Tax Changes in Canada for 2021

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by Enoch Omololu

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The Covid-19 pandemic ravaged the world in 2020 leaving countries reeling from health and economic damages. And, the increased spending by governments to minimize its impact has resulted in historical deficits that will need to be accounted for at some point.

This has led various experts to speculate that we should expect some significant tax changes in Canada this year and in the near future.

While we can’t say for sure whether capital gains will be restricted or the GST will increase, below we have covered the tax rate changes we know about so far for 2021.

Tax Changes 2021

For the 2020 tax year and tax season, the deadline to file tax returns for most filers is April 30, 2021.

Home Office Expenses

Canadians who worked from home in 2020 may be eligible to claim up to $400 for work-space-in-the-home expenses, office supplies, and more.

The Canada Revenue Agency (CRA) has relaxed the rules so employees can claim home office expenses under a temporary flat rate method that doesn’t require them to:

  • Provide receipts or supporting documents
  • Provide a completed and signed Form T2200S or T2200
  • Calculate the workspace they use at home

You can claim $2 for each day you worked from home in 2020, up to a maximum of $400 (or 200 work days).

Tax-Related Benefits and Contributions

Employment Insurance Contributions

The maximum annual insurable earning in 2021 is $56,300, an increase of $2,100 from the threshold of $54,200 in 2020.

The rate for calculating the premium you pay remains at 1.58%.

The maximum amount of EI Premium an employee pays this year is $889.54, and for employers, it is $1,245.36.

In Quebec, the maximum EI premium for employees is $664.34 and for employers, it is $930.08.

Canada Pension Plan Contributions

The CPP contribution rate for workers increases to 5.45% in 2021, or a total of 10.90% when combined with the employer rate.

The maximum pensionable earning is $61,600, an increase of $2,900 from the $58,700 in 2020. The basic exemption amount remains at $3,500 in 2021.

You can expect to pay up to $3,166.45 in CPP contributions this year. If you are self-employed, your maximum contribution is doubled at up to $6,332.90.

Canada Child Benefits

The Canada Child Benefit (CCB) amount for the first half of 2021 is:

  • Maximum of $6,765/child/year under age 6 and up to $5,708 per child from age 6-17.

For the second half of 2021, it is:

  • Maximum of $6,833/child/year under age 6 and up to $5,765 for those aged 6-17.

CERB and CESB Taxes

The Canada Emergency Response Benefit (CERB) and Canada Emergency Student Benefit (CESB) you received in the 2020 tax year are taxable.

You will receive a T4A from the CRA and will need to record the payments when you file your tax return.

If you received any of the other income benefits below, you may also need to pay taxes:

While these three benefits have a 10% tax withheld at source, your overall taxable income bracket could mean you owe additional taxes.

GST/HST Benefits

The Federal Sales Tax (GST) paid by eligible individuals is refunded as follows:

  • Adult: $299 maximum
  • Child: $157 maximum
  • Single supplement: $157

GST payments are clawed back when your family’s net income exceeds $38,892.

Federal Tax Rate Changes 2021

The federal income tax brackets increased in 2021 based on an indexation rate of 1.0%

  • Up to $49,020: 15%
  • $49,020 to $98,040: 20.5%
  • $98,040 to $151,978: 26%
  • $151,978 to $216,511: 29%
  • $216,511 and over: 33%

The basic personal amount is up to $13,808. If you are in a high income tax bracket and earn $216,511 or more, your basic personal amount is $12,421.

Provincial Tax Rate Changes 2021

The income tax brackets for most provinces increases this year based on the respective provincial or federal consumer price index. Some provinces have surtaxes in addition to the base tax rates*.

