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Biggest Tax Changes Canadians Need to Know in 2023

2023 tax changes

There are tax changes every year: these are some of the biggest you'll need to know about when filing your return this tax season

Tax season is approaching, and, as is the case every year, new changes have been implemented for the 2022 tax year that may affect your circumstances and your tax return, including new credits and deductions that you may be eligible for.

To make things easier, we’ve broken down how these changes will affect you and compiled a list of the most important changes you should be aware of when completing your tax return in 2023.

COVID-19 Benefits Repayments

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 be given a T4A slip including the information you need to file your tax return.

If you received the CRB and your net income after certain adjustments exceeds $38,000, you may be required to repay all or a portion of your benefits in 2022.

If you have already repaid all or part of your COVID-19 benefits in 2022, you can claim the tax deduction for the payback in either the year you got the benefit or the year you repaid it.

Furthermore, any one-time provincial payments to assist you with COVID-19 will not be taxable, and you will not be required to disclose them as income on your 2022 tax return.

Claiming Up to $500 for Work at Home Expenses

You can claim the work-from-home tax credit again this year. You can claim your calculated total if you’ve been keeping track of your spending. Alternatively, you could opt for a flat rate of $2 per day spent working from home during the pandemic.

The Expected BPA Increase Is In Force

The government increased the Basic Personal Amount for the 2022 tax year to $14,398 as part of their policy of gradually raising it until it reaches $15,000 in 2023. This means that every Canadian will get a modest rise in their return this year, and another increase is probable next year as well.

Inflation Has Led to a Shift in Tax Brackets

The government has modified tax bands for 2022 in order to maintain Canadians’ purchasing power as commodity prices gradually rise.

The following are the new federal tax brackets for 2022:

  • $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 upward adjustment means that Canadians on the cusp of a tax bracket may find themselves moved into a lower rate this year and paying less in taxes as a result.

No Changes to TFSA Limits

The TFSA contribution limit will stay at $6,000 for the year. This means that if you’ve had an account since 2009, were 18 years old at the time, and have been a resident of Canada during the entirety of that time, your cumulative allowed amount in your TFSA is now $81,500.

There Are New OAS Limit Amounts

The OAS is intended to give retirees an income stream to supplement their retirement. However, if your income exceeds specific thresholds, your OAS payment may be decreased or withdrawn outright.

If your taxable income in 2022 exceeded $81,761, you would be required to repay some of your OAS. Likewise, if your taxable income exceeded $134,626, you would not have received any OAS payments. Seniors aged 75 and over received an automatic 10% boost in their Old Age Security pension as of July 2022, thanks to the CRA’s new Affordability Plan.

Canada Pension Plan Maximum Contributions Have Been Increased

The Canada Pension Plan (CPP) has 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.

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.

The RRSP Dollar Limit is 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.

Notable Tax Credit Changes

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 firms, including sole proprietorships, can claim up to $10,000 in qualifying ventilation upgrades, resulting in a maximum $2,500 tax credit.

Automobile income tax deduction limits

The adjustments include an increase in the Capital Cost Allowance (CCA) maximum limitations for zero emission and passenger vehicles, a $100 increase in deductible monthly leasing expenses, and a 2 cent rise in the per kilometer rate paid by employers to employees who use their personal vehicle for work.

Ontario Specific Tax Credit Changes

The Ontario Staycation Credit

This is a one-time tax credit for Ontarians who can claim up to $1,000 individually or $2,000 as a family for their stay in an Ontario hotel, cottage, or campground during 2022.

The Ontario Seniors Care at Home Tax Credit

This is a refundable personal income tax credit designed to assist seniors with qualified medical expenses, such as those associated with aging at home. The credit is equal to 25% of qualified medical expenses up to $6,000, up to a maximum of $1,500.

The Seniors’ Home Safety Tax Benefit

This is a new tax credit that helps seniors make their homes safer and more accessible by providing a 25% credit up to $10,000 in qualified expenses. The maximum credit per year is $2,500.

This is not an exhaustive list of course, and so if you want to ensure that you get the most out of your tax filing this year, getting professional help is never a bad idea, especially if yours is a more complicated tax return this year. At K.K. Professional Chartered Accountant we are ready to help. Contact us today and let’s talk taxes, both your upcoming return and how we can help you maximize your finances to do better in 2023.