The end of 2020 is fast approaching which means it’s time for you to start making year-end tax planning decisions.
To help you on your way, here are some important tax planning considerations for employees.
- If you were eligible for the Canada Emergency Response Benefit but did not apply, you have until December 2, 2020 to claim the benefit retroactively.
- If you will be in a lower tax bracket in 2021 than you were in 2020, consider deferring the receipt of certain employment income. This may include deferring a bonus or delaying billing for freelance or consulting work.
- If you’re in a lower tax bracket in 2020 than you will be in 2021, considering accelerating the payment of certain employment income. This may include requiring freelance or consulting clients to pay bills before the end of the year.
- If you have an employee loan, pay any interest you plan on paying for 2020 by January 30, 2021.
- If you worked from home during COVID-19, consider having your employer issue a T2200 Declaration of Conditions of Employment and track home office expenses. You may be able to claim these expenses on your personal return.
- If you moved to be closer to work or school, you may be able to claim your moving expenses.
- If you know you will have extra deduction and non-refundable tax credits in 2021, consider reducing how much income tax is remitted at the source.
- When you use a company car, you may incur an operating cost benefit or standby charge. To reduce an operating cost benefit, consider reimbursing your employer for the personal use of the car or limit how often you use the vehicle for personal driving. To offset the standby charge, you can reduce the expense by limiting how often the car is available to you, don’t use it for personal use or choose a less expensive vehicle.
- Make sure you have kept proper records for the use of a work vehicle.
- Starting in 2020, if you are 25 to 65 and enrolled at an eligible educational institute, you may be able to claim the Canada Training Credit.
- If you have any work-related expenses, find out if you can claim a rebate for the GST/HST paid on them.
- Decide whether to make any year-end donations.
- Calculate your medical expenses tax credit to determine whether it is in your best interest to incur additional medical costs before year end.
- Decide whether you will make contributions to your RRSP. This year’s contribution limit is $27,230.
- If you are turning (or turned) 71 in 2020, your final RRSP contributions must be made before the end of the year.
- If you are planning to withdraw from your RRSP for the Home Buyers’ Plan (HBP) or Lifelong Learning Plan (LLP), consider waiting until January. That way you won’t have to start paying it back for an additional year.
- If you are already in repayment for the HBP or LLP, remember to make your payment. If you don’t, any unpaid amount owing will become taxable income.
- If you are planning to withdraw from your TFSA, you may want to withdraw before the year ends so that the withdrawal amount will be added back to your contribution room at the beginning of 2021. If you wait to withdraw in January, the amount will not be added back to your contribution room until 2022.
- Certain expenses must be paid before year-end to be deductible on your tax return. This includes interest paid and investment counselling fees, childcare expenses, alimony, medical expenses and professional dues.
- Check in with your tax professional for last minute tax planning strategies specific to your situation. Contact us today!