Federal Income Tax and Benefit Guide – 2021
Completing your return (Steps 3 and 4)

Step 3 – Net income

Line 20600 – Pension adjustment

Enter the pension adjustment amount as reported on your information slips.

Special situations

If you lived in Canada and participated in a foreign pension plan in 2021, you may have to enter an amount on line 20600 of your return. Contact the CRA for information.

If you contributed to a foreign employer-sponsored pension plan or to 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 you are temporarily working in Canada and you continue to participate in a qualifying retirement plan offered by your employer in the United States, complete Form RC267, Employee Contributions to a United States Retirement Plan – Temporary Assignments.

If you are a Canadian resident travelling to work in the U.S. and contributed to a U.S. employer-sponsored retirement plan, complete Form RC268, Employee Contributions to a United States Retirement Plan – Cross-Border Commuters.

Line 20700 – Registered pension plan (RPP) deduction

Generally, you can deduct the total of all amounts from box 20 of your T4 slipsbox 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 a previous year for a period before 1990 and you have not fully deducted that amount

Note

You may be able to deduct the contributions you made to a pension plan in a foreign country. To find out how much you can deduct, see line 20600.

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

  • 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 archived Interpretation Bulletins IT-103R, Dues paid to a Union or to a Parity or Advisory Committee, and IT-158R2, 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 that one of you could earn employment or self-employment income, go to school, or do research. The expenses are deductible only if the child was under 16 years of age or had an impairment in physical or mental functions at sometime in 2021.

Note

If you received employment insurance benefits, provincial parental insurance plan benefits, or COVID-19-related income replacement benefits in 2021, you may be able to claim eligible child care expenses that you paid even if you did not:

  • earn employment or self-employment income
  • go to school
  • do research

For more information, see Form T778, Child Care Expenses Deduction.

Line 22100 – Carrying charges, interest expenses, and other expenses

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

  • fees to manage or take care of your investments (other than fees you paid for services in connection with your pooled registered pension plan (PRPP), registered retirement income fund (RRIF), registered retirement savings plan (RRSP), specified pension plan (SPP), and your tax-free savings account(TFSA))
  • fees for certain investment advice (see archived Interpretation Bulletin IT-238R2, Fees Paid to Investment Counsel) or for recording investment income
  • fees to have someone complete your return if all of the following apply:
    • You have income from a business or property
    • Accounting is a usual part of the operations of your business or property
    • You did not use the amounts claimed to reduce the business or property income you reported (see consolidated and archived Interpretation Bulletin IT-99R5, Legal and Accounting Fees)
  • most interest you paid on money you borrowed for investment purposes, but generally only if you use it to try to earn investment income, such as interest and dividends

Note

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, paid or will have to pay to you

Note

Legal fees you incurred to try to make child support payments non-taxable must be deducted on line 23200 of your return. For more information, see Guide P102, Support Payments.

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 interest on your income tax refund, report the interest on line 12100 of your return in the year that you received it. If the CRA then reassessed your return and you repaid any of the refund interest in 2021, you can claim, on line 22100 of your return, a deduction for the amount you repaid up to the amount you had reported as income.

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

  • interest you paid on money that you borrowed to contribute to a registered retirement savings plan (RRSP), a deferred profit-sharing plan (DPSP), a pooled registered pension plan (PRPP), a registered pension plan (RPP), a retirement compensation arrangement (RCA), a net income stabilization account, a specified pension plan (SPP), a registered education savings plan (RESP), a registered disability savings plan (RDSP), or a tax-free savings account (TFSA)
  • safety deposit box charges
  • the interest paid on your student loans (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 archived Interpretation Bulletin IT-238R2, Fees Paid to Investment Counsel
  • legal fees you paid to separate or divorce or to establish custody of, or visitation arrangements for, a child

If you have a tax shelter, see Other amounts you have to report on your return.

Line 22200 – Deduction for CPP or QPP contributions on self-employment income 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 
  • choose to make on your Revenu Québec Income Tax Return on certain employment income (see your Revenu Québec Guide to the Income Tax Return)

The Canada Pension Plan (CPP) or Quebec Pension Plan (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.

