Tax Tip Thursday

Every year, the CRA changes things. This is nothing new. However, 2023 has some big ones! Let’s take a look…

CPP

Once again, it is going to cost you more to contribute to your CPP. $3754 for 2023 up from $3500 for 2022, so an extra $254. And if you are self employed, you can make that double! $500 as you also have to pay the employer portion.

EI

Same thing here! EI is $1002 for 2023 vs $952 in 2022, so an extra $50.  No EI for self employed unless you voluntarily pay into it.  We’ll talk about that another day. $1400 on behalf of those employees! Or $70 more.

TFSA

You will be happy to know that the TFSA annual limit went up to $6500 from $6000 previously. If you have not contributed, the max is $88k life to date.

OAS

Every year they set a threshold of the amount of income you can earn as a senior before they start clawing back your OAS. This year, the limit has been raised to $86,912.

FHSA – First Home Savings Account

This is new and is expected to come into play beginning in April. You can contribute up to $40k tax free towards your 1st home purchase. It is very similar to the RRSP, but it is exclusively for a home and is IN ADDITION to the RRSP limits. The contributions are tax deductible as well! AND the withdrawals are like a TFSA and are tax free! You get the best of both worlds! If you are a first time home buyer.

First Time Home Buyers’ Tax Credit DOUBLED

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.

HATC – Home Accessibility Tax Credit

If you’re 65 or older, are eligible for the disability tax credit, and have remodeled your home for safer access, you can claim up to $20,000 of your related HATC expenses.

MHRTC – Multigenerational Home Renovation Tax Credit

Jan. 1 also marks the beginning of this new credit, which is equal to 15 per cent of eligible expenses (up to $50,000) incurred for a qualifying renovation that creates a secondary dwelling to permit an eligible person (such as a senior or a person with a disability) to live with a relative.

Anti-Flipping Rules

Finally, new anti-flipping rules for residential real estate are scheduled to come into force on Jan. 1, 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-per-cent taxable as business income.

Work from Home Tax Credit

They are maintaining the simple method of calculating your home office expenses at $2 a day to a maximum of $500.  Just remember there are rules!

Repaying COVID-19 Benefits

If you received COVID-19 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 you have repaid all or parts of COVID-19 benefits in 2022, you can choose which year to claim the tax deduction. You can either claim the deduction in the year you received the benefit, or the year you repaid it.

Plus, any one-time provincial payments to help you through COVID-19 will not be taxable, and you don’t need to report them as income on your 2022 tax return.

Tax Brackets Shift Upwards

The basic personal amount and all the tax brackets have increased.  This means that you will pay a little less tax

And don’t forget about the staycation credit!  20% deduction up to $200 for an individual and $400 for a family.

Lots of Changes, Lots to Talk About

Don’t forget about the staycation credit! That’s a 20% deduction up to $200 for an individual and $400 for a family.

There’s a lot of important changes this year, and you might be able to take advantage of some of it! As always, if you’re looking for help or clarification on any of this please don’t hesitate to reach out. Book your appointment today!

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.