What Are the Changes in Canada for Tax Season? The past year has been a whirlwind of financial chaos, and surprisingly, not all of it can be blamed on the pandemic.
Canada has been hit hard by inflation, resulting in skyrocketing interest rates and a wild surge in prices for everyday essentials like groceries and gas.
However, amidst the chaos, one thing remains steadfast: taxes. But hold on tight because there are some changes you need to know about for Tax Season 2023. Get ready for surprises!
New Tax Filing Deadline For 2023?
The first change to note is the tax-filing deadline. Traditionally, Canadians have until April 30 to file their taxes. However, this year, April 30 falls on a Sunday, and unfortunately, the taxman doesn’t work weekends.
So, the new deadline for filing your 2022 taxes is Monday, May 1st. Remember, don’t be late!
Extended Deadline for the Self-Employed
If you’re self-employed, you get a little extra breathing room. Your tax-filing deadline is extended until June 15th. So, make sure you take advantage of the extra time to dot your i’s and cross your t’s. No excuses!
How Are The Income Tax Brackets: What’s Changing?
Hold onto your wallets because there’s a significant update to the Federal Income Tax brackets this year. But before we dive into the changes, let’s quickly recap what income tax brackets are for those new to the tax game.
Understanding the Income Tax Dance
Depending on your annual income, you fall into one of five federal and five provincial tax brackets, each taxed at different rates. It’s like a dance—when your income increases, only the additional amount may be taxed at a higher bracket rate.
For example, if you earn $60,000 a year, the first $50,197 is taxed at 15%, while the remaining $9,803 falls into the next bracket, taxed at 20.5%.
The Inflation Twist: Changes in Tax Rates
In 2022, the federal government adjusted the federal income tax brackets by 6.3% to account for inflation. This means that the thresholds for each federal income tax bracket have increased.
The silver lining? You might end up paying a lower rate on more of your income because wages didn’t rise as much as inflation.
Here Are The New Federal Income Tax Brackets And Rates For 2023:
- 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%
Boosting your wallet: changes in the basic personal amount
The basic personal amount, a non-refundable tax credit claimable by all individuals, has also seen an update. If you make $40,000 or less, you’ll be thrilled to know you get a full tax deduction.
The basic personal amount has been increased from $14,398 in 2022 to $15,000 in 2023. Going forward, it will be indexed for inflation in subsequent years. More money in your pocket—hooray!
Don’t Forget Your RRSPs
While we’re on the topic of income tax brackets, let’s not overlook registered retirement savings plans (RRSPs). The contribution limit has increased from $27,830 in 2021 to $29,210 in 2022.
Remember, your contribution limit is generally capped at 18% of your earned income unless you have carry-forward room. So, make the most of it and secure your future!
COVID-19 Benefit Repayments:
The federal government rolled out several COVID-19 benefits in 2020, providing much-needed income to those financially affected by the pandemic. But now, it’s time to reckon with these benefits and pay your taxes on them. Here’s what you need to know:
If you received any of the following benefits, brace yourself for the tax implications:
- Canada Worker Lockdown Benefit (CWLB)
- Canada Recovery Caregiving Benefit (CRCB)
- Canada Recovery Sickness Benefit (CRSB)
- Canada Recovery Benefit (CRB)
- Provincial or territorial COVID-19 financial assistance payments
- Canada Emergency Response Benefit (CERB) with the CRA
- Canada Emergency Student Benefit (CESB)
Dealing with Repayments
You’ll receive a T4A slip to declare these benefits on your tax return. If your total income exceeds $38,000, you may have to repay a portion of the benefits you received.
Choose Your Deduction Strategy
If you repaid your COVID-19 benefits before January 1, 2023, you have the flexibility to choose when you claim the deductions. You can either claim the entire amount in the year of repayment or the year you received the benefits.
Alternatively, you can split the tax deductions between your returns, spreading the burden over multiple years. Just remember not to deduct more than you repaid.
Maximize Your Benefits: Reassessment and Lower Tax Burden
If you’ve already filed your 2021 tax return and repaid your benefits in 2022, you have an option. You can either claim the benefits on your 2022 tax return or request a reassessment of your 2021 taxes from the Canada Revenue Agency (CRA).
This way, you can choose the option that results in a lower tax burden. Play smart and keep more of your hard-earned money!
A quick reminder: repayments made after December 31, 2022, can only be deducted in the year of repayment. So, make sure you act promptly and take advantage of the available deductions. Every penny counts!
