Income Tax Measures – in brief
On April 19th, the Federal Budget 2021 was unveiled by the finance minister, Chrystia Freeland. The 2021 budget is over 700 pages of regulation and legislative changes by the Federal Government, some that take place immediately, while others require the passing of a budget bill before they come into effect.
We’ve sorted through the hundreds of pages to try to share some of the most relevant line items to our customers, but keep in mind that until any legislation is passed, the following highlights are only proposals.
- Disability Tax Credit: There are a number of credits that are available to those with recognized physical and mental disabilities. The Income Tax Act’s recognition of impairment in physical or mental function terminology has not been updated in recent years. The budget proposes an expansion on the inclusion of what are considered “mental functions necessary for everyday life” as well as aspects of “life-sustaining therapy”, by modernizing the language to more closely match clinical terminology.
- Canada Workers Benefit: This non-refundable tax credit that reduces taxes-owing for individuals, or families, who qualify based on their adjusted net income. The budget proposes to enhance this tax credit for low income workers by increasing the amount of earnings allowed for individuals and families before the benefit is phased out for them.
- Northern Residents Deductions: For those Canadians willing to brave the coldest winters, living in Northern Canada, the NRD is a deduction that reduces taxable income and is based on residency and travel. The 2021 budget proposes to add a flat-rate method option for the travel deduction, expanding access to that travel component by including a standard amount to be allocated across multiple trips and non-medical personal travel (with eligibility requirements and exceptions).
- Tax treatment of C19 Benefits: If you were required to pay back your COVID Relief benefit(s), the 2021 Budget proposes an amendment to the Income Tax Act to give individuals the ability to use deduction associated with that repayment in the year the benefit was received, even if paid back in a different year.
- Correspondence with the CRA: The budget proposes changes to the Income Tax Act to allow the CRA to send electronic documents for some correspondence, to communicate with individuals that file electronically, without the individual taxpayer approving the same. Those that file with paper, will continue to receive paper notices.
- Increasing OAS for those 75 and older: The budget proposes an immediate one-time payment of $500 in August of 2021; and then to increase the OAS by 10% ongoing, effective July 2022.
- Student Loan Relief: The budget proposes to give student loan recipients, current students and receipt grads, an additional year of relief from interest, for Canada Student Loans and Canada Apprentice Loans to March 31, 2023
- Benefit Extensions: The budget proposes to extend the benefit period for the Canada Recovery Benefit (CRB) for an additional 12 weeks (for a total of 50 weeks, with the final 8 weeks reduced to $300 per week), and the Canada Recovery Caregiving Benefit (CRCB) for an additional 4 weeks.
There is much more to the 2021 Federal budget proposal than what is included here that relates to other areas such as business support and amendments to GST/HST regulations. Once the budget bill is approved, we will be adding more resources to our TurboTax Tips page. If you would like to read about the budget directly, it can be found here.
Check back often to find support from our tax experts for your current, or changing, tax situation.
Accounting educator, business strategist, and advisor.
Turbo Tax Canada blog editor and writer.
Susan has been an accounting professional for over 20 years and has been working with businesses and individuals and their taxes for the past 13. Education is a passion for Susan, and when not writing or talking about tax for TurboTax Canada, she can be found speaking at events, teaching at Mohawk College, and working with many businesses, bookkeepers and accounting firms as part of her education offerings and her Find Our Bookkeeper™ recruitment program. Susan is known to be approachable but pulls no punches when it comes to the reality of business finance, taxes, and the importance of education.