CERB will expire, but these 3 CRA tax breaks will still last


For months, CERB provided financial support to Canadians in need. Introduced in April, it has disbursed more than $ 60 billion so far. For Canadians who lost their jobs due to COVID-19, this was a much needed lifeline.Now, however, the program appears to be ending. According to Canada.ca, the CERB must still expire on October 3. The program was extended in June, but it was an extension of the maximum coverage period, not the program end date. Unless new expansions are announced, CERB will end this fall.

If you are currently receiving CERB, it is time to start planning for life afterwards. As the Canadian economy gradually reopens, you may be able to find a job that can more than replace what you got from CERB. Regular Employment Insurance benefits may also be an option.

As for the no-questions bi-monthly payments of $ 1,000, it looks like they will soon be a thing of the past. That doesn’t mean, however, that you still can’t get money from the CRA. As you are about to see, there are many tax breaks you can claim that can reduce the taxes you owe the CRA.

These don’t cut you off a regular check like CERB does, but could result in a larger refund once you file your taxes next year. The first is one that you’ve probably heard of before, but that can’t use to its full potential.

RRSP contributions

RRSP contributions are the most obvious tax relief for working Canadians. You can contribute up to 18% of your income to an RRSP and get a full tax deduction on the money contributed. If you contribute $ 10,000 and have a marginal tax rate of 30%, you will save $ 3,000 in taxes.

This is a huge advantage, especially if you are an investor. Say you want to buy shares in a company like Fortis Inc (TSX: FTS) (NYSE: FTS). Let’s also imagine that RRSPs did not exist. If this is the case, you will only be able to invest what is left after your employer deducts income taxes.

However, we live in a world where RRSPs make to exist. So you can contribute $ 10,000 to one and reduce your taxable income by $ 10,000. At a marginal tax rate of 30%, you will get an additional $ 3,000 to invest because of this. You might not be able to invest the money immediately, but you would get a tax refund that you could invest later.

Dividend tax credit

Another generous tax benefit you can take advantage of is the dividend tax credit. Like RRSP contributions, this tax break saves you the taxes you would otherwise have to pay. The dividend tax credit is a 15% tax credit on the “grossed up” value of your dividends.

Continuing with the example of Fortis, $ 3,000 of dividends from this stock would be grossed up to $ 4,140. Your tax credit on this amount would be $ 621. This is a significant tax saving and you can claim it on any eligible dividend you receive.

Capital losses

Finally, we have capital losses. The capital losses you incur can be used to offset any capital gains you receive. So, for example, if you cash a gain of $ 10,000 on one FTS stock and a loss of $ 10,000 on another stock, you have no net taxable gain left.

It can save you money at tax time. Keep in mind, however, that you have to take your losses for this to work. If your stocks are just down and you’re hoping for a rally, you can’t take advantage of this tax break.

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Andrew Button, a silly contributor, has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC.


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