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Canada Revenue Agency: Don’t Forget to Claim This Big Tax Credit!

All eyes have been on new benefits announced by the federal government in 2020. These have included radical programs like the Canada Emergency Response Benefit (CERB). This allowed Canadians to apply for a $2,000/month stipend if they were impacted by the COVID-19 pandemic. Applicants went through the Canada Revenue Agency portal.

Today, I want to talk about another program that is often ignored – the Basic Personal Amount (BPA). This allows taxpayers to apply for a tax credit that can take a big bite out of what you owe for the most recent tax year.

Canada Revenue Agency: How to claim this lucrative tax credit

Back in the spring, I’d discussed some important tips for taxpayers in 2020. One of the tips I’d suggested was to explore the Basic Personal Amount. The BPA is a non-refundable tax credit that can be claimed by all Canadians. Its purpose is to provide a full reduction from federal income tax to all individuals with taxable income below the BPA.

In 2019, the BPA stood at $12,298. This allows Canadians to earn up to this amount before owing any federal income tax. Taxpayers must keep the BPA in mind when they are filing with the Canada Revenue Agency in the years ahead. Even better, there is promising news on the horizon when it comes to the BPA.

Good news: This credit is set to expand in the years ahead

When this year started, I’d discussed some of the big changes ahead over the course of this decade. Changes will come to the BPA. In fact, this was one of the promises of the Liberal re-election campaign back in 2019.

In 2020, the BPA will increase from $12,298 to $13,229. The Liberals, who were reduced to a minority government in the previous election, have vowed to bump up the BPA to $15,000 by 2023. This is great news for taxpayers who are looking for extra breathing room. The COVID-19 pandemic has worsened financial troubles for citizens across Canada. This program is one source of relief that taxpayers need to be up on in the years ahead.

How to duck the Canada Revenue Agency and churn out tax-free income

Taking advantage of the BPA when filing out your tax return with the Canada Revenue Agency is a must. However, Canadians should also consider income generation that the government can’t touch under any circumstances. This can be accomplished with a Tax-Free Savings Account (TFSA).

Canadians who open a TFSA may want to consider adding income-generating equities in their portfolio. There are solid options on the TSX that pay out dividends monthly. For example, TFSA investors can scoop up Shaw Communications (TSX:SJR.B). This Canadian telecom has seen its stock drop 8.2% in 2020 as of close on November 10. However, its shares have increased 5.4% week over week.

The company has managed to post solid results in the face of this historic crisis. Moreover, it delivered EBITDA growth of 3.7% in fiscal 2020. Shares of Shaw Communications possess a favourable price-to-book value of 1.9, putting in solid territory relative to industry peers. Better yet, it last paid out a monthly dividend of $0.099 per share. That represents a strong 5.1% yield.

Here are more stocks that can work wonders in your TFSA . . .

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