While most of us think tax season in Canada doesn’t really kick off until April, the truth is that you can—and should—start preparing your income tax return well before spring. This guide should give you all the information you need to make filing your taxes as stress-free as possible, including the new and updated tax breaks available on the 2021 income tax return and when all the deadlines are.
What’s New for Taxes in Canada 2022?
Each year, the federal government adds, removes or changes eligible deductions, credits and benefits that can save you money on your annual tax return. While there are a couple of changes to existing claims (see below), there is just one new tax credit to be aware of when you file your 2021 return: the Digital News Subscription Tax Credit. This new federal non-refundable tax credit applies to fees you paid for a digital news subscription from a qualified Canadian journalism organization. You can claim up to $500 in eligible subscriptions, which could save you up to $75 in taxes (15%).
What’s changed for taxes in Canada 2022
Similarly, take note of the following tax deductions and credits that have been tweaked on this year’s return:
- Increased Home-Office Expenses Deduction: Last tax year, the government introduced an easier flat-rate method to claim a deduction for home-office expenses, given that millions of employed Canadians worked remotely during the pandemic. Since those work-at-home conditions have continued for many of us into 2021, the simplified claim will apply again this year—with the maximum tax deduction increasing to $500 (up from $400 last year).
- Enhanced Eligible Educator School Supply Tax Credit: This existing tax credit, which allows teachers and early childhood educators to claim a 15% refundable tax credit on up to $1,000 of eligible supplies, is bumping up to a 25% credit. This will apply even if the teachers used those supplies at home rather than in the classroom/daycare.
How to File Taxes in Canada
There are several ways for Canadians to file their taxes:
- File Online: The CRA calls its online filing for individuals NETFILE (as opposed to EFILE, which is the service that tax preparers use). To send in your return via NETFILE, choose a certified desktop, online, or mobile software product, like TurboTax, to prepare your return and follow the prompts to submit it to the CRA. If you use NETFILE and have set up direct deposit, you should receive your refund in about 8 days. NETFILE opens on February 21, 2022.
- Mail-in a paper copy: If you filed a paper return last tax season in Canada, the CRA should automatically mail you the 2021 income tax package by the end of February. Otherwise, you can view and download forms from the CRA website starting Jan. 18, 2022.
- File by Phone: Canadians with low or fixed incomes, and whose tax situation doesn’t change much each year, are invited by letter to use the CRA’s automated phone service, File My Return.
COVID-19 and Taxes in Canada
Any COVID-19 benefit relief payments you may have received during 2021 is considered taxable income and must be reported as such on your return. The government agency (CRA or Service Canada) that issued the payments will mail you a T4A or T4E tax slip by the end of February, showing the total amount in benefits you received. (If you don’t receive your slip(s) by then, check your My Account for electronic copies.)
Depending on your total income and tax bracket, the government may not have withheld enough taxes on these payments, which means you could owe more money than you expected when you file your return. Because of this, it’s important to prepare your return as early as possible, so you know exactly how much you owe well before the payment deadline.
If you collected benefits that you were not eligible for, you will have to pay them back. However, there is one notable exception: students who would have been eligible for the Canada Emergency Student Benefit (CESB), but instead mistakenly applied for and received the Canada Emergency Response Benefit (CERB) will be allowed to offset their CERB repayments by whatever amount they would have received in CESB benefits.
When Does NETFILE Open for 2021 income taxes?
NETFILE opens on Monday, February 21, 2022, for filing personal tax returns for the 2021 tax year. To file online, you must use CRA-certified tax-filing software products that use the NETFILE web service. You can also file previous tax years back to 2016, but returns for tax years earlier than 2015 must be done on paper.
Frequently Asked Questions
The Final Word
Tax time doesn’t have to be painful. There are plenty of resources online to help you through it as well as reliable online tax filing software to make it easier. Just schedule some time to get it done before the deadline. Late filers risk being hit with penalties. Wouldn’t you rather spend that money on something you want? And if you’re getting a refund, get those funds as soon as possible so you can do what you like with them. In either case, file on time!
Lastly, don’t forget to review our handy guide on How to Get More Money Back from your Tax Return! It could put a little more change in your pocket.