ARCHIVED - Federal Income Tax and Benefit Guide - 2020 - Deductions (Net income and Taxable income)

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• Step 3 – Net income
  • Line 20600 – Pension adjustment
  • Line 20700 – Registered pension plan (RPP) deduction
  • Line 21000 – Deduction for elected split-pension amount
  • Line 21200 – Annual union, professional, or like dues
  • Line 21400 – Child care expenses
  • Line 22100 – Carrying charges and interest expenses
    • Policy loan interest
    • Refund interest
  • Line 22200 – Deduction for CPP or QPP contributions on self-employment and other earnings
    • Making additional CPP contributions
    • How to calculate your contributions
    • Request for refund of CPP contributions
  • Line 22215 – Deduction for CPP or QPP enhanced contributions on employment income
  • Line 22900 – Other employment expenses
    • Repayment of salary or wages
    • Legal fees
    • Employees profit-sharing plan (EPSP)
  • Line 23200 – Other deductions
    • Income amounts repaid
      • Employment insurance (EI) benefits
    • Legal fees
    • Other deductible amounts
  • Line 23600 – Net income
• Step 4 – Taxable income
  • Line 25000 – Other payments deduction
  • Line 25300 – Net capital losses of other years
  • Line 25600 – Additional deductions
    • Exempt foreign income
    • Vow of perpetual poverty
    • Employees of prescribed international organizations

Step 3 – Net income

Report the amounts and claim the deductions that apply to you on lines 20600 to 23500 using your information slips along with the instructions provided on your return and on any applicable worksheet, schedule, and form. In this section of the guide, you will find information you may need to supplement the instructions on the return.

This section does not provide supplementary information for lines 20800, 20810, 21300, 21500, 21700, 21900, 22000, 22300, 22400, 23100, and 23500, as the instructions on the return or in other information products provide the information you need.

Line 20600 – Pension adjustment

If you lived in Canada and participated in a foreign pension plan in 2020, you may have to enter an amount on this line.

If you participated in a foreign employer-sponsored pension plan or in a social security arrangement (other than a United States (U.S.) arrangement), complete Form RC269, Employee Contributions to a Foreign Pension Plan or Social Security Arrangement – Non-United States Plans or Arrangements (if applicable).

If you are temporarily working in Canada and you continue to participate in your employer’s retirement plan in the U.S., complete Form RC267, Employee Contributions to a United States Retirement Plan – Temporary Assignments (if applicable).

If you are a Canadian resident who travels to work in  the U.S. and you participate in your employer’s retirement plan in the U.S., complete Form RC268, Employee Contributions to a United States Retirement Plan – Cross-Border Commuters (if applicable).

Line 20700 – Registered pension plan (RPP) deduction

Generally, you can deduct the total of all amounts shown in box 20 of your T4 slips, in box 032 of your T4A slips, and on your union or RPP receipts. See Guide T4040, RRSPs and Other Registered Plans for Retirement, to find out how much you can deduct if any of the following apply:

• You contributed more than $3,500 to an RPP and your information slips show a past-service amount for service before 1990
• You contributed an amount to an RPP in an earlier year, for a period before 1990, and you have not fully deducted that amount

Line 21000 – Deduction for elected split-pension amount

Claim the amount you are transferring to your spouse or common-law partner if you both made a joint election to split your eligible pension income by completing Form T1032, Joint Election to Split Pension Income. For more information, see line 11500.

Line 21200 – Annual union, professional, or like dues

Claim the total of the following amounts related to your employment that you paid (or that were paid for you and reported as income) in the year:

• annual dues for membership in a trade union or an association of public servants
• professional board dues required under provincial or territorial law
• professional or malpractice liability insurance premiums or professional membership dues required to keep a professional status recognized by law
• parity or advisory committee (or similar body) dues required under provincial or territorial law

For more information, see interpretation bulletin IT-103, Dues paid to a union or to a parity or advisory committee, and interpretation bulletin IT-158, Employees’ professional membership dues.

Line 21400 – Child care expenses

You or your spouse or common-law partner may have paid someone to look after your child so one of you could earn employment or self-employment income, go to school, or do research. The expenses are deductible only if at some time in 2020 the child was under 16 years of age or had an impairment in physical or mental functions.

