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11 Ways to Maximize Your Tax Deductions in 2020

11 Ways to Maximize Your Tax Deductions in 2020

Here are some quick and easy ways to maximize your tax deductions in 2020 before the year runs out. We’ve updated our article from the year prior and added a deduction that is aimed to help you during Covid.

tax deductions 2019

1) Covid Relief

Each employee is entitled to receive $500 as a non-taxable payment to assist with setting up a home office due to Covid. As well, employers may issue a T2200 to any employee who worked from home more than 50% of the time, which will enable the employee to deduct home office expenses. 

2) Make a charitable donation

Donate to a registered charity. Make sure you obtain a receipt and that the donee issuing it is legally entitled to do so. The Canada Revenue Agency provides a searchable online database that allows you to confirm whether a charity is registered and eligible to issue official donation receipts. You can search this list by clicking here. You can also determine the status of a registered charity by calling the CRA at 1-800-267-2384.

At the federal level, your credit will be 15 percent of the first $200 of donations and 29 percent of your additional donations. All provinces also have similar credits, which fluctuate between 4 percent and 24 percent.

3) Contribute to your RRSP and TFSA

Contribution to your RRSP reduces your taxable income and therefore reduces the amount of annual tax you will pay. It is the most common deduction claimed by Canadians.

Note you have until March 2, 2021 to contribute to your RRSP being the first business day after the 60th day of the year. If you don’t contribute by that time, not to worry, you won’t lose it if you don’t use it. The remaining contribution room will be rolled over to the next year. The maximum amount of your contribution is 18% of your 2020 salary income or $27,300 whichever is less, plus any unused contribution room from previous years.

Contribution to your TFSA will not form a deduction to your taxes, however increases or gains within the account will not be subject to income tax. The annual contribution amount for 2021 remains the same at $6,000 per year.

4) Maximize Medical Expense Deductions

You would be surprised by the number of deductible medical expenses permitted under the Income Tax Act. The Canada Revenue Agency provides a handy list of medical expenses that may be tax deductible. To search this list, click here.

5) Apply for First-Time Home Buyers’ (FTHB) tax credit

If you bought your first home this year, you are entitled to claim a $5000 non-refundable tax credit on your 2020 tax return. The non-refundable tax credit rate of 15 percent means the actual reduction of your taxes will be $750. If your federal taxes are less than $750, your credit will be reduced accordingly since it is a non-refundable credit

This amount can be divided between spouses or between other people jointly purchasing the home, but the total amount claimed for the purchase cannot exceed $5,000.

6) Disability Tax Credit

The Disability Tax Credit (DTC) is designed to relieve unavoidable expenses for Canadians with disabilities. To be approved for the credit, a medical practitioner must complete Form T2201 and certify your condition. The government recently added nurse practitioners to the list of professionals who can verify eligibility for this tax break.

In 2020, the maximum federal disability amount  is $8,576 with a maximum supplement of $5,003 for persons under the age of 18. In 2021, the maximum federal supplemental amount is $8,662 with a maximum of $5,053 for persons under the age of 18.

7) Claim those Moving Expenses

If you moved for a new job or full-time academic course recently, you might be eligible to deduct moving expenses from your taxable income. Your move has to be at least 40 kilometres closer to your new job or school to qualify for this deduction.

Eligible moving expenses include transportation and storage costs, travel expenses, temporary living expenses, and costs related to selling your old home and buying a new one.

8) Deduct Employment Expenses

Many employees are permitted to deduct various employment expenses where their employer requires them to incur expenses in the performance of their job. In order to qualify, your employer must provide you with a T2200 form which sets out the conditions under which you must incur these expenses.

If you are a commissioned employee you have a wider ambit of deductible expenses available to you than a mere salaried employee. Be sure to check your eligibility by reviewing the CRA’s publication here.

9) Deduct Child Care Expenses

Child Care Expenses that are deductible under subsection 63(3) are expenses paid to an eligible child care provider, a day nursery school or day-care, a day camp, a boarding school or camp or any educational institution for the purposes of providing child care services. Specifically excluded from the definition of child care expenses are medical expenses, clothing, transportation and education costs and board and lodging expenses.
The maximum child care expenses that can be claimed per child each year is limited to the annual child care expense amount which is $8,000 for each child under the age of 7; $5,000 per child for children aged 7 to 16 years, and $11,000 for a child in respect of whom a disability tax credit may be claimed. Generally, these expenses must be deducted by the spouse with the lower income.  

10) Deduct Interest Paid on Student Loans

The Canada Revenue Agency permits you to claim interest paid on student loans in your tax returns. However, note you can only claim interest payments on loans received under the Canada Student Financial Assistance Act, the Canada Student Loans Act, and equivalent provincial or territorial programs.

11) Union/Professional Dues and Licensing Examination Fees

You may claim the amounts related to your employment that you paid for annual dues for membership in a trade union or an association of public servants or for professional board dues required under provincial or territorial law.

If you paid insurance premiums relating to your profession, these are deductible as well. For example, doctors, lawyers and nurses can claim their malpractice insurance as a deduction against their income.

We’re Here to Help

For the complete list of all available deductions and credits, click here or contact us, we’re here to help™.

You work hard for your money. We work hard for you to save it.

-Shira Kalfa, BA, JD, Partner and Founder

Shira Kalfa is the founding partner of Kalfa Law. Shira’s practice is focused in corporate-commercial and tax law including corporate reorganizations, corporate restructuring, mergers and acquisitions, commercial financing, secured lending and transactional law. Shira graduated from York University achieving the highest academic accolade of Summa Cum Laude in 2012. She graduated from Western Law in 2015, with a specialization in business law. Shira is licensed to practice by the Law Society of Ontario. She is also a member of the Ontario Bar Association, the Canadian Tax FoundationWomen’s Law Association of Ontario, and the Toronto Jewish Law Society. 

© Kalfa Law 2020

The above provides information of a general nature only. This does not constitute legal advice. All transactions or circumstances vary, and specified legal advice is required to meet your particular needs. If you have a legal question you should consult with a lawyer.

Speak with a tax lawyer today about maximizing your tax deductions for 2019.

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