CRA: 3 Ways You’ll Pay More Taxes in 2021

The CRA is hiking taxes over the next few years. Offset these with an investment in Fortis (TSX:FTS)(NYSE:FTS) stock.

| More on:
IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT

Image source: Getty Images

The Canada Revenue Agency (CRA) pulled out all the stops to support the economy last year. Canadians received thousands of dollars in benefits that effectively reduced the economic burden of the crisis. 

However, now that the crisis is being resolved and the government has a tremendous debt load to tackle, Canadians may face higher taxes. Here are three ways we could pay more money to the CRA in 2021 and beyond. 

CRA CPP contribution

The CRA has already declared tax hikes on Canada Pension Plan (CPP) payments. In fact, the rate you pay into the collective pension pot will increase every year until 2023. This year, your CPP pensionable earnings will increase from $58,700 to $61,600.

When you account for all the CPP hikes over the next four years, the total hike is 16.7%. That’s a hefty amount of your paycheck committed to the CRA. 

Property taxes

This tax hike is regional. Depending on where you live, your city or province may hike the property taxes you pay on your property. In Toronto, for instance, experts believe the property tax rate will have to increase 47% to cover the budget deficit. The city council will declare a final figure next month, but it’s likely to be steep. 

A similar pattern could play out across the country. This impacts you if you own property, but could also mean higher rents to cover the added expense for landlords. 

Potential GST hike

The CRA has proposed a new Goods and Sales Tax (GST) on digital commerce, which means you could potentially be paying more to shop online or buy software starting July, 2021. 

CRA is still seeking comments on this proposal. So we don’t know exactly how much this will impact ordinary Canadians. What we know for sure is it’s a hike to consumption taxes. 

The only CRA tax you can reduce

CPP contributions, property taxes and GST are beyond your control. If the CRA hike them, you have to pay. The only taxes you could potentially reduce are on investments. Investing through a tax-free savings account (TFSA) could reduce your capital gains and dividends. 

If your investment performance is good enough, you could offset all the tax hikes the CRA throws at you this year. 

You don’t even need to focus on high-growth tech stocks. A robust dividend stock like Fortis Inc (TSX:FTS)(NYSE:FTS) could help you boost performance. In fact, my Fool colleague Amy Legate-Wolfe believes this stock could help you turn a $6,000 TFSA contribution into $1.3 million

That calculator is based on Fortis stock’s incredible dividend and sturdy price performance. The stock avoided the crash in 2020 and has retained its value throughout. It now offers a 3.9% dividend. After 46 years of annual dividend hikes, it seems likely that Fortis will hike this dividend in 2021 as well. 

Adding Fortis stock to your TFSA could help you offset many of the CRA’s tax hikes over the next few years. 

Bottom line

The CRA is hiking taxes over the next few years. Offset these with an investment in Fortis stock. 

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 Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC.

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 »