Line 22100 – Carrying charges and interest expenses

Claim the following carrying charges and interest you paid to earn income from investments:

• fees to manage or take care of your investments (other than any fees you paid for services in connection with your pooled registered pension plan, registered retirement income fund, registered retirement savings plan, specified pension plan, and your tax-free savings account)
• fees for certain investment advice (see Interpretation Bulletin IT-238, Fees Paid to Investment Counsel) or for recording investment income
• fees to have someone complete your return, but only if you have income from a business or property, if accounting is a usual part of the operations of your business or property, and if you did not use the amounts claimed to reduce the business or property income you reported. See Interpretation Bulletin IT-99, Legal and Accounting Fees
• most interest you pay on money you borrow for investment purposes, but generally only if you use it to try to earn investment income, including interest and dividends. However, if the only earnings your investment can produce are capital gains, you cannot claim the interest you paid
• legal fees you incurred relating to support payments that your current or former spouse or common-law partner, or the natural parent of your child, will have to pay to you

Policy loan interest – To claim interest paid during the year on a policy loan made to earn income, ask your insurer to complete Form T2210, Verification of Policy Loan Interest by the Insurer.

Refund interest – If the CRA paid you interest on an income tax refund, report the interest in the year you receive it on line 12100 of your return. If the CRA then reassessed your return and you repaid any of the refund interest in 2020, you can claim on line 22100 of your return, the amount you repaid, up to the amount you had reported as income.

You cannot claim on line 22100 of your return any of the following amounts:

• the interest you paid on money you borrowed to contribute to a registered retirement savings plan, a pooled registered pension plan, a specified pension plan, a registered education savings plan, a registered disability savings plan, or a tax-free savings account (TFSA)
• safety deposit box charges
• the interest part of your student loan repayments (although you may be able to claim a credit on line 31900 of your return for this amount)
• subscription fees paid for financial newspapers, magazines, or newsletters
• brokerage fees or commissions you paid when you bought or sold securities. Instead, use these costs when you calculate your capital gain or capital loss. For more information, see Guide T4037, Capital Gains, and Interpretation Bulletin IT-238, Fees paid to investment counsel
• legal fees you paid to get a separation or divorce or to establish custody of, or visitation arrangements for a child

If you have a tax shelter, see Tax shelters.

Line 22200 – Deduction for CPP or QPP contributions on self-employment and other earnings

Claim contributions you:

• have to make on self-employment and limited or non-active partnership income
• choose to make on certain employment income (see Making additional CPP contributions under line 30800)
• choose to make on your provincial income tax return for Quebec on certain employment income (see your Quebec provincial guide)

The CPP or QPP contributions you have to make, or choose to make, will depend on how much you have already contributed to the CPP or QPP as an employee, as shown in boxes 16 and 17 of your T4 slips.

>Making additional CPP contributions

You may be able to make CPP contributions on certain income when:

• No contribution was made (for example, tips not shown on a T4 slip)
• You had more than one employer in the year and the total CPP contributions on all T4 slips are less than the required amount

For more information, see Making additional CPP contributions under line 30800.

How to calculate your contributions

Contributions include a base and an enhanced amount. CPP and QPP rates for base contributions are different. Find your situation in the first two columns and follow the instructions in the third column.

If you were a member of a partnership, include on Schedule 8 or Form RC381 only your share of the net profit. You cannot use self-employment or partnership losses to reduce the CPP or QPP contributions you paid on your employment earnings.

Your CPP or QPP contributions must be prorated if, in 2020, one of the following situations applies:

• You were a CPP participant and turned 18 or 70 years of age or received a CPP disability pension
• You were a QPP participant and turned 18 years of age or received a QPP disability pension
• You were a CPP working beneficiary (see line 30800) and elected to stop paying CPP contributions or revoked an election you made in a previous year
• You are filing a return for a person who died in 2020

Request for refund of CPP contributions

Under the CPP, all requests for a refund of CPP over-contributions must be made within four years after the end of the year for which the request is being made.

Line 22215 – Deduction for CPP or QPP enhanced contributions on employment income

You can claim a deduction for the enhanced contributions on CPP and QPP pensionable earnings you contributed through your employment income.

Whether you contributed to the CPP or QPP, the maximum allowable claim is $165.60.

For more information, see Schedule 8 or Form RC381, whichever applies.

