Reading content about taxes is about as interesting as watching your plants grow, but that doesn’t mean you should sweep it under the rug. If you want to get the most of your money in 2023, you need to be somewhat versed in the high-level changes.
Here are 11 of the most interesting ones that won’t put you to sleep.
Here goes. I’m excited to talk tax…
Remember: I’m not an accountant! Make sure you speak to your accountant before modifying any part of your tax plans.
1. Multigenerational Home Renovation Tax Credit: You could get up to $50,000 back on your taxes if you make certain renovations to your property to allow an elderly or disabled person to live with a family member. This tax credit amounts to 15% of the expenses you incurred.
2. Anti-flipping rules: New anti-flipping rules for residential real estate 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.
3. Inflation adjustment factor: Almost all of the income tax and benefit amounts are indexed to inflation. The tax people at Canada Revenue Agency (CRA) announced they’ll be using 6.3% as the inflation rate in 2023.
4. Tax brackets for 2023: All five federal income tax brackets for 2023 have been adjusted to inflation using the 6.3%.
This means the new income tax brackets are as follows:
- $0 to $53,359 pays 15%
- $53,359 to $106,717 pays 20.5%
- $106,717 to $165,430 pays 26%
- $165,430 to $235,675 pays 29%
- Anything above that is taxed at 33%
Each province also has its own set of provincial tax brackets, which has also been adjusted for inflation.
5. Basic personal amount (BPA): An individual can make up to $15,000 in 2023 without having to pay any federal tax.
6. CPP (QPP) contributions: The personal contribution rate for the Canada Pension Plan (CPP) is 5.95%, and the Quebec Pension Plan (QPP) contribution rate is 6.4%. The most contributions by employers and employees are $3,754.45 and $4,038.40 for CPP and QPP respectively, as the new maximum annual earning has been set at $66,600 (plus the basic exemption of $3,500).
7. EI premiums: Employment insurance premiums are also rising, with a contribution rate for employees of 1.63% (1.27 per cent for Quebec) up to a maximum contribution of $1,002.45 ($781.05 for Quebec) on 2023 maximum insurable earnings of $61,500.
8. Tax-free savings account (TFSA) limit: In 2023, the contribution limit for a Tax-Free Savings Account (TFSA) will go up to $6,500 – an increase of $500 from the current limit. If you’ve been a Canadian resident and 18+ since 2009, your cumulative TFSA limit is now $88,000.
9. RRSP dollar limit: The registered retirement savings plan dollar limit for 2023 is $30,780, up from $29,210 in 2022. The amount you can contribute to your RRSP is limited to 18% of your 2022 earned income, which includes self-employment and rental income.
10. Old Age Security (OAS): Your OAS will be reduced in 2023 if your taxable income is above $86,912 in 2023.
11. First Home Savings Accounts (FHSA): Starting April 1, 2023, the new program offers a tax-free way to save $40,000 for people who are planning to buy their first home in Canada. Contributions to a First-Time Home Buyer Savings Account (FHSA) will be tax-deductible, similar to an RRSP, but withdrawals made to buy a house, including from any returns on investments in the account, will be tax-free. The new legislation confirms that first-time buyers can use both the FHSA and the existing Home Buyers’ Plan to purchase their initial residence.
If you want more details about these new tax changes, check out the CRA website at https://www.canada.ca/en/revenue-agency.html
I hope this helped!
Anthony
