One thing you can be sure of is that the government will continue to make changes to tax that we need to keep on top on. They aren’t necessarily the best at keeping Canadians informed or rather some Canadians ignore anything to do with taxes. A necessary evil, I suppose.
With the tax filing season right around the corner, and most Canadians using tax software or a preparation service, we tend to rely on these entities to keep us up to date and incorporate them into our tax return preparation. Many new changes have been put into effect for the 2022 tax year that may have an impact on your situation, including new credits and deductions that you may be eligible for.
To make things simple, we’ve provided a breakdown of how these changes will affect you and put together the most important changes you should know about when filing your return in 2023.
Repaying covid benefits
If you received covid benefits from the CRA in 2022, such as the Canada Recovery Benefit (CRB), Canada Sickness Recovery Benefit (CSRB) or Canada Recovery Caregiving Benefit (CRCB) you will receive a T4A slip with the relevant information you need for your tax return.
If you received the CRB and your net income after certain adjustments is more than $38,000, then you may have to repay all or part of the benefits you received in 2022.
If in 2022 you have already repaid all or part of covid benefits received, you can choose which year to claim the tax deduction on, either the year you received the benefit, or the year you repaid it. Plus, any one-time provincial payments to help you through covid will not be taxable, and you don’t need to report them as income on your 2022 tax return.
Work from home expenses
Making a return from last year, you can once again claim the work-from-home tax credit. If you’ve been keeping track of your expenses, you can go ahead and claim your calculated total. Otherwise, you can use the flat rate method of $2 for each day worked from home during the pandemic.
Basic Personal Amount increasing
As part of their policy to continue increasing it over time until it reaches $15,000 in 2023, the government increased the Basic Personal Amount for the 2022 tax year to $14,398. This means that every Canadian will get a slight boost to their return this year, and it’s likely you can expect another increase next year as well.
Tax brackets shifted for inflation
The government has adjusted tax brackets for 2022 to maintain buying power for Canadians as prices of goods continue to slowly increase.
The new federal tax brackets for 2022 are as follows:
- $0 to $50,197 of income (15%)
- More than $50,197 to $100,392 (20.5%)
- More than $100,392 to $155,625 (26%)
- More than $155,625 to $221,708 (29%)
- $221,708.01 and higher (33%)
The adjustment upwards means that Canadians on the edge of a tax bracket might find themselves shifted into a lower bracket this year and paying less tax.
TFSA limit unchanged
The TFSA contribution limit will remain at $6,000 for 2022. This means that if you’ve had an account since 2009, were 18 years of age and have been a resident of Canada throughout that period, the cumulative total you can have in your TFSA is now $81,500. The TFSA contribution limit increases to $6,500 for 2023 for a cumulative total of $88,000.
New OAS limit amounts
The OAS is designed to provide retirees with a source of income to support their retirement. However, if your income is over certain limit amounts, you might find your OAS amount reduced, and even canceled entirely.
For the 2022 tax year, if your taxable income was over $81,761, you would need to repay some of your OAS. Similarly, if your taxable income was over $134,626, you would not have received any OAS payments. Thanks to the CRA’s new Affordability Plan, seniors aged 75 and over received an automatic 10% increase of their Old Age Security pension, as of July 2022.
CPP maximum contributions increased
The Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) have been increased by 2.7%, the maximum pensionable earnings are $64,900, with a basic exemption of $3,500 for 2022. For CPP, the Employee and employer maximum contribution is $3,039.30; for QPP it is $3,315.60.
Québecers also have the option to increase their Québec Pension Plan premiums, by making extra contributions, to the enhanced plan. The enhancement of the QPP will provide future retirees with an increase in their pension premiums from 25% to 33.33%.
Note that any self-employed individuals must account for both the employer and the employee sides of the contribution. For 2022, their maximum contribution amount for the CPP is $6,078.60 and for the QPP it is $6,999.60.