Province/TerritoryIncome Tax Bracket and rates 2021
AlbertaUp to $131,220: 10%;
$131,220.01 to $157,464: 12%;
$157,464.01 to $209,952: 13%;
$209,952.01 to $314,928: 14%;
$314,928.01 and over: 15%
British ColumbiaUp to $42,184: 5.06%;
$42,184.01 to $84,369: 7.70%;
$84,369.01 to $96,866: 10.50%;
$96,866.01 to $117,623: 12.29%;
$117,623.01 to $159,483: 14.70%;
$159,483.01 to $222,420: 16.80%;
$222,420.01 and over: 20.50%
ManitobaUp to $33,723: 10.80%;
$33,723.01 to $72,885: 12.75%;
$72,885.01 and over: 17.40%
New BrunswickUp to $43,835: 9.68%;
$43,835.01 to $87,671: 14.82%;
$87,671.01 to $142,534: 16.52%;
$142,534.01 to $162,383: 17.84%;
$162,383.01 and over: 20.30%
Newfoundland and LabradorUp to $38,081: 8.70%;
$38,081.01 to $76,161: 14.50%;
$76,161.01 to $135,973: 15.80%;
$135,973.01 to $190,363: 17.30%;
$190,363.01 and over: 18.30%
Nova ScotiaUp to $29,590: 8.79%;
$29,590.01 to $59,180: 14.95%;
$59,180.01 to $93,000: 16.67%;
$93,000.01 to $150,000: 17.50%;
$150,000 and over: 21%
NunavutUp to $46,740: 4%;
$46,740.01 to $93,480: 7%;
$93,480.01 to $151,978: 9%;
$151,978.01 and over: 11.50%
Northwest TerritoriesUp to $44,396: 5.90%;
$44,396.01 to $88,796: 8.60%;
$88,796.01 to $144,362: 12.20%;
$144,362.01 and over: 14.05%
Ontario*Up to $45,142: 5.05%;
$45,142.01 to $90,287: 9.15%;
$90,287.01 to $150,000: 11.16%;
$150,000.01 to $220,000: 12.16%;
$220,000.01 and over: 13.16%
Prince Edward IslandUp to $31,984: 9.80%;
$31,984.01 to $63,969: 13.80%;
$63,969.01 and over: 16.70%
QuebecUp to $45,105: 15%;
$45,105.01 to $90,200: 20%;
$90,200.01 to $109,755: 24%;
$109,755.01 and over: 25.75%
SaskatchewanUp to $45,677: 10.50%;
$45,677.01 to $130,506: 12.50%;
$130,506.01 and over: 14.50%
YukonUp to $49,020: 6.40%;
$49,020.01 to $98,040: 9%;
$98,040.01 to $151,978: 10.90%;
$151,978.01 to $500,000: 12.80%;
$500,000.01 and over: 15%

Registered Savings and Investing

The annual TFSA contribution limit in 2021 is $6,000, the same as for last year.

Individuals who have been eligible to contribute to a TFSA since its inception in 2009 now have a total contribution room of $75,500.

The maximum annual RRSP contribution limit is 18% of your income up to a maximum of $27,830.

Pension Amount Changes

The maximum monthly OAS amount is $615.37, and for GIS, it is $919.12.

OAS payments drop to zero when your income is $129,075 or higher. OAS clawback starts when your income exceeds $79,054.

The maximum monthly Canada Pension Plan (CPP) amount is $1,203.75.

How To File Your Taxes

You can use a free or paid online tax software to file your 2020 tax return.

Online NETFILE tax submissions via CRA-certified tax software are processed faster than paper returns and you can get your refund within 2 weeks.

Some of the best online tax preparation services in Canada include:

You can learn more about these tax platforms here.

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Author

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Enoch Omololu

Enoch Omololu is a personal finance expert and a veterinarian. He has a master’s degree in Finance and Investment Management from the University of Aberdeen Business School (Scotland) and has completed several courses and certificates in finance, including the Canadian Securities Course. He also has an MSc. in Agricultural Economics from the University of Manitoba and a Doctor of Veterinary Medicine degree from the University of Ibadan. Enoch has a passion for helping others win with their personal finances and has been writing about money matters for over a decade. His writing has been featured or quoted in The Globe and Mail, Winnipeg Free Press, Wealthsimple, Financial Post, Toronto Star, Credit Canada, MSN Money, National Post, CIBC, and many other personal finance publications.

His top investment tools include Wealthsimple and Questrade. He earns cash back on purchases using KOHO, monitors his credit score for free using Borrowell, and earns interest on savings through EQ Bank.

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