 to $13,229 for individuals with a net income of up to $150,473.

This increase is gradually reduced as income levels move higher. For individuals with a net income above $214,368, the increase in BPA does not apply. In these cases, the BPA stands at $12,298.

Where do you invest these additional savings?

The Canada Revenue Agency has allowed Canadians to delay tax payments. The above-mentioned increase in the BPA will also result in savings for several individuals. So, where do you invest these incremental savings (though you will have to pay taxes eventually)?

The current pullback in equity markets makes dividend stocks ideal investments. You can invest in high-quality, dividend-paying stocks. The ongoing market volatility has driven share prices lower. This has increased forward yields for companies such as Fortis (TSX:FTS)(NYSE:FTS).

Utility companies such as Fortis are defensive investments. While consumer spending has fallen significantly, people are unlikely to delay the payment of electricity and gas bills. The predictable and stable cash flows make utility stocks such as Fortis almost recession-proof.

Fortis stock is trading at $55.6, which is 6% below its 52-week high. Comparatively, the iShares S&P/TSX 60 Index ETF is trading 14% below its 52-week high. Fortis has a forward yield of 3.43%, which means an investment of $20,000 in this stock will result in annual dividend payments of $686.

Fortis is one of the top stocks to hold in case recession fears come true. Its growing income, long-term growth prospects, and a regulated utility asset base make it a winning bet in the upcoming decade.

Fortis has also increased dividend payments for 45 consecutive years. As a majority of its operations are under long-term contracts, the company’s earnings and cash flow remain stable across economic cycles, making a dividend cut very unlikely.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.

More on Dividend Stocks

Female hand holding piggy bank. Save money and financial investment
Dividend Stocks

RRSP Savings: 2 Top TSX Dividend Stocks to Build Retirement Wealth

Here's how investors can turn small initial RRSP contributions into substantial savings for retirement.

Read more »

Man holding magnifying glass over a document
Dividend Stocks

2 BMO ETFs Are Less Volatile Than BMO Stock

Two ETFs of a big bank are more suitable for risk-averse or ultra-conservative investors than its stock.

Read more »

Target. Stand out from the crowd
Dividend Stocks

1 Cheap Dividend Stock to Buy as Recession Fears Rise

Great-West Lifeco (TSX:GWO) is an undervalued financial stock that looks like a great buy, even as the world economy tumbles…

Read more »

Profit dial turned up to maximum
Dividend Stocks

2 TSX Stocks Paying Over 5% in Dividends

Add these two blue-chip dividend stocks to your portfolio for wealth growth through shareholder dividends and capital gains.

Read more »

Business people standing near houses models
Dividend Stocks

2 REITs to Own as Rental Housing Demand Rise

Two prominent residential REITs should be on your buy list, as the rental housing market picks up due to rising…

Read more »

Retirement plan
Dividend Stocks

FIRE Movement: How to Retire Early Using Your TFSA

You can increase your financial independence and even retire early by investing in solid dividend stocks in your TFSA over…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: 2 Stocks to Buy Now for a Personal Pension Fund

RRSP investors can find top TSX dividend stocks at cheap prices today.

Read more »

Cogs turning against each other
Dividend Stocks

1 Passive-Income Stock to Counter Volatility

Looking for a stock that can counter volatility now and tomorrow? This stock is a reliable option for growth and…

Read more »