Registered Retirement Savings Plan Limits
The maximum Registered Retirement Savings Plan (“RRSP”) contribution limit for 2021 is $27,830. Your RRSP deduction for 2021 is generally calculated as 18 per cent of your 2020 earned income, less 2021 pension adjustments to a maximum of $27,830, plus any unused RRSP deduction room carried forward from prior years.
Tax-Free Savings Account Limits
The Tax-Free Savings Account (“TFSA”) annual contribution limit for the 2021 tax year has increased to $6,000. The cumulative contribution limit is $75,500.
Investment income earned in your TFSA is not taxable and the contributions you make to your TFSA are not deductible.
Enhanced Support for Teachers
Under the current tax rules, teachers are eligible to claim a refundable tax credit of 15 per cent on an amount of up to $1,000 in expenditures made in a taxation year for eligible supplies. To qualify, eligible supplies must be purchased for use in a school or other regulated child care facility for the purpose of teaching or facilitating learning. Eligible supplies include books, construction paper, flash cards, games and puzzles, containers, and educational support software. Under the current rules, electronic devices are not included in the list of eligible supplies.
The 2021 Economic and Fiscal Update proposes to enhance this tax credit for 2021 by:
- Increasing the refundable credit to 25 per cent;
- Broadening the rules regarding the locations where teaching supplies are permitted to be used by removing the requirement that teaching supplies must be used in a school or regulated child care facility to be eligible; and
- Expanding the list of eligible supplies to include certain electronic devices, including:
- calculators (including graphing calculators);
- external data storage devices;
- web cams, microphones, and headphones;
- wireless pointer devices;
- electronic educational toys;
- digital timers;
- speakers;
- video streaming devices;
- multimedia projectors;
- printers; and
- laptop, desktop, and tablet computers, provided that none of these items are made available to the eligible educator by their employer for use outside of the classroom.
Home Buyers’ Plan Withdrawal Limit
The Home Buyer’s Plan limit for the 2021 tax year remains at $35,000. Amounts withdrawn under the Home Buyer’s Plan must be repaid to an RRSP over a period not exceeding 15 years, starting in the second year following the year in which the withdrawal was made to prevent any income inclusion. The Home Buyer's Plan applies to first-time home buyers.
First-Time Home Buyers' Amount
The first-time home buyers' amount is $5,000, in respect of which you may qualify for a federal non-refundable tax credit of $750, if you purchased a home in the year and both of the following conditions apply:
- You or your spouse or common-law partner acquired a home; and
- You did not live in another home owned by your/or your spouse or common-law partner in the year of acquisition or in any of the preceding four years.
Interest Paid on Student Loans
Interest paid in 2021 or the preceding five years on qualifying student loans can normally be claimed as a non-refundable tax credit. Interest paid on a Canada Apprentice Loan amount for registered Red Seal apprentices can also be claimed.
Canada Caregiver Credit
For 2017 and subsequent taxation years, the Infirm Dependent tax credit, the Caregiver tax credit, and the Family Caregiver tax credit have been replaced by a new 15 per cent non-refundable Canada Caregiver Credit (“CCC”). The amount in respect of which the CCC is calculated is $7,348 and may be claimed for the care of an infirm dependent relative. The credit amount is reduced by the dependent’s net income over$17,256 and fully phased out when the net income of a dependent exceeds $24,604.
Ontario Childcare Access and Relief from Expenses Credit
In 2019, the province of Ontario introduced the Ontario Childcare Access and Relief from Expenses (“CARE”) tax credit for low- and moderate-income families who pay child care expenses. The CARE is a refundable tax credit that is only available to families with household income under $150,000.
The CARE tax credit is in addition to the existing Child Care Expense Deduction. Families could receive up to $6,000 per child under the age of seven, up to $3,750 per child between the ages of seven and 16, and up to $8,250 per child with a severe disability.
Canada Workers Benefit
For 2019 and subsequent taxation years, the Working Income Tax Benefit is replaced by the Canada Workers Benefit (“CWB”) which is a federal refundable tax credit. The amount of the CWB will be computed as 26 per cent of earned income over $3,000, to a maximum credit of $1,381 for single individuals without children and $2,379 for families (couples and single parents).
The maximum credit is reduced by 12 per cent of adjusted net income over $13,064 for single individuals without children and $17,348 for families.
In addition, in 2019, the government introduced an amendment to clarify that kinship care providers would be considered the parents of a child in their care for the purposes of the CWB. As a result, Kinship care providers would be eligible for the CWB amount available for families, provided all other eligibility requirements are met.
Disability Tax Credit
The
2021 Federal Budget proposed some changes relating to the mental functions necessary for everyday life, life-sustaining therapy, and the calculation of therapy time that are eligible for the DTC. Speak to your Crowe Soberman advisor if you think these changes may apply to you and/or any members of your family.
Adoption Expenses
You can claim an amount for eligible adoption expenses related to the adoption of a child who is under 18 years of age. For the 2021 taxation year, the maximum amount of eligible expenses for each child remains at $16,563. Parents can claim these adoption expenses in the tax year that includes the end of the adoption period for the child.
The adoption period:
- Begins when an application is made for registration with a provincial or territorial ministry responsible for adoption (or with an adoption agency licensed by a provincial or territorial government) or when an application related to the adoption is made to a Canadian Court, whichever is earlier; and
- Ends when an adoption order is issued by, or recognized by, a government in Canada for that child or when the child first begins to live permanently with you, whichever is later.
Lifetime Capital Gains Exemption
For dispositions of qualified small business corporation shares in 2021, the lifetime capital gains exemption has increased to $892,218.
For dispositions of qualified farm or fishing property, the lifetime capital gains exemption is maintained at $813,600 for dispositions before April 21, 2015 and $1,000,000 for dispositions after April 20, 2015.
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