Line 22900 – Other employment expenses

You can claim certain expenses (including any GST/HST) you paid to earn employment income if the following two conditions apply:

• Your employment contract required you to pay them
• You did not receive an allowance for the expenses or the allowance you received is reported as income

Repayment of salary or wages – You can claim salary or wages you reported as income for 2020 or a previous year if you repaid them in 2020. This includes amounts you repaid for a period when you were entitled to receive wage-loss replacement benefits or workers’ compensation benefits. However, you cannot claim more than the income you received when you did not perform the duties of your employment.

Legal fees – You can claim the legal fees you paid in the year to collect or establish a right to salary or wages owed to you. The amounts claimed are not tied to the successful outcome of your case. However, the legal expenses must be incurred by you to collect or establish a right to collect an amount owed to you that, if received by you, would have to be included in your employment income. You must reduce your claim by any amount awarded to you for those fees or any reimbursement you received for your legal expenses.

Employees profit-sharing plan (EPSP) – You may be eligible to claim as a deduction the excess EPSP amount contributed on your behalf to an EPSP. To calculate your deduction, complete Form RC359, Tax on Excess Employees Profit Sharing Plan Amounts.

Complete Form T777, Statement of Employment Expenses, to provide the details of your deductions and calculations for your expenses (except those related to an EPSP). Guide T4044, Employment Expenses, contains Form T777 and other forms you will need. The guide also explains the conditions that apply when you claim these expenses.

Line 23200 – Other deductions

Claim the allowable amounts not deducted elsewhere on your return. Specify the deduction you are claiming in the space provided on the return.

If you have a tax shelter, see Tax shelters.

Income amounts repaid

If in 2020 you repaid amounts you received and reported as income (other than salary or wages) for 2020 or a previous year, you can claim most of these amounts on line 23200 of your return for 2020. However, if a court order made you repay support payments you reported on line 12800 of your return, claim the repayment on line 22000 of your return.

If in 2020 you repaid an amount you received from a registered disability savings plan and reported it as income in 2020 or a previous year, you can claim the amount on line 23200 of your return. For more information, go to Registered disability savings plan (RDSP), or see Guide RC4460, Registered Disability Savings Plan.

In 2020, you may have had an amount recovered from your gross old age security (OAS) pension (shown in a letter or in box 20 of your T4A(OAS) slip) because of an overpayment you received in a previous period. If so, you can claim a deduction on line 23200 of your return for the amount you repaid.

Employment insurance (EI) benefits – You may have received more benefits than you should have and already paid them back to the payer of your benefits. For example:

• The payer of your benefits may have reduced your EI benefits after discovering the mistake. In this case, your T4E slip will show only the net amount you received, so you cannot claim a deduction
• If you repaid excess benefits you received directly to the payer of your benefits, box 30 of your T4E slip will show the amount you repaid. Include that amount on line 23200 of your return. This is not the same as repaying a social benefit on line 23500 of your return

Legal fees

You can claim the following expenses:

• fees (including any related accounting fees) you paid for advice or assistance to respond to the CRA when the CRA reviewed your income, deductions, or credits for a year or to object to or appeal an assessment or decision under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan, or the Quebec Pension Plan
• fees you paid to collect (or establish a right to) a retiring allowance or pension benefit. However, you can claim only up to the retiring allowance or pension income you received in the year, minus any part of these amounts transferred to a registered retirement savings plan or registered pension plan. You can carry forward, for up to seven years, the legal fees you cannot claim in the year
• certain fees you incurred to try to make child support payments non-taxable

You must reduce your claim by any award or reimbursements you received for these expenses. If you are awarded the cost of your deductible legal fees in a future year, report that amount in your income for that year.

For more information about other legal fees you may deduct, see Interpretation Bulletin IT-99, Legal and Accounting Fees.

