Will you be working in 2020?
- Maximum RRSP contribution: The total amount you can contribute to your RRSP each year is made up of your contribution limit for the current year plus any “carry-forward” contribution room from previous years. Your RRSP contribution limit for 2019 is 18% of the earned income you reported on your tax return in the previous year, up to a maximum of $26,500. The maximum contribution for 2020 will be $27,230. If you have a company pension plan, your RRSP contribution limit is reduced. Both your annual contribution limit and any carry-forward contribution room are shown on your notice of assessment (NOA, sent by the CRA once your tax return is filed and has been assessed).
- TFSA limit: Any individual who is 18 years of age or older, who has a valid social insurance number (SIN) and is deemed to be a Canadian resident, is eligible to open a TFSA. In certain provinces and territories, the legal age (depending on the age of majority in that province or territory) at which an individual can enter into a contract (which includes opening a TFSA) is 19. In 2009 or later, in these jurisdictions, a person 18 years of age who would otherwise be eligible, will accumulate TFSA contribution room for that year and carries it over to the following year when he/she is able to open a TFSA.
A person determined to be a non-resident of Canada for income tax purposes can hold a valid SIN and be allowed to open a TFSA, however, any contributions made while a non-resident will be subject to a 1% tax for each month the contribution stays in the account.
In 2020, the annual limit is $6,000, for a total of $69,500 for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009. The annual limit for 2019 was $6,000, for a total of $63,500 in room available in 2019 for someone who has been eligible since 2009.
- Lifetime capital gains exemption: The lifetime capital gains exemption is $883,384 in 2020 and $866,912 in 2019. When you make a profit from selling a small business, a farm property or a fishing property, the lifetime capital gains exemption (LCGE) could spare you from paying taxes on all or part of the profit you’ve earned. For many small business owners, it’s a tool to help them save for retirement or invest more in another small business. Determining whether you are qualified for the LCGE is complicated. To find out more, we recommend you speak with an accountant or lawyer.
- Maximum pensionable earnings: For 2020, the maximum pensionable earnings (YMPE) is $58,700 ($57,400 in 2019), and the basic exemption amount remains $3,500 for 2019 and 2020.
- Maximum EI insurable earnings: The maximum annual insurance earnings (federal) for 2020 is $54,200; for 2019, $53,100.
- Low-interest loans: The current family “prescribed” loan rate is 2%. The prescribed rate is an interest rate set quarterly by the Canada Revenue Agency that approximates short-term Treasury bill rates. If you make an investment loan to your spouse, common-law partner, minor child or a family trust for them, the investment income from investing the loan proceeds will be taxed in your hands, rather than in the hands of the family member (or trust) who received the loan, unless certain rules are followed.
If the loan bears interest at the prescribed interest rate in effect at the time the loan was made, these attribution rules will not apply provided conditions are met.
One key point you must remember is that the interest on these loans must be paid at least annually, and by January 30 of the year following the year in which the interest accrued. Note that the interest must be paid on time each year that the loan is outstanding to avoid income attribution. Accordingly, now is the time to ensure that the interest that accrued on such loans in 2019 is paid by January 30, 2020 so that the tax benefit of these loans can be maintained.
- Home buyers’ amount: Did you buy a home in 2019? You may be able to claim up to $5,000 of the purchase cost and get a non-refundable tax credit of up to $750.
- Medical expenses threshold: For the 2020 tax year, the maximum will be 3% of net income or $2,397, whichever is less. For 2019, the max is 3% or $2,352, whichever is less.
- Basic personal amount: For 2020, it will be $12,298, reported on line 300. For 2019, it’s $12,069. (Note that the newly re-elected federal Liberal government promised to raise the basic personal amount over four years to reach $15,000, phasing out the benefits of the increase at incomes over $147,667)
Are you retired or retiring in 2020?
- Age amount: You can claim this amount if you were 65 years of age or older on December 31 of the taxation year. The maximum amount you can claim in 2019, it’s $7,494. In 2020 it will be $7,637.
- Pension income amount: You may be able to claim up to $2,000 on your tax return if you reported eligible pension, superannuation or annuity payments.
- OAS recovery threshold: If your net world income exceeds $79,054 for 2020 and $77,580 for 2019, you may have to repay part of or the entire OAS pension (Recovery Tax, better known as the “claw-back”). The OAS claw-back results in a reduction of OAS benefits by 15 cents for every $1 above the threshold amount and is essentially an additional 15% tax. Unlike other benefits available to low-income seniors, income from OAS is taxable. For 2019, if your income exceeds $126,058, your OAS benefit is reduced to $0 ($123,302 for 2018). For income earned in 2020, it will be $128,137.
Do you have Children and/or Dependents?
- Canada caregiver credit: If you have a dependent who’s physically or mentally impaired, you may be able to claim up to an additional $2,182 in calculating certain non-refundable tax credits.
- Disability amount: The amount for 2020 is $8,576 (non-refundable credit; $8,416 in 2019), with a supplement up to $5,003 for those under 18 (the amount is reduced if child care expenses are claimed; $4,909 in 2019).
- Child disability benefit: The child disability benefit is a tax-free benefit of up to $2,886 (2020) for families who care for a child under age 18 with a severe and prolonged impairment in physical or mental functions. For 2019, the amount is $2,832.
- Canada child benefit: This non-taxable benefit was effective July 1, 2016, and replaced the universal child care benefit (UCCB). In 2020, the maximum CCB benefit will be $6,765 per child under age six and up to $5,708 per child aged six through 17. In 2019, those amounts are $6,639 per child under age six and up to $5,602 per child aged six through 17.
- Child care expense deduction limits: As of 2018, the maximum amounts that can be claimed are $8,000 for children under age seven, $5,000 for children aged seven through 16, and $11,000 for children who are eligible for the disability tax credit.