Note

Do not calculate CPP contributions for the income from box 81 of the T4 slips you received from a placement agency.

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.

How to calculate your contributions

Contributions include a base amount and an enhanced amount. CPP and QPP rates for base contributions are different.

Residents of a province or territory other than Quebec on December 31, 2021

If you contributed to:

Residents of Quebec on December 31, 2021

If you contributed to:

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 that you paid on your employment earnings.

Your CPP or QPP contributions must be prorated if one of the following situations applies in 2021:

  • You were a CPP participant who turned 18 or 70 years of age or received a CPP disability pension
  • You were a QPP participant who turned 18 years of age or received a QPP disability pension
  • You were a CPP working beneficiary (see line 30800) who elected to stop paying CPP contributions or revoked an election made in a previous year
  • You are filing a return for a person who died in 2021
Note

If you started receiving CPP retirement benefits in 2021, the CRA may prorate your basic exemption.

Request for a refund of CPP contributions

Under the CPP, all requests for a refund of CPP over-contributions must be made no later than four years from the end of the year the overpayment occurred in.

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

You can claim a deduction for the enhanced contributions on Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) pensionable earnings you made through your employment income.

Whether you contributed to the CPP or QPP, the maximum allowable deduction is $290.50.

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

Line 22900 – Other employment expenses

You can claim certain expenses (including goods and services tax/harmonized sales tax) that you paid to earn employment income if both of the following conditions apply:

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

Notes

If you worked from home in 2021 due to COVID-19, you may be able to claim home office expenses. For more information, go to Home office expenses for employees.

You cannot deduct the cost of travel to and from work or other expenses, such as clothing.

Repayment of salary or wages

You can claim salary or wages that you reported as income for 2021 or a previous tax year if you repaid them in 2021. 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 legal fees that 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 the excess EPSP amount contributed on your behalf to an EPSP as a deduction. 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 calculate your expenses (except those related to an EPSP). Guide T4044, Employment Expenses, contains Form T777 and other forms you need. The guide also explains the conditions that apply when you claim these expenses.

Line 23200 – Other deductions

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

If you have a tax shelter, see Other amounts you have to report on your return.

Income amounts you repaid

If you repaid provincial or territorial COVID-19 benefits in 2021 for an overpayment of provincial or territorial COVID-19 benefits received in 2020, the amount repaid will be reported in box 201 of your T4A slip. You can only claim a deduction for the total amount repaid on line 23200 of your 2021 return. For information about federal COVID-19 repayments, see line 23210.

If you repaid amounts in 2021 that you received and reported as income (other than salary or wages) for 2021 or a previous tax year, you can claim most of these amounts on line 23200 of your 2021 return. However, if a court order made you repay support payments that you reported on line 12800 of your return, claim the repayment amount on line 22000 of your return.

If you repaid an amount in 2021 that you received from a registered disability savings plan (RDSP) and reported it as income in 2021 or a previous tax 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.

If you had an amount recovered from your gross old age security (OAS) pension in 2021 (shown in a letter or box 20 of your T4A(OAS) slip) because of an overpayment you received before 2021, you can claim a deduction on line 23200 of your return for the amount you repaid.

Notes

You may have had OAS recovery tax withheld from your 2021 OAS benefits. The amount deducted is shown in box 22 of your T4A(OAS) slip for 2021. Do not claim this amount on line 23200 of your return. Instead, use the chart for line 23500 of your Federal Worksheet to calculate your social benefits repayment at line 42200 and allowable deduction at line 23500. Claim the amount from box 22 of the T4A(OAS) slip on line 43700 of your return. 

If you repaid employment income, see Repayment of salary or wages.

If you repaid interest earned on an income tax refund, see Refund interest.

Employment insurance benefits

You may have received more benefits than you were entitled to and have already paid them back to the payer of your benefits. If the payer of your benefits reduced your employment insurance benefits after discovering the mistake, your T4E slip will show only the net amount you received so you cannot claim a deduction.

If you repaid excess benefits that you received directly to the payer of your benefits, box 30 of your T4E slip will show the amount that you repaid. Include this amount on line 23200 of your return.

