For 2023, other than the inflation, housing market and investment, here are some tax updates that you may be interested to know.
For most of tax payers
Basic personal amount:
The amount of income that an individual can earn without paying any federal tax. The basic personal amount for 2023 is $15,000 for taxpayers with net income of $165,430 or less. If income reaches above $165,430, the basic personal amount is gradually clawed back until it reaches $13,521 for net income of $235,675. The basic personal amount for 2022 ranges from $12,719 to $14,398. Remember, this credit is “non-refundable.”
RRSP dollar limit:
The maximum contribution for 2023 is $30,780; for 2022, it’s $29,210. The 2024 limit is $31,560.
TFSA limit:
In 2023, the annual limit is $6,500, for a total of $88,000 for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009. The annual limit for 2022 is $6,000, for a total of $81,500 in room available in 2022 for someone who has been eligible since 2009.
If you are on salary
Canada Pension Plan contribution:
Employed individuals making $66,600 or more will pay an extra $255 through the CPP tax in 2023 as the contribution rate increases from 5.7% to 5.95%. The employer’s contribution will increase by $255 as well on the same level of pay. The basic exemption amount for 2023 still remains at $3,500.
Employment Insurance contribution:
Employed individuals making $61,500 or more will pay an extra $49.71 through the EI tax in 2023. Their employers will pay an extra $70, which is 1.4 times of employee’s portion.
If you use your personal vehicle for the company’s business, the limit on the deduction of tax-exempt allowances paid by employers to employees who use their personal vehicle for business purposes in the provinces will increase to 68 cents per kilometer for the first 5,000 kilometers driven, and to 62 cents for each additional kilometer. For the territories, the limit will also increase by seven cents to 72 cents per kilometer for the first 5,000 kilometers driven, and to 66 cents for each additional kilometer.
Again, related to housing market
First Home Savings Accounts (FHSA):
The FHSA offers prospective first-time home buyers the ability to save $40,000 tax-free in life time and up to $8,000 in any one year, including 2023 even though the rules don’t come into effect until April 1, 2023. Like registered retirement savings plans (RRSP), contributions to an FHSA would be tax deductible. Like tax-free savings accounts (TFSA), income and gains inside an FHSA as well as withdrawals would be tax-free. Who is eligible? To open an FHSA, you must:
• be an individual resident of Canada
• be at least 18 years of age
• be a first-time home buyer, which means you, or your spouse or common-law partner (“spouse”) did not own a qualifying home that you lived in as a principal place of residence at any time in the year the account is opened or the preceding four calendar years. For the purposes of the first-time home buyer’s test, a home owned by your spouse in which you lived during the relevant period will only put you in a bad position as you are unqualified as a first-time home buyer.
The Residential Property Flipping Rule:
A new deeming rule to ensure profits from flipping residential real estate are always subject to full taxation. Starting on January 1, 2023, profits arising from dispositions of residential property (including a rental property) that was owned for less than 12 months would be deemed to be business income. That means 100% taxable. This rule also extends to profits arising from the disposition of the rights to purchase a residential property via an assignment sale. Profits arising from an assignment sale would be deemed to be business income if the rights to purchase a property were assigned after having been owned for less than 12 months.
The Prohibition on the Purchase of Residential Property by Non-Canadians Act
Beginning January 1, 2023, non-Canadians will be subject to a two-year ban on the purchase of certain residential real estate in Canada – and anyone who knowingly helps a non-Canadian buy a house could be subject to significant penalties. prohibits foreign corporations and individuals who are not permanent residents of Canada or Canadian citizens from purchasing residential real estate in Canada between January 1, 2023, and December 31, 2024. What happens to the contract signed before January 1, 2023. Any contractual obligations arising or assumed prior to January 1, 2023, will not be subject to the Ban.
If you are self-employed/running your corporation
Another aspect of the change that may attract your attention if you are running the corporation to perform service for a hiring business. The Canada Revenue Agency has decided to escalate the scrutiny of personal services businesses, and the consequences for breaching these tax rules can be severe. For example, some deductions may be denied and small business deduction may not be available. Basically, The Canada Revenue Agency will focus on industries that services are provided through a corporation, and the individual doing the work would be considered an employee if they provided the services directly. Industries that are potentially impacted include trucking, IT consulting, accounting, construction and catering.
Other than the above, if your business’s car is under a lease, the deductible leasing costs will be increased from $900 to $950 per month, before tax, for new leases entered into on or after January 1, 2023.
Don’t forget about this.
The temporary Ontario Staycation Tax Credit for 2022 has been discontinued. This tax credit aims to encourage Ontario families to explore the province, while helping the tourism and hospitality sectors recover from the financial impacts of the COVID 19 pandemic. If you are Ontario residents, you can claim 20% of the eligible 2022 accommodation expenses, for example, for a stay at a hotel, cottage or campground, when filing their personal Income Tax and Benefit Return for 2022. You can claim eligible expenses of up to $1,000 as an individual or $2,000 if you have a spouse, common-law partner or eligible children, to get back up to $200 as an individual or $400 as a family. Don’t forget about this credit as it has been removed after 2022.
Hope you enjoy the read.
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