While the obligation to file a tax return recurs annually, that return form is never exactly the same from year to year. Tax brackets and allowable deduction and credit amounts change each year and, more significantly, new deductions are provided for and new credits allowed or eliminated.
The changes on the individual income tax return for 2020 are perhaps not as numerous or as significant as in some prior years, but there are new credits and deductions which may be claimed, and changes to some existing filing procedures. What follows is an outline of some of the more important changes affecting individual tax filers for 2020, and where those changes can be found on the T1 return form.
Home office expense deduction claims by employees — line 22900 and Form T777S
For many years, employees who work from home more than 50% of the time or who use their home as a place to hold client meetings on regular basis have been able to deduct certain expenses when calculating taxable income for the year.
Obviously, during 2020, the number of employees who work from home increased dramatically, and the Canada Revenue Agency (CRA) has made changes to the rules governing home office expense deductions to accommodate that reality.
In previous years, a home office expense deduction was calculated by totalling all eligible expenses and claiming the percentage of those expenses which corresponded to the size of the home office relative to the entire home. For example, an individual whose home work space used 15% of the total square footage of his or her home would be able to claim 15% of eligible home office expenses.
The CRA has added a new cost to the list of eligible home office deduction expenses. Effective for the 2020 and subsequent tax years, eligible employees can include reasonable monthly home internet access fees in tallying home office expenses.
While it’s still possible to calculate and claim home office expenses for 2020 using the detailed method outlined above, the CRA has also made available a simpler method for those who don’t wish to do all of the required calculations involved in the detailed method. Using the CRA’s “quick method”, taxpayers who are eligible to claim home office expenses can simply claim $2 per day, for a maximum of 200 days. The total allowable claim using the quick method is, therefore, a deduction of $400.
Home office expenses are claimed on line 22900 of the return, and taxpayers making this claim must also complete Form T777S.
For anyone who claims home office expenses for 2020, regardless of the method used, there are rules with respect to who is eligible to make such a claim, what expenses can be claimed and what documentation is required to support those claims. Those rules, together with information on how to calculate the claim under various scenarios, are set out on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-229-other-employment-expenses/work-space-home-expenses/work-space-use.html.
Non-refundable digital news subscription tax credit — line 31350
It’s common knowledge that the field of publishing, especially the publication of news, is in a state of flux, as traditional print media adapts to the online dissemination of such news. In recognition of this reality, the federal government will be providing (for the years 2020 to 2024) a digital news subscription tax credit.
For 2020, individual taxpayers can claim up to $500 for amounts paid for qualifying subscription expenses. Generally, such qualifying expenses are those paid to Canadian print journalism organizations (i.e., not broadcast media) for a digital news subscription to content that is primarily original news.
While the maximum amount which can be claimed for such a subscription is $500 per year, that amount can be split between taxpayers, as long as the total claim does not exceed $500.
The digital news subscription tax credit is claimed on line 31350 of the 2020 tax return.
Refundable training tax credit — line 45350
Canadian taxpayers aged between 26 and 66 years of age may be able to claim a refundable tax credit for eligible tuition and other fees paid in 2020 in relation to occupational, trade, or professional training.
To qualify for the credit, such tuition fees must generally have been paid to a Canadian university or college, or to a certified Canadian institution offering occupational training. Individuals wishing to claim the credit must also have been resident in Canada throughout 2020 and must meet certain income requirements and limitations for 2020.
Each of those requirements is outlined in more detail on the CRA website at https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-training-credit/who-can-apply.html.
Providing the NETFILE access code
The vast majority of Canadian taxpayers file their returns electronically, using NETFILE or E-FILE. At one time it was necessary, in order to NETFILE, to obtain an access code from the CRA in order to file electronically. That’s no longer the case, as the CRA now uses a taxpayer’s date of birth and social insurance number to satisfy their online filing security requirements.
This year, however, taxpayers who are using NETFILE have the option of including an access code as part of the return filed, for a different purpose. Some background is required to understand that purpose.
Taxpayers frequently contact the CRA (often through the individual’s income tax enquiries line at 1-800-959-8281) with questions about their particular tax situation. CRA representatives must, of course, confirm the identify of the person they are speaking to, in order to establish that that person is entitled to the information sought. To do so, the caller is required to answer questions beginning with their name, social insurance number, and date of birth, followed by questions which are specific to the information provided in their tax returns filed for previous years.
This year, taxpayers who include their particular access code in their return filings will be able to use information from the 2020 return as identifying information in any future contacts with the CRA, while those who choose not to provide the access code will not. (Note that such taxpayers should still be able to fulfill information security requirements by providing information filed in returns from other tax years.)
The access code which taxpayers can choose to include with the 2020 return filed was provided by the CRA on the taxpayer’s 2019 Notice of Assessment. That eight-digit alpha-numeric code can be found on page 1 of that Notice of Assessment, in the top right-hand corner.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.