Tax Changes For Homeowners: What You Need To Know To Save Big
Big changes are happening in the realm of housing when it comes to taxes. The federal government is determined to make homeownership more accessible to Canadians, and they’ve made significant adjustments to the tax code to achieve this goal. Brace yourself for the exciting news that could save you thousands!
First-Time Home Buyers Rejoice: The Home Buyers’ Tax Credit Doubles
If you’re a first-time homebuyer, get ready to celebrate! The First-Time Home Buyers’ Tax Credit (HBTC) has doubled from $5,000 to a whopping $10,000.
This means potential savings of up to $1,500 on your taxes. The government wants to ease the financial burden and make that dream home more attainable for you.
House Flippers Beware: Capital Gains Tax Changes
Attention, house flippers! There’s a significant change that affects you. The primary residence exemption can no longer be used to dodge capital gains taxes.
If you sell a house within 12 months of purchasing it, 100% of the capital gains will be taxed as business income. However, don’t fret—there are exceptions for cases like death or divorce. Just be aware of the new rules and plan your flipping endeavors accordingly.
Enhancing Accessibility: Home Accessibility Tax Credit
Ensuring accessibility for all Canadians is a top priority, and the tax code reflects this commitment. The Home Accessibility Tax Credit has received a boost, increasing to $20,000.
This tax credit applies to expenses related to renovations or modifications that make a home more accessible for individuals with disabilities or illnesses. Embrace the opportunity to create an inclusive living space while saving on your taxes.
Coming Soon: First Home Savings Account
Although it won’t have an impact on your taxes this year, the First Home Savings Account is an exciting development set to launch on April 1. Till 2024.
This tax-free account combines the features of a Tax-Free Savings Account (TFSA) with a Registered Retirement Savings Plan (RRSP). Canadians will be able to contribute up to $8,000 per year, with a lifetime maximum of $40,000, toward the purchase of their first home.
Contributions are tax-free upon withdrawal, just like with a TFSA, and can be deducted against income, similar to RRSP contributions. Start planning for your future home!
What Medical Expenses Are Now Eligible For Tax Credits?
Medical expenses can be a financial burden, but the tax code has recently expanded to provide relief.
If you’ve invested in fertility treatments or surrogacy, rejoice! You can now claim the amounts paid to Canadian fertility clinics and donor banks for expenses related to conceiving a child through donor sperm or ova.
This includes expenses incurred by you, your spouse, your common-law partner, or your surrogate. The new tax credits are designed to ease the financial strain of these important medical journeys.
Diagnosed with Type 1 Diabetes? You’re Eligible for More
In June 2022, a new medical tax credit was introduced, and it’s worth revisiting. If you’ve been diagnosed with type 1 diabetes, you are now eligible for the Federal Disability Tax Credit.
This opens up opportunities to potentially open a Registered Disability Savings Plan (RDSP). Take advantage of the support available to you and ensure you’re maximizing your benefits.
What Is Line 10100 On Your Tax Return:
From Line 101 to Line 10100: In the realm of tax returns, even the smallest changes can cause a ripple effect. Until 2019, Line 101 was the star of the show. But hold on tight, because Line 10100 has taken the stage since then. Yes, it’s more digits, but fear not, as it serves the same purpose—to declare your employment income to the Canada Revenue Agency (CRA).
What Does Line 10100 Capture?
Line 10100 serves as a vessel for your employment income—a comprehensive snapshot of your earnings derived from employment activities. It encapsulates the wages, salaries, tips, commissions, bonuses, and other forms of remuneration you received throughout the tax year.
So whether you toiled away at a traditional job or embarked on a freelance adventure, Line 10100 captures it all.
Line 10100 stands as a vital checkpoint. Remember, it’s not just a line of numbers, but a declaration of your hard work and dedication.
When Is Tax Season Canada
The official start date for filing your taxes this year begins Monday, Feb. 20th. As the Canada Revenue Agency (CRA) opens its virtual doors, welcoming Canadians to embark on their tax-filing journey.
Tax Season 2023 is poised to be a roller coaster ride with twists and turns, but armed with the right information, you can navigate it smoothly.
Remember the new tax-filing deadline, brace yourself for changes in income tax brackets, and stay on top of your COVID-19 benefit repayments. Maximize your deductions, seize the opportunities, and emerge victorious from this tax season
These changes to the tax code are all about putting more money back in your pocket. If you qualify for any of the homeowner or medical tax credits mentioned above, make sure to claim them.
Even if you don’t qualify for the new credits, filing your taxes is always a wise move. You may still be eligible for GST/HST and childcare credits based on your income, giving your budget a valuable boost.
Don’t miss out on the opportunities available to you—file your taxes and reap the rewards! Good luck!
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