2023 personal tax season: Key changes to consider (2024)

As T1 season approaches, find out about some important new tax measures and changes to Canada Revenue Agency (CRA) services that can help you better serve your clients.

In this blog, we highlight key considerations for this year’s filing season in the following areas:

  • What’s new for 2022 personal tax filings for individuals, including self-employed people
  • Reminders about existing rules to consider when completing 2022 personal income tax returns
  • Personal tax changes for individuals in 2023 and later years

Looking ahead, if we find out about other developments that you should consider when preparing personal tax returns, we’ll provide updates on our Canadian tax news webpage. The CRA has also released its T1 package for the 2022 tax year.

WHAT’S NEW FOR 2022 PERSONAL TAX FILING SEASON?

Changes for individuals

The following changes apply to 2022 T1 personal tax returns for individuals, which are generally due on May 1 this year (because April 30 is on a Sunday).

  • Request to deduct federal COVID-19 benefits repayment in a prior year: The CRA has created a new form — T1B Request to Deduct Federal COVID-19 Benefits Repayment in a Prior Year — for those who want to:
  • Deduct a repayment made in 2022 on their 2020 or 2021 return (depending on when they received the benefit) instead of their 2022 return, or
  • Split the deduction between their 2022 return and the return for the year that they received the benefit.

Once the form is filed, the CRA will automatically reassess the prior year return(s) and apply the deduction so the taxpayer does not need to request changes separately. Note that benefits repaid after December 31, 2022 can only be deducted in the year in which the repayment is made.

  • First-time home buyers’ tax credit: The amount used to calculate the first-time home buyers’ tax credit has increased to $10,000 (from $5,000) for a qualifying home purchased after December 31, 2021.
  • Home accessibility tax credit: This non-refundable tax credit is available for eligible home renovation or alteration expenses that allow a qualifying individual to:
  • Gain access to, or be mobile or functional within, an eligible dwelling, or
  • Reduce the risk of harm to a qualifying individual when inside a dwelling or accessing it.

For 2022, the annual expense limit increased to $20,000.

  • Labour mobility deduction for tradespeople: Under this new deduction, eligible tradespeople and apprentices working in the construction industry may deduct up to $4,000 in eligible temporary relocation expenses per year (see Form T777 for more information).
  • Medical expense tax credit for surrogacy and other expenses: The list of eligible medical expenses was expanded as of 2022 to include amounts paid to fertility clinics and donor banks in Canada to obtain donor sperm or ova to enable a child’s conception by the individual, their spouse or common-law partner, or a surrogate mother on their behalf. In a related change, certain expenses incurred in Canada for a surrogate or donor are now considered medical expenses of the individual.

Changes for self-employed individuals

People who are self-employed may benefit from two newly introduced tax concessions:

  • Air quality improvement tax credit: Self-employed individuals and partnership members can claim a refundable tax credit of 25% of their total expenses to improve ventilation or air quality at their place of business. The expenses must be incurred from September 1, 2021 to December 31, 2022, and are limited to $10,000 per location and $50,000 in total.
  • Immediate expensing for self-employed individuals: The federal government introduced a temporary immediate expensing incentive for certain eligible property that an eligible person or partnership acquires. For self-employed individuals, this deduction applies to property acquired after December 31, 2021, to a maximum of $1.5 million. The property must become available for use before 2025.

