Do Canadians claim available tax credits and deductions every tax season? Tax preparations for this year could be more confusing because of the numerous federal government transfers you must include in your 2020 tax returns. However, taxpayers can derive substantial tax savings if they don’t miss out on five important tax write-offs.
1. Childcare expenses
Claiming childcare expenses for 2020 taxes is straightforward. Don’t forget to claim them if you paid for a daycare center or hired a caregiver to care for your child so you could work or attend school. Another valid reason is that you also need the services to do a project from a grant received.
2. Work-from-home expenses
Did you work from home in 2020 more than 50% of the time due to COVID-19? If yes, claim the work-from-home expenses as a tax deduction. You can go for the simplified flat rate method (maximum deduction of $400) or the detailed method for larger expenses.
3. GST credit
You may qualify to receive the Goods & Services Tax (GST) payments when you file your tax return on or before April 30, 2021. The payments are based on your net income, and the Canada Revenue Agency (CRA) typically pays every quarter. Your first payment should be in July if you filed your tax return on time or by the deadline. The second payment is in October, and then the remaining two would be in January and April of the following year.
Canadians with income of between $13,000 and $24,000 may be eligible for the Canada Workers Benefit (CWB). This refundable credit also includes a disability supplement if you have an approved Disability Tax Credit Certificate on file with the CRA.
5. RRSP contributions
Registered Retirement Savings Plan (RRSP) users take note. In case you’re unaware, RRSP contributions are excellent tax-saving tools. All contributions to this account are tax deductions. It can reduce your total income, dollar-for-dollar, and bring down your tax payables significantly.
Boost non-taxable income
Canadians can boost their non-taxable income in 2021. If you have a Tax-Free Savings Account (TFSA) and free cash to spare, invest in income-producing assets. A dividend stock like NorthWest Healthcare Properties (TSX:NWH.UN) is a cash cow during the pandemic. Likewise, you’ll have more financial cushion during a long-drawn recession.
The $2.49 billion real estate investment trust (REIT) pays a fantastic 6.18% dividend. Assuming your available TFSA contribution room is $25,000, the tax-free income you can derive is $1,545. Northwest Healthcare is the lone REIT in the cure sector, so the stock’s popularity has risen immensely since the pandemic began.
At only $12.89 per share, would-be investors gain access to a portfolio of high-quality international healthcare real estate infrastructure. NorthWest Healthcare has interests in medical buildings, hospitals, and clinics in Australia, Brazil, Canada, New Zealand, and Europe. About 190 properties produce stable, recurring rental revenues. The partners or lessees are mostly leading healthcare operators.
When you receive your tax assessment from the CRA, check which deductions and credits require documentary proof or evidence of expenses. Tax experts advise Canadians to save and keep receipts just in case. It would be best for tax-conscious individuals to hold on to all tax documentation for easy reference later on.