2 Giant COVID-19 Tax Breaks the CRA Is Dishing Out in 2020

The workspace-in-the-home tax deduction and one-time CCB enhancement are just two of the giant COVID-19 tax breaks in 2020. To maximize the tax-free benefit of the TFSA, you can invest in the high-yield Capital Power stock.

| More on:
Man making notes on graphs and charts

Image source: Getty Images.

Canada’s immediate response to the coronavirus outbreak was to move back the tax-filing and tax-payment deadlines. COVID-19 hit the country in time for the 2020 tax season. The extensions by the Canada Revenue Agency (CRA) gave taxpayers ample time to prepare, as they prioritize health and safety over income tax returns.

Apart from the tax date changes, the CRA came out with several tax breaks this year as additional support to distressed Canadians. Two of the prominent ones are the Canada Child Benefit (CCB) and the workspace-in-the-home tax deduction.

Workspace-in-the-home tax deduction

Remote work became prevalent, as the government implemented lockdown measures to prevent the spread of COVID-19. The CRA deduction isn’t new, but the disruption forced people to perform work or conduct business at home. You can claim the lucrative tax deduction if you convert your home into a workplace or business office.

The CRA sets two conditions before you can deduct expenses. First, you must be working more than 50% of the time in your makeshift office or workspace in your home. Second, the purpose of using a place in your home as an office or place of business is to earn employment income.

Tax-free CCB enhancement

The closure of schools and daycare centres meant Canadian parents need to stay home with the children and work from home at the same time. CRA has $2 billion to enhance the CCB and provide eligible recipients with a one-time top-up of $300.

CCB recipients, however, must file their 2019 tax returns to receive the higher benefits for 2020-21. The CRA will stop the payments in October 2020 if your tax return is not with them in early September. The pandemic isn’t over, so you shouldn’t miss claiming the tax-free benefit.

TFSA stock

The tax breaks in 2020 are helpful in many ways because families have income support during the crisis. Canadians with investable funds can invest to earn tax-free income through the Tax-Free Savings Account (TFSA).

Capital Power (TSX:CPX) is excellent in your TFSA. The utility stock is a good buy at $29.43 per share, given its very high 7.23% dividend. For as low as $5,000 investment, you earn $361.50 in tax-free income per year. Make it $50,000, and it’s a whopping $3,615 in passive income annually.

This $3.1 billion company from Edmonton has been in existence since 1891. Currently, Capital Power owns and operates power-generation facilities in the home country and the neighbouring United States. The independent power producer company generates revenue from its highly contracted and diversified portfolio of generation assets.

While some high-yield stocks are dividend traps, slashing dividends to preserve capital or boost liquidity isn’t in the plan. The utility stock even raised its dividend by 6.8% in the third quarter of 2020. It has seven straight years of dividend increases, too.

Important                                                   

Sometimes tax breaks come few and far between. However, the CRA has a host of tax-relief measures available in 2020. Canadian taxpayers shouldn’t miss claiming what is due them, regardless of amount. Every dollar in a deep recession is important.

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 Christopher Liew has no position in any of the stocks mentioned.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

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

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »