Tax Changes: What You Need to Know for the 2021 Tax Year
There have been some changes to Canada’s tax rules for the 2021 tax year. Understanding these changes and how they affect you is a very important part of making sure you’re handling your tax obligations correctly. Here are the most important personal and small business tax changes you should be aware of.
What are the tax changes for 2021?
2021 Personal Tax Changes
According to the Government of Canada’s web page on 2021 personal tax changes, these are the biggest adjustments to note when getting ready to file.
Zero-Emission Vehicles: The definition of what qualifies as a zero-emission vehicle is different for the 2021 tax year, provided the vehicle was bought after March 1, 2020. It can still qualify if subject to terminal loss claim or capital cost allowance, provided it wasn’t acquired on a tax-deferred basis, or “rollover.” It also can’t have been previously owned by someone who isn’t part of an arms-length transaction.
Canada Workers Benefit (CWB): The rates and income thresholds are different for the 2021 tax year. There is also a “secondary earner exemption” that has been introduced. Information based on province or territory is available.
COVID-19 Benefits: A T4A slip with instructions will be provided to you if you received benefits related to COVID-19. These benefits include the Canada Recovery Benefit (CRB), Canada Recovery Sickness Benefit (CRSB), or Canada Recovery Caregiving Benefit (CRCB). If you received a CRB, you might need to repay all or part of it if your net income is over $38,000. There is a chart you can use for calculating the repayment amount. Indigenous people may find that their benefits are tax-exempt. There is a form you can file for that exemption if you qualify.
2021 Small Business Tax Changes
It’s not just individuals who are subject to some differences in filing this year. There are also 2021 small business tax changes to consider. Here are the biggest ones to be aware of.
COVID-19 Benefits: Self-employed borrowers who received the Canada Emergency Wage Subsidy (CEWS), Canada Emergency Rent Subsidy (CERS), Canada Recovery Hiring Program (CRHP) or Fish Harvester Benefit and Grant Program (FHBGP) must include these in business income or reduce their expenses to match the amount they received. Corporations also have to report these benefits, as they are taxable for nearly every entity that received them.
Three New Programs: The government is proposing three new programs to help businesses that were hit the hardest by the COVID-19 pandemic. These programs are the Tourism and Hospitality Recovery Program, the Hardest-Hit Business Recovery Program, and the Local Lockdown Program. These programs will provide support for businesses that are primarily in the hospitality and tourism industries, so those businesses can stay afloat until the economy recovers.
Territory and Province Changes: Many provinces and territories have changed some of their individual filing requirements. The list of these changes is long and varies by province or territory. The best way to be sure you’re handling your taxes the right way is to look at the information for your location, so you don’t mistake what you can deduct or miss any important deadlines.
If you follow the guidelines for your 2021 personal or small business income taxes and make sure you’re taking any changes into account, you can reduce any chances of having a problem with underpayment of your taxes. You can also reduce the chances that you’ll miss a deduction and end up paying more than you need to. Fortunately, the government is pretty clear about the changes, and what you need to do to file your taxes successfully. If you would like to discuss how tax changes could impact your business or personal return, book a free consultation with an Avisar expert.
Disclaimer:
Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.
