CRA: 2 Tax Breaks To Keep in Mind for 2021 Tax Season

The deadline for filing the 2020 taxes is less than a month away. If you haven’t filed yet, it might be prudent to pick up the pace and don’t forget your tax breaks.

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The deadline to file and pay 2019 taxes was moved quite substantially to accommodate the unusual circumstances of 2020. People were speculating that the same thing might happen again in 2021, especially considering that the country isn’t fully out of the woods yet.

But the Canada Revenue Agency (CRA) is stuck with the typical tax deadlines, and you have to file your 2020 taxes before April 30. Ideally, you should have already filed (the sooner, the better), but if you haven’t, you still have a few weeks to get done with this important financial responsibility. But even as you rush your tax filing, you shouldn’t forget about all the tax breaks you are eligible for, especially the following two breaks.

Childcare expenses

The year 2020 was a hectic year. Many people had to work from home for the first time ever in their lives, which disrupted their job routines. By the way, don’t forget the work-from-home tax credit as well. Leverage the flat-rate method to get an easy tax break.

Since many parents spent a lot of time at home instead of away on work, they might not have paid as much for childcare expenses as they usually pay in any given year. So if you are used to claiming childcare expenses on your taxes, understand that this year’s expenses would be different. You might even have incurred additional costs if you had to go to work and your child’s daycare centre was closed down due to COVID-19 (bringing in a nanny and house sitter).

RRSP contributions

You might have faced other financial disruptions last year as well, but even if you didn’t contribute to your RRSP when you usually do (or not as much as you typically do), you can still claim a deduction. So even if it’s relatively smaller compared to previous years, you should claim your RRSP contributions as you file your taxes.

And if your contributions are just sitting in your RRSP, waiting for you to move them into a decent stock, you might want to consider Power Corporation of Canada (TSX:POW). The Montreal-based financial service company also happens to be a six-year-old Dividend Aristocrat that’s currently offering a juicy 5.4% yield.

While it’s not a powerful growth stock (usually), it displayed very steady growth in the last 12 months. Its dividends seem relatively safe given its sable payout ratio and erratically growing net income. It’s a holding company with two divisions: Power Financial and Investment Platform. Under the Power Financial umbrella, it owns 66.9% of Great-West Lifeco, 62.1% of IGM Financials, and 48.7% of Switzerland-based Pargesa.

Foolish takeaway

Filing your taxes as early as possible gives you more time and peace of mind to piece everything together nicely. But when you are rushing to file your taxes near the deadline, you might make costly mistakes, like forgetting a major deduction that you can’t carry forward. You should therefore try to make a practice of filing as early as possible.

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 Adam Othman has no position in any of the stocks mentioned.

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