Other deductible amounts

The following are examples of other amounts you can claim:

• income subject to tax on split income as determined on Form T1206
• depletion allowances (complete Form T1229, Statement of Resource Expenses and Depletion Allowance)
• certain unused RRSP, pooled registered pension plan (PRPP), or specified pension plan (SPP) contributions which were refunded to you or your spouse or common-law partner in 2020 (attach to your return an approved Form T3012A, Tax Deduction Waiver on the Refund of your Unused RRSP, PRPP, or SPP Contributions from your RRSP, or Form T746, Calculating Your Deduction for Refund of Unused RRSP, PRPP, and SPP Contributions)
• the excess part of a direct transfer of a lump-sum payment from your registered pension plan (RPP), PRPP, and SPP to an RRSP or registered retirement income fund (RRIF) you withdrew and are including on line 12900 or line 13000 of your return for 2020. Use Form T1043, Deduction for Excess Registered Pension Plan Transfers You Withdrew From an RRSP, PRPP, SPP or RRIF, to calculate the deductible amount
• designated benefits from a RRIF shown in box 22 of your T4RIF slips, a refund of RRSP premiums shown in box 28 of your T4RSP slips, or the RPP or PRPP amount shown in box 194 of your T4A slips, or the SPP amount shown in box 018 of your T4A slips, if you rolled over an amount to a registered disability savings plan (RDSP). For more information about RDSPs, go to Registered disability savings plan (RDSP), or see Guide T4040, RRSPs and Other Registered Plans for Retirement

Line 23600 – Net income

If the amount you calculate for line 23600 of your return is negative, you may have a non-capital loss. Complete Form T1A, Request for Loss Carryback, to calculate your loss and any amount you may want to carry back to your 2017, 2018, or 2019 return. Do not file an amended return for the year or years to which you apply the loss.

Step 4 – Taxable income

Claim the deductions that apply to you on lines 24400 to 25600 using your information slips along with the instructions provided on your return and on any applicable form. In this section of the guide, you will find information you may need to supplement the instructions on the return.

This section does not provide supplementary information for lines 24400, 24900, 25100, 25200, 25400, and 25500, as the instructions on the return or in other information products provide the information you need.

Line 25000 – Other payments deduction

If you reported net federal supplements on line 14600 of your return, you may not be entitled to claim the whole amount from line 14700 of your return. Complete the calculation below:

• the amount from line 23400 of your return, minus
• the amounts on line 11700 and line 12500 of your return, plus
• the amounts deducted on line 21300 of your return and the amount for a repayment of registered disability savings plan income included on line 23200 of your return

If the result is greater than $79,054, contact the CRA to find out how much you can deduct. Otherwise, claim the amount from line 14700 of your return.

Line 25300 – Net capital losses of other years

Within certain limits, you can claim your net capital losses of previous years which you have not already claimed. Your available losses are shown on your notice of assessment or reassessment for 2019. You will probably have to adjust any losses you incurred after 1987 and before 2001. For more information, see Guide T4037, Capital Gains.

Line 25600 – Additional deductions

In the space provided on the return, specify the deduction you are claiming.

Exempt foreign income

If you reported foreign income on your return (such as support payments you received from a resident of another country and reported on line 12800 of your return) that is tax-free in Canada because of a tax treaty, you can claim a deduction for it.

Under the Canada–United States tax treaty, you can claim on line 25600 of your return a deduction equal to 15% of the U.S. Social Security benefits, including U.S. Medicare premiums, which you reported as income on line 11500 of your return.

If you have been a resident of Canada and have received U.S. Social Security benefits continuously during the period starting before January 1, 1996, and ending in 2020, you can claim a deduction equal to 50% of the U.S. Social Security benefits received in 2020.

This 50% deduction also applies to you if you are receiving benefits related to a deceased person and you meet all of the following conditions:

• The deceased person was your spouse or common-law partner immediately before they died
• The deceased person had, continuously during a period starting before January 1, 1996, and ending immediately before they died, been a resident of Canada and received benefits to which Paragraph 5 of Article XVIII of the Canada-United States tax treaty applied
• You have been, continuously during a period starting when the person died and ending in 2020, a resident of Canada and received such benefits

Vow of perpetual poverty

If you have taken a vow of perpetual poverty as a member of a religious order, you can claim the earned income and pension benefits you have given to the order. For more information, see Interpretation Bulletin IT-86, Vow of Perpetual Poverty.

Employees of prescribed international organizations

If in 2020 you were employed by a prescribed international organization, such as the United Nations, you can claim a deduction for the net employment income you report on your return from that organization. Net employment income is your employment income minus the related employment expenses you are claiming. If you do not know if your employer is a prescribed international organization, contact your employer.

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