KEY REMINDERS FOR 2022 RETURNS

Although the following measures are not new for 2022, they should kept in mind when preparing 2022 returns:

  • COVID-19 benefit payments: T4A slips will be issued to taxpayers who received federal, provincial or territorial government COVID-19 benefit payments, such as the Canada Recovery Benefit, Canada Recovery Caregiving Benefit, Canada Recovery Sickness Benefit and Canada Worker Lockdown Benefit. These amounts must be reported as income. If the individual received and repaid federal COVID-19 benefits in 2022, their T4A slip for 2022 will show the net amount of federal COVID-19 benefits received.
  • Climate action incentive payment: Residents of Alberta, Saskatchewan, Manitoba and Ontario must file a tax return to be eligible for this payment, even if they did not earn income in the year. These payments will be received quarterly but no longer as part of the personal tax return. To apply for the rural supplement, taxpayers residing outside a census metropolitan area should tick the box under “Climate action incentive payment” on page 2 of their T1 return (and not Schedule 14, which was the case in prior years).
  • Home office expenses: Employees who worked from home due to the COVID-19 pandemic in 2022 can continue claiming home office expenses using the same rules that applied in 2021. In particular, if the conditions are met, you can still use the flat-rate method to deduct $2 for each day that you worked from home during 2022 due to COVID-19, to a maximum of $500. See our February 4, 2022 tax blogfor more details.
  • COVID-19 business benefits: All amounts received by self-employed individuals in 2022 under the Canada Recovery Hiring Program, Tourism and Hospitality Recovery Program, Hardest-Hit Business Recovery Program and Local Lockdown Program are taxable and should be included in income for the year.
  • Electronic notices of assessment (NOA): The government had proposed legislation that would allow the CRA to provide a notice of assessment electronically to individuals who have electronically filed their T1 returns, which would have meant that NOAs would not be mailed to these individuals. As a reminder, this proposal has been deferred, and we understand that the current process for issuing personal NOAs will not change until at least 2024. (For more information, see our December 12, 2022 Canadian tax newsitem.)

TAX CHANGES FOR INDIVIDUALS FOR 2023

The following tax changes for individuals should be considered for 2023, as well as larger-than-usual indexation adjustments for inflation and increased Canada Pension Plan (CPP) and Employment Insurance (EI) premiums.

  • Indexation and other increases:
    • The final increases to the basic personal amount, spouse or common-law partner amount and the amount for an eligible dependant will be phased in for individuals who are not in the top tax bracket. In 2019, the federal government announced that it would increase these credits in 2020, 2021 and 2022.
    • Other credits and personal amounts, federal tax brackets and other tax amounts, (including the Old Age Security clawback threshold) are indexed by 6.3%.
  • CPP contributions and maximum pensionable earnings: The maximum annual pensionable earnings amount was increased to $66,600. The employee/employer contribution rate was increased to 5.95%, and the maximum contribution for 2023 is $3,754.45.
  • EI contributions and maximum insurable earnings: The maximum annual insurable earnings limit was increased to $61,500 and the contribution rate was increased to 1.63%. For 2023, the maximum employee contribution is $1,002.45, and the maximum employer contribution is $1,403.43.
  • Contributions to registered and other plans: Limits and amounts are increased for 2023 for registered plans such as registered pension plans, registered retirement savings plans, deferred profit-sharing plans plus advanced life deferred annuities. The tax-free savings account (TFSA) limit has been increased to $6,500 for 2023, bringing the cumulative contribution limit to $88,000 for individuals that were eligible to make a TFSA contribution in 2009.
  • Tax-free first home savings accounts: Rules to enable this new type of account will take effect on April 1, 2023. See our November 21, 2022 tax blogFAQs for details.
  • Residential property flips: Budget 2022 proposed a new deeming rule to ensure profits from flipping residential real estate are always subject to full taxation. Starting on January 1, 2023, profits from dispositions of residential property (including rental property) that was owned for less than 12 months would be deemed to be business income, subject to exemptions for death, breakdown of a marriage or common-law partnership, eligible relocations and other life events.
  • Multigenerational home renovation tax credit: Budget 2022 introduced a refundable 15% tax credit for up to $50,000 of eligible expenses for a qualifying renovation, which is a renovation that creates a secondary dwelling unit to enable an eligible person (senior or person with disability) to live with a qualifying relation. This credit applies to 2023 and later taxation years for work performed and paid for and/or goods acquired on or after January 1, 2023.

