Canada Revenue Agency: A $2,071 Basic Personal Tax Credit for All Canadians

The CRA gives you many tax credits. While every tax credit has eligibility criteria, the basic personal tax credit is for every Canadian. 

| More on:
Happy diverse people together in the park

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

As a Canadian or a resident of Canada, you get many benefits depending on your income, marital status, age, and the number of children. But there is one basic benefit for all Canadians, rich or poor or single or married. And this one benefit is the basic personal amount (BPA) tax credit. 

Like all its benefits, the Canada Revenue Agency (CRA) adjusts the BPA tax credit for inflation and income. For 2021, the basic personal tax credit is $2,071.

Are you eligible for the CRA’s basic personal tax credit? 

The CRA adopts a progressive tax system, where it charges higher tax to the wealthy and lower tax to low- and mid-income earners. But it does not charge any tax on essential goods like grocery and prescribed medicines. It also calculates the minimum amount a Canadian needs for essentials like utility bills and healthcare and exempts that amount from the 15% federal tax.

For 2021, the CRA arrived at a basic personal amount of $13,808, which brings a tax credit of $2,071. Now, I said the BPA tax credit is for the rich and poor, but the CRA has set the tax credit range of $2,071 and $1,863.  

People earning above $216,511 can claim $1,863, and those earning below $151,978 can claim $2,071 in basic personal tax credit. If your 2021 net income is between $151,978 and $216,511, your BPA will reduce gradually. 

How to use the basic personal tax credit

There is more to it than meets that eye. You can leverage the BPA tax credit to claim some CRA cash benefits it offers low- and mid-income Canadians. 

  • If your income is below $48,000, you can get the Goods and Service Tax (GST) refund. 
  • As a parent, you can get the maximum Canada Child Benefit (CCB) of $6,833 for a child below six if your income is below $32,028. You will also get an additional CCB of $1,200 only for 2021. 
  • A 65-year-old earning below $79,845 can get the Old Age Security (OAS) of $7,384. 

Several tax benefits, like the BPA tax credit, will reduce your tax bill and encourage you to claim the above CRA cash benefits. For instance, Sam turned 19 this month. He is a student, and his overall income is around $10,000. He can leverage the BPA tax credit to reduce his federal and provincial tax bill to zero and claim a $456 GST refund

Enhance your CRA tax benefits 

The real amount of the basic personal tax credit can be more than $2,071, depending on how you use it. If you spend your tax savings, the tax credit is the above amount. But if you put this amount in the Tax-Free Savings Account, it can even double in two to three years. 

You can invest the $2,000 amount in growth stocks like Magna International (TSX:MG)(NYSE:MGA). Magna is not an automaker but a supplier, engineer, consultant, and third-party manufacturer for most automakers and tech companies trying their hands with auto. With factories in the world’s largest auto markets of China, Europe, and the United States, Magna gives you international exposure. Moreover, the company is at the core of the electric vehicle (EV) wave and is also preparing for the autonomous vehicle (AV) revolution. 

Even the government policies are on Magna’s side. America, Canada, and Europe are investing billions of dollars and bringing policies that encourage EV adoption. Both public and private transportation will switch to low-carbon vehicles. Magna will supply components and also manufacture EVs for automakers like Fisker. It also hopes to manufacture Apple car and Google’s Waymo AVs in the future. 

Magna stock has surged 37% year to date. The stock has completed its five-year growth in four months and is still growing. This is because it is in a long-term growth cycle. The earlier you jump the rally, the better. You have already lost $75 income by not investing $2,000 in Magna at the start of the year. 

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 Puja Tayal has no position in any of the stocks mentioned. David Gardner owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool recommends Magna Int’l and recommends the following options: short March 2023 $130 calls on Apple and long March 2023 $120 calls on Apple.

More on Investing

Profit dial turned up to maximum
Tech Stocks

$1,000 Invested in Constellation Software Stock Would Be Worth This Much Today

Constellation Software (TSX:CSU) is trading above $2,000 today. Why this stock is so expensive, and is it worth buying?

Read more »

Dividend Stocks

Passive Income: 3 Top Canadian Stocks to Buy for Monthly Dividends

Companies such as Pembina Pipeline and Killam Apartment REIT pay investors monthly dividends, making them top bets for income-seeking investors.

Read more »

Shopping card with boxes labelled REITs, ETFs, Bonds, Stocks
Stocks for Beginners

TFSA Investors: Top TSX Stocks to Buy With $6,000

Here are two safe, dividend-paying TSX stocks for your long-term portfolio.

Read more »

Gold medal

3 Growth Stocks That Could Be Huge Winners in the Next Decade and Beyond

Are you looking for growth stocks that could be huge winners in the next decade? Here are three top picks!

Read more »

Retirees sip their morning coffee outside.

Retirees: How to Make Over $95/Week in Passive Income TAX FREE!

Canadian retirees who are hungry for passive income should look to snag stocks like Sienna Senior Living Inc. (TSX:SIA) in…

Read more »

Man holding magnifying glass over a document

Where to Invest $500 in the TSX Right Now

Given the massive correction, long-term investors can start buying stocks like Shopify and goeasy to outpace the broader markets by…

Read more »

Aircraft wing plane

Air Canada Stock Is a Fantastic Deal Right Now

Air Canada (TSX:AC) is a great stock to own, as market fear turns into hope amid falling recession fears.

Read more »

Pixelated acronym REIT made from cubes, mosaic pattern

Beginner Investors: Get Passive Income by Investing in REITs!

You can get passive income by investing in REITs like Northwest Healthcare Properties REIT (TSX:NWH.UN).

Read more »