Tax changes you can expect for 2020

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Time to read: 4 minutes

2020 was a whirlwind year for most of us. Here are the key changes for your 2020 tax return, tailored for you healthpreneurs.

If you’ve received Covid support (including CERB, CRB, CEBA, etc.):

  • You’ll need to pay tax on this income, just like you pay tax on your self-employment income

    • The Canada Recovery Benefit (CRB), Canada Recovery Sickness Benefit (CRSB), and Canada Recovery Caregiving Benefit (CRCB) had 10% tax withheld from your payment. Even though you paid some tax initially, you’ll likely have to pay additional taxes when filing your return.

    • Even though taxes weren’t withheld from the other payments, they’re still taxable.

  • You’ll pay tax on this income at your tax rate, which depends on your income level and province

  • When amounts are taxable:

    • Canada Emergency Response Benefit (CERB), CRB, CRSB, CRCB: Taxable when you received the payment

    • Canada Emergency Business Account (CEBA): The 25% forgivable portion is taxable when you received the funds. If you later become ineligible to have the amount forgiven, you can claim a deduction when the amount is repaid

    • Canada Emergency Wage Subsidy (CEWS): Taxable on the last day of the period the subsidy relates to, regardless of when it’s received. For example, if you received a subsidy for Period 9 (Oct 25 to Nov 21, 2020) that was paid in January 2021, it’s taxable in 2020

    • The 10% Temporary Wage Subsidy (TWS): Taxable in the year you reduced your payroll remittance

    • Canada Emergency Rent Subsidy (CERS): Taxable on the last day of the period the subsidy relates to, regardless of when it’s received

  • If you repaid CERB, amounts you received from the government are still taxable whenever you received them. You’ll receive a deduction in the year you make a repayment.

  • The CRB is clawed back if your net income (from all sources, but excluding the CRB) is over $38,000. This is done as part of your tax return

How should I report Covid support for my taxes to HBA?

  • Personal support (CERB, CRB, CRSB, CRCB): We’ll ask for this information in our Personal Tax Questionnaire. Do not include it in your business financials to avoid double-counting.

  • Business support (CEBA, CEWS, TWS, CERS):

    • Sole proprietors (most people): We’ll ask for this information in our Personal Tax Questionnaire. Do not include it in your business financials to avoid double-counting.

    • Incorporated professionals: These amounts should be included in your income statement and balance sheet.

 Introducing the Canada Training Credit 

  • This is a new tax credit for eligible tuition and other fees paid in 2020 and subsequent years. We’ll automatically apply for this on your tax return.

  • The credit will be claimed on your tax return, and will reduce any income tax owing or increase your refund.

  • The way this works is that you’ll accumulate credits each year, which you can apply on your tax return. People aged 25-64 who make between $10-150K will accumulate $250 a year, up to a $5,000 lifetime amount.

  • You’ll be able to apply these credits against eligible tuition and other fees, up to half the amount paid during the year. The other half will continue qualifying for tuition credits.

Enhancements to home office deductions for employees

  • This likely doesn't affect you, since these changes are only applicable to employees - which doesn't apply to most holistic healthcare practitioners.

    • Self-employed practitioners can continue to claim home office expenses, as usual, if they meet the usual criteria

  • The CRA has introduced a simplified method of claiming home office expenses for eligible employees.

  • Using the simplified method, you don't have to keep receipts or measure the size of your home office. Instead, you'll claim a flat rate of $2 per day, up to $400.

  • If you choose to use the traditional, detailed method, you still need to keep your receipts and prorate your expenses over the space you use in your home. You also need your employer to sign Form T2200 or the simplified Form T2200S.

  • Eligibility for the simplified method:

    • You worked from home during 2020 due to Covid

    • You worked more than 50% of the time from home for at least 4 consecutive weeks during 2020

    • You're not claiming any other employment expenses

    • Your employer didn't reimburse you for all your home office expenses