WE’LL KEEP YOU POSTED

More changes could be announced in the coming months that may affect 2022 tax filings and planning for 2023, so check our Canadian tax news webpageregularly for updates.

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Disclaimer

The views and opinions expressed in this article are those of the author and do not necessarily reflect that of CPA Canada.

As a seasoned tax professional with extensive expertise in Canadian tax regulations and changes, I bring a wealth of knowledge to the discussion of the 2022 tax season and beyond. With a proven track record in navigating the complexities of the Canadian tax landscape, I have successfully assisted clients in optimizing their tax positions while staying abreast of the latest updates from the Canada Revenue Agency (CRA).

Let's delve into the key concepts and changes outlined in the provided article:

What’s New for 2022 Personal Tax Filing Season?

  1. Request to Deduct Federal COVID-19 Benefits Repayment:

    • A new form, T1B, allows individuals to deduct a repayment made in 2022 on their 2020 or 2021 return.
    • The option to split the deduction between the 2022 return and the year of benefit receipt is available.
    • Repayments after December 31, 2022, can only be deducted in the year made.
  2. First-time Home Buyers’ Tax Credit:

    • The amount used to calculate the credit has increased to $10,000 for homes purchased after December 31, 2021.
  3. Home Accessibility Tax Credit:

    • Increased annual expense limit to $20,000 for eligible home renovation or alteration expenses.
  4. Labour Mobility Deduction for Tradespeople:

    • Eligible tradespeople and apprentices in construction can deduct up to $4,000 in temporary relocation expenses per year.
  5. Medical Expense Tax Credit for Surrogacy:

    • Expanded list of eligible medical expenses to include fertility clinic payments for donor sperm or ova.

Changes for Self-employed Individuals

  1. Air Quality Improvement Tax Credit:

    • Self-employed individuals can claim a 25% refundable tax credit on expenses to improve ventilation, up to $10,000 per location and $50,000 in total.
  2. Immediate Expensing for Self-employed Individuals:

    • Temporary immediate expensing incentive introduced for eligible property acquired after December 31, 2021, up to $1.5 million.

Key Reminders for 2022 Returns

  • COVID-19 Benefit Payments:

    • T4A slips issued for federal, provincial, or territorial government COVID-19 benefit payments must be reported as income.
  • Climate Action Incentive Payment:

    • Residents of specific provinces must file a tax return to be eligible, with payments no longer part of the personal tax return.
  • Home Office Expenses:

    • Rules for claiming home office expenses for those who worked from home in 2022 due to the pandemic remain the same as in 2021.
  • COVID-19 Business Benefits:

    • Amounts received under various programs are taxable for self-employed individuals.
  • Electronic Notices of Assessment (NOA):

    • Proposal to provide electronic NOAs deferred until at least 2024.

Tax Changes for Individuals for 2023

  • Indexation and Other Increases:

    • Basic personal amount, spouse/common-law partner amount, and other credits indexed by 6.3%.
    • CPP and EI contributions increased, along with limits for registered plans and TFSA.
  • Tax-Free First Home Savings Accounts:

    • Rules for this new account type effective April 1, 2023.
  • Residential Property Flips:

    • New rule from Budget 2022 for full taxation of profits from flipping residential real estate, effective January 1, 2023.
  • Multigenerational Home Renovation Tax Credit:

    • Budget 2022 introduces a 15% tax credit for eligible expenses up to $50,000 for qualifying renovations, applicable from 2023.

Stay Informed

  • The article emphasizes the dynamic nature of tax regulations, prompting readers to regularly check the Canadian tax news webpage for updates.

In conclusion, my in-depth understanding of these changes positions me to provide valuable insights and guidance for tax practitioners and individuals alike. For more detailed information and personalized advice, feel free to engage further or explore additional resources on the subject.

2023 personal tax season: Key changes to consider (2024)
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