Canada Revenue Agency: Claim up to $ 410 in CPP Contribution Tax Credit in 2020

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Planning for retirement is crucial and many Canadians are unable to do so. Therefore, Service Canada does it for you. Once you are 18 and start making over $ 3,500 a year as an employee or business owner, Service Canada enrolls you in the Canada Pension Plan (CPP). The only exception to the CPP is for people who live in Quebec, because that province has its own pension plan.To return to the CPP, Service Canada requires you to contribute a certain percentage of your income greater than $ 3,500 to the plan. If you are an employee, your employer will deduct your CPP contribution directly from your pay. You will benefit from these deductions when you file your income tax returns. Yes, the Canada Revenue Agency (CRA) gives you a tax credit on CPP contributions. You also receive CPP benefits after you turn 60, but I’ll leave this discussion another time.

The 2020 CPP contribution tax credit

In 2019, Service Canada launched the CPP Enhancement Program, under which it will slightly increase the contribution rate and pensionable earnings over the next seven years. For 2020, Service Canada has increased the CPP contribution rate to 5.25% on pensionable earnings between $ 3,500 and $ 58,700. This means that the maximum you can contribute to the CPP is $ 2,898, or 5.25% of $ 55,200 ($ 58,700 – $ 3,500).

However, for the CPP contribution tax credit, the CRA is looking at the base rate of 4.95%. For 2020, your maximum base CPP contribution will be $ 2,732. The CRA exempts 15% federal tax on this amount, which equals $ 409.86. However, around $ 410 is the maximum CPP contribution tax credit you can claim if your net income for 2020 is $ 58,700 or more. If your 2020 income is less than this limit, here’s how you calculate your CPP contribution tax credit.

For example, Wayne earned a net income of $ 50,000 in 2020. His base CPP contribution was $ 2,301 (4.95% of $ 46,500). He can get a federal tax credit of $ 345 (15% of $ 2,301).

What can you do with the $ 400 CPP contribution tax credit?

A tax credit of around $ 400 can go a long way only if you make it work for you. You can use the $ 400 to buy a game console or buy that stock which can convert it to $ 800 in two years. Lightspeed POS (TSX: LSPD) (NYSE: LSPD) is the story of recovery from the pandemic. It covered the trip from $ 12 to $ 59 in less than nine months and continues to grow. To give you an idea of ​​what it means to own Lightspeed stock, he converted $ 400 to $ 1,350 between April 9 and November 20.

Where is Lightspeed stock getting this level of growth? The answer is a pandemic. The COVID-19 pandemic has made social distancing a new normal. People avoid crowded places, cash payments, and restaurants. But stores and restaurants cannot go bankrupt until the vaccine circulates around the world. Therefore, they are going digital with the Lightspeed platform. This platform provides them with customers and helps them process orders through contactless payments, shipping, curbside pickup and online reservation.

Lightspeed responds to the needs of the COVID-19 economy and innovates and grows by tapping into new markets. In the second quarter of fiscal 2021 results, its revenue jumped 62% year-over-year as more retailers and restaurants subscribed to the Lightspeed platform. Now that 62% is organic growth. It is also acquiring the New York-based ShopKeep cloud-based commerce platform, which will grow revenues by more than 80% for fiscal 2021 ending March 31, 2021.

Lightspeed share price momentum

Lightspeed stock has strong fundamentals and growth potential. Earlier this month, when the stock broke through the $ 50 mark on strong earnings, I said the stock may support the $ 50 price and rise further as income increases.

Today, the stock has risen by more than 7%, as cases of COVID-19 have risen dramatically, with cases forecast for a dramatic increase in cases if Canadians do not strictly follow social distancing. Even after the pandemic, Lightspeed’s stock will increase. Buy the stock before it gets too expensive like Shopify.

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Fool contributor Puja Tayal has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns stocks and recommends Shopify and Shopify. The Motley Fool owns shares of Lightspeed POS Inc.

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