December 2021 Tax Update

Tax Reminders and Year End Tax Tips

I hope you and your family and friends healthy and safe.

I am doing well.  The above picture of the snowman is from when I attended a paint night at a local restaurant in 2019. When paint nights resume, I look forward to creating more “masterpieces”!

December is here already, and amidst the planning for the holidays, it’s a good time to review your tax and financial situation before the end of the year. Here are some reminders and planning tips that you may find helpful. I am happy to answer any questions you have about the items below or any other tax matters.

Registered Retirement Savings Plan (RRSP)
The deadline to top off or make a contribution to your RRSP for a 2021 tax deduction is March 1, 2022.

Home Buyers Plan (HBP)
Did you withdraw from your RRSP to put a down payment on your home through the HBP program? Your notice of assessment will show the required amount of payback for 2021. Contribute the amount to your RRSP by March 1, 2022. If the contribution is not made, the payback amount is added to income.

Thinking of making some charitable contributions before the end of the year? For donations over $200, every additional $100 reduces your taxes by $46.

If you need to mail in your contribution, make sure it arrives in time so that the charity can you issue you a receipt dated in 2021. If you contribute online, remember to download the actual tax receipt, the email itself may be not be sufficient support.

Old Age Security (OAS) Repayment
If you receive OAS benefits and if your net income is over $79,845, you will have to repay some of those benefits through the filing of your tax return. If you are close to the threshold, consider delaying any additional income such as extra RRIF payments or sale of investments.

Canada Recovery Benefit (CRB)
Did you receive the CRB in 2021? If your net income excluding the CRB exceeds $38,000, you will be required to repay $0.50 of the benefit for every dollar in net income you earn above $38,000. If your net income will exceed the threshold, consider making a RRSP contribution to lower your net income by the March 1, 2022 deadline.

The last period for the CRB was period 28 (October 10 to 23, 2021) which will be open for application until December 22, 2021. Period 27 is also open until December 8, 2021

Tax Free Savings Account (TFSA)
The TFSA contribution limit increases every January 1. The additional contribution for 2022 is $6,000. Login into your CRA My Account to find out your TFSA limit.

Disability Tax Credit (DTC)
If you experienced a change in health and it may be ongoing, consider applying for the disability tax credit. This credit is claimed on the tax return and can reduce taxes up to $2,000 per year.

There is a new digital app for doctors making it easier for you and them to complete the T2201 DTC form. It is called the “Disability Tax Credit – digital application for medical practitioners”.

If you have recently moved to a retirement home or long-term care, make sure you apply for the DTC so that you can claim the eligible attendant portion of your fees.

The government is proposing to broaden access by expanding the definitions of mental functions and loosening restrictions on the 14 hour/week of therapy requirements.

Employment Expenses
Did you work at home due to covid in 2021? The government is proposing to extend the temporary flat method deduction for employees. The maximum claim is $500 for 2021 and 2022 ($2 per day worked at home).

There was no mention in the Liberal platform about the T2200 Short Form. If you expect that your actual out of pocket work related expenses will exceed $500 and it is in your employment contract that you are responsible for those expenses, consider having your employer fill out the T2200 Declaration of Conditions of Employment.

Non-registered Investments
Now is a good time to review your non-registered investment activity to see if you have any capital gains that you may wish to offset by selling poor performing investments with accrued losses. The settlement must take place in 2021, so the trade date must be no later than December 29, 2021.

Consider deferring any capital gains until early 2022, the taxes on these gains are not payable until April 2023.

CRA My Account
As CRA continues to offer more and more services online, I recommend signing up for CRA My Account if you have not done so already. Once you are signed up you can access prior year notice of assessments, your RRSP and TFSA limits, change your address, update direct deposit, check payments made and apply for benefits.

To sign up, go to Canada Revenue Agency’s website, click on Sign in to a CRA Account, then click on “My Account” and follow the instructions to register.

Who says tax isn’t fun?
In a recent tax course I attended online, the presenters shared a delightful video from Belize. To educate the population about the new GST, the Belize government released the “GST song”.

(If the link does not work, type “youtube Belize general sales tax” in your browser.)

Please contact me if you would like to discuss any of this information.

I wish you and yours the best of the holiday season.