RRSP annual limit increased
The RRSP annual dollar limit for tax year 2022 is $29,210. Remember that your RRSP contribution limit is capped at 18% of your earned income in the previous year. This means the dollar limit is the maximum amount you can contribute regardless of your income.
First-time Home Buyer’s Credit
The First-Time Home Buyers’ Tax Credit, also known as the HBTC, is a federal government initiative to make homeownership more affordable for some Canadians.
After the passage of new legislation in December of 2022, eligible first-time home buyers can now claim a $10,000 non-refundable income tax credit, double what they could before, which could result in tax savings of up to $1,500. There’s no need to apply or be approved for the HBTC; just enter the Home Buyer’s Amount of $10,000 on Line 31270 of your income tax return. The credit will result in a rebate on your taxes.
Changes to tax credits and deductions
Some credits have been added, changed, reinstated, or expanded for the 2022 tax year. Below are some of the Federal changes to tax credits:
- Air Quality Improvement Tax Credit: Eligible businesses including sole proprietorships, can claim 25% of their qualifying ventilation upgrades to a maximum of $10,000, creating a $2,500 tax credit.
- Automobile income tax deduction limits: The changes include Increase in Capital Cost Allowance (CCA) ceiling limits for zero emission and passenger vehicles, deductible monthly leasing costs increased by $100, and the per kilometer rate paid by employers to employees who use their personal vehicle for work has increased by 2 cents per km from last year.
Below are some of the changes to tax credits by province:
- The Children’s Sports and Arts Tax Credit: is a new $500 credit to help cover the costs of registering in sports and the arts for kids under 19 years old in 2022.
- The Rebate for Fertility Treatments, Surrogacy-related Medical Expenses: is a refundable tax credit equal to 40 % of the cost of fertility treatments and surrogacy-related medical expenses. Treatment must take place in Nova Scotia by a qualified medical practitioner or clinic.
- The Ontario Staycation Tax Credit: is a one-time tax credit for Ontarians who’ll be able to claim 20% of their stay in an Ontario hotel, cottage, or campground, during 2022 up to $1,000 individually or $2,000 as a family.
- The Ontario Seniors Care at Home Tax Credit: is a refundable personal income tax credit to help seniors with eligible medical expenses, including expenses that support aging at home. The credit is equal to 25% of your eligible medical expenses up to $6,000, for a maximum credit of $1,500.
- The Seniors’ Home Safety Tax Credit: is a new credit that supports seniors in making their homes safer and more accessible, with a credit of 25% up to a maximum of $10,000 in eligible expenses. The maximum credit is equal to $2,500 per year.
Big Changes for 2023
- Starting in November, the federal government began issuing increased GST/HST tax credits to low- and modest-income Canadians. The credits range from $234 to $628, depending on family size.
- Canada’s new dental benefit program will provide families with up to $1,300 per child over two years, depending on income.
- The new multigenerational home renovation tax credit can cover up to $7,500 for adding a secondary suite to accommodate a family member who is a senior or has a disability.
- Finally, new anti-flipping rules for residential real estate are scheduled to come into force on Jan 1st and are designed to reduce speculative demand in the marketplace and help to cool excessive price growth. The principal residence exemption will not be available on the sale of your home if you’ve owned it for less than 12 months with certain exceptions. Instead, the gain will be 100% taxable as business income.
There seems to be a never-ending change to tax legislation. The purpose, in a large respect according to governments, is to make the cost of living easier for Canadians. While I respect the effort, they also make it even more complexing for Canadians to understand. That is why it is important to engage a tax preparer or accountant to ensure you take advantage of all the credits and deductions available to you.
We ensure, when talking with our clients, that we share what we know as it applies to their personal situations. That is one good reason to work with a Financial Life Planner. If external assistance is needed in your situation, we will bring in the experts needed to structure your affairs as efficiently and effectively as possible. Staying ahead of the tax curve is important in Keeping Life Current.