Note

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 that you paid: 
    • for advice or assistance to respond to the CRA when the CRA reviewed your income, deductions, or credits for a year
    • 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 that you paid to collect (or establish a right to) a retiring allowance or pension benefit. 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 (RRSP) or registered pension plan (RPP). You can carry forward the legal fees you cannot claim in the year for up to seven years 
  • certain fees you incurred to try to make child support payments non-taxable
Notes

Fees relating to support payments that your current or former spouse or common-law partner, or the natural parent of your child, paid to you must be claimed on line 22100 of your return.

You cannot claim legal fees that you incurred to separate or divorce, or to establish custody of, or visitation arrangements for, a child. For more information, see Guide P102, Support Payments.

You can claim legal fees that you paid in the year to collect or establish a right to salary or wages owed to you. See line 22900.

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

For more information about other legal fees you may deduct, see consolidated and archived Interpretation Bulletin IT-99R5, Legal and Accounting Fees.

Other deductible amounts

Following are examples of other deductible amounts that you can claim:

NewLine 23210 – Federal COVID-19 benefits repayment

If you repaid federal COVID-19 benefits (CERB, CRB, CRCB, CRSB or CESB) in 2021 that you received in 2020, you can claim a deduction for the repayment.

If you received your CERB from the CRA, the amount repaid will be reported in box 201 of your T4A slip. If you received your CERB from Service Canada, the amount repaid will be reported on your T4E slip along with other EI amounts repaid. Service Canada will send you a letter showing the amount of CERB you repaid.

You can claim a deduction for the federal COVID-19 benefits repayment in any of the following ways:

  • on line 23210 of your 2021 return
  • on line 23200 of your 2020 return
  • on both your 2020 and 2021 returns as long as the total amount claimed is not more than the amount reported in box 201 of your T4A slip plus the amount of CERB shown in the letter from Service Canada

Notes

If you received your CERB from Service Canada and choose to claim all or part of your deduction on line 23200 of your 2020 return, you must subtract the portion you are claiming in 2020 from box 30 of your T4E slip for 2021.

If you want to claim a deduction on your 2020 return but it has already been assessed, you will have to request an adjustment. For more information, see How to change a return.

Line 23500 – Social benefits repayment

Complete line 23500 of your return if you have an old age security benefits repayment, an employment insurance benefits repayment, and/or a Canada recovery benefit (CRB) repayment.

CRB repayment

If you received the CRB in 2021, you may have to repay some or all of the CRB you received.

The CRB you are entitled to receive is the amount you actually received in the year (box 202 of all T4A slips) minus any amounts you were not entitled to receive included in your T4A slips. Amounts you are not entitled to receive may be the result of a change in your circumstances, an overpayment or some other factor. In most cases, you will receive a notification from the CRA that you are not entitled to an amount.

How to calculate your CRB repayment

Complete the chart for line 23500 using your Federal Worksheet.

Enter the amount of CRB you received in the year on line 25 of the worksheet. Enter amounts you were not entitled to receive (whether repaid or not) on line 26. The result at line 27 is the CRB you were entitled to receive in the year.

If the amount on line 28 is more than $38,000, you will have to reimburse 50% of every dollar that is over $38,000. You will not have to reimburse more than you received in the year

Step 4 – Taxable income

Line 25300 – Net capital losses of other years

You can claim, within certain limits, your net capital losses from previous years that you have not already claimed.

Your available losses are shown on your 2020 notice of assessment or reassessment. 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

Specify the deduction you are claiming in the space provided on your return.

Exempt foreign income

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

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

If you have been a resident of Canada receiving U.S. Social Security benefits continuously during the period starting before January 1, 1996, and ending in 2021, you can claim a deduction equal to 50% of the U.S. Social Security benefits received in 2021. This 50% deduction also applies 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 been a resident of Canada receiving benefits (to which Paragraph 5 of Article XVIII of the Canada-United States tax treaty applied) continuously during a period starting before January 1, 1996, and ending immediately before they died 
  • You have been a resident of Canada receiving benefits continuously during a period starting when the person died and ending in 2021

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 archived  Interpretation Bulletin IT-86R, Vow of Perpetual Poverty.

Employees of prescribed international organizations

If, in 2021, 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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