Big, Interesting Changes for 2023 Income Taxes
January 18th, 2024
Posted in: Tax
We have some big, interesting changes happening to Canadian income taxes for the 2023 tax year.
This video is a nice summary of the big changes.
Basic Personal Tax Credit Increased
Per advisor.ca, “The basic personal amount for 2024 is $15,705 for taxpayers with net income of $173,205 or less. At income levels above $173,205, the basic personal amount is gradually clawed back until it reaches $14,156 for net income of $246,752.”
Federal Tax Brackets Adjusted
The federal income tax brackets have increased by 4.7%.
The first $55,867 of income will be taxed at 15%.
$55,867 to $111,733 will be taxed at 20.5%.
$111,733 to $173,205 will be taxed at 26%.
$173,205 to $246,752 will be taxed at 29.32%.
$246,752 and up will be taxed at 33%.
CPP Limits Increasing – New Two-Tiered Limits Added
The Canada Revenue Agency states, “The maximum pensionable earnings under the Canada Pension Plan (CPP) will be $68,500—up from $66,600 in 2023. The basic exemption amount for 2024 remains at $3,500.
“Starting in 2024, a higher, second earnings ceiling of $73,200 will be implemented and used to determine second additional CPP contributions (CPP2). As a result, pensionable earnings between $68,500 and $73,200 are subject to CPP2 contributions.”
Tax-Free Savings Account (TFSA) Limit Increased
The TFSA limit for Canadians has increased to $7000 per year.
RRSP Limit Increased
The RRSP limit has increased to $31,560 for the 2023 tax year.
FHSA (First Home Savings Account) Tax Deduction
Starting April 1, 2023, Canadians could put money into an FHSA to work towards saving a down payment for a house. This money can be used as a deduction on your income taxes. A note here: the contribution limits increase year by year, so even if you don’t use it much right away, it is not a bad idea to open an account now.
Again per the CRA, “Contributions that you make to your first home savings accounts (FHSAs) are generally deductible on your income tax and benefit return. It is important to note that transfers from your registered retirement saving plans (RRSPs) to your FHSAs are not deductible.”
Lifetime Capital Gains Exemption Increased
Again per advisor.ca, “In 2024 the lifetime capital gains exemption (LCGE) amount on the sale of qualified small business corporation (SBC) shares, or on farming or fishing property, will rise above $1 million for the first time, pushed higher by inflation…In 2024 the LCGE on the sale of SBC shares will be $1,016,836, up from $971,190 in 2023, an increase of $45,646 or 4.7%, which is next year’s federal indexation rate.”
This site has a good overview of a whole bunch of the changes for the 2023 tax year.
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