Tax Changes For 2023 (2022 Tax Year)

As we sail into the new year, there are some changes for the Canadian income tax rules for the 2022 income tax year, as there are every year.

For a quick look, here is a 14-minute video describing the new regulations.

New Tax Brackets

The federal government has made some changes to the tax brackets:

“Up to $50,197 of income is taxed at 15%.

Income between $50,197 and $100,392 is taxed at 20.5%.

Income between $100,392 and $155,625 is taxed at 26%.

Income between $155,625 and $221,708 is taxed at 29%.

Above $221,708, income is taxed at 33%.”

Basic Personal Amount Increase

The Basic Personal Amount (BPA) has increased to $14,398 for the 2022 tax year.

Covid-19 Benefit Repayments

If you received Covid-19 benefits in 2022, you should receive a T4A slip for them. If you made more than $38,000 in income, you may need to repay part or all of these benefits.

If you repaid Covid-19 benefits before January 1, 2023, you may claim the repayment as a deduction on your 2022 income tax return.

Per cpacanada.ca, “You have the option to claim your repayments as a deduction in the year you made the repayment or in the year you received the benefits. You may also split the deduction between your tax returns, as long as you do not deduct more than what you repaid.” - Bruce Ball, FCPA, CPA Canada’s vice-president of taxation

Housing Tax Credits

The First-Time Home Buyers’ Tax Credit (HBTC) has increased to $10,000. The Home Accessibility Tax Credit has increased to $20,000.

Residential Property Flipping Rule

This rule came into effect January 1, 2023.

Per spiremortgage.ca, “Under the new rule, a “flipped property” is any residential property that:

• Is located in Canada

• Was purchased with the intention of making a short-term profit

• Was owned by the taxpayer for less than 365 consecutive days before the sale of the property

Any gains on these properties are considered business income and fully taxable. No principal residence exemption is available to reduce the tax.”

Multigenerational Home Renovation Tax Credit

As explained by cpacanada.ca, “The new Multigenerational Home Renovation Tax Credit introduced in Budget 2022 also took effect January 1, 2023. It provides a 15 per cent tax refund on expenses of up to $50,000 to a maximum credit of $7,500 for expenses related to building a secondary suite for a family member who is a senior or an adult with a disability.”

First Home Savings Account (FHSA)

The new First Home Savings Account (FHSA) rules become effective April 1, 2023. Again, per cpacanada.ca, “You can contribute to $40,000 over your lifetime and up to $8,000 for any one year, including 2023, even though the rules don’t come into effect until April 1.” Unlike the RRSP rules, the carryover of the unused annual contribution limit is limited to one year and the limit applies to contributions made within the calendar year.” - Bruce Ball, FCPA, CPA Canada’s vice-president of taxation

Old Age Security (OAS) Limits Changed

According to Yahoo Finance, “The new thresholds for the 2022 tax year are as follows:

Minimum income recovery threshold: $80,761.

Maximum recovery thresholds for ages 65-74: $134,626.

Maximum recovery threshold for ages 75 and above: $137,331.

If you made more than the minimum amount, you will have to pay back some or all of your OAS. If your income is above the maximum amount for your age group, your OAS might be canceled.”

Canada Pension Plan (CPP) Earning And Contribution Increase

The maximum pensionable earnings for CPP have increased to $66,600 (from $64,900).

The maximum employer and employee contributions for CPP are now $3,754.45 each.

Self-employed maximum CPP contributions are now $7,508.90.

Maximum Employment Insurance (EI) Contributions For Employees

cpacanada.ca states, “Maximum EI contribution premium for employees increased to $1,002.45 from $952.74, while maximum insurable earnings increased from $60,300 in 2022.”

Contribution Changes For Registered Plans (RRSP, TFSA, Etc.)

Again, explained by cpacanada.ca, “Maximum contribution changes for other registered plans for 2023 are as follows:

The RRSP dollar limit has increased to $30,780 from $29,201.

The TFSA dollar limit has increased to $6,500 from $6,000.

The annual money purchase limit for RPPs has increased to $31,560 from $30,780.

The defined benefit limit for RPPs increased to $3,506.67 from $3,420.00.

The deferred profit sharing plan limit has increased to $15,780 from $15,390.”

Miscellaneous Changes And Notes

cpacanada.ca adds a couple more important points:

“There are a number of additional changes relating to specific deductions and tax credits, including the labour mobility deduction for tradespeople and additional medical expense tax credits for surrogacy, fertility clinics and sperm donor bank services. For self-employed individuals, they may be able to claim a refundable air quality improvement tax credit and immediate expensing deductions. These details and more can be found in the 2023 Tax Guide.”

“If you are eligible to receive Climate Action Incentive Payments, you have to file a tax return even if you did not receive any income in the year,” - Bruce Ball, FCPA, CPA Canada’s vice-president of taxation

 One final note—the usual Canadian tax deadline, April 30th, falls on a Sunday this year, so the Canada Revenue Agency (CRA) will consider May 1st at the deadline. As always, Shaw & Associates would love to sit down with you and discuss your tax situation, and help you maximize your returns.

Contact Shaw & Associates Chartered Accountants for accounting help you can count on. One complimentary meeting with us will put you and your business on a more profitable and positive path.