2023 Tax Season: What You Need to Know

The 2023 tax season will bring some changes that taxpayers need to be aware of to make sure they are compliant with their filing obligations. You can file your 2022 tax return starting on February 20, 2023. The deadline for most Canadians to file their 2022 income tax and benefit returns is April 30, 2023 but you have until May 1 this year as April 30 falls on a Sunday. If you or your spouse or common-law partner had self-employment income in 2022, you have until June 15, 2023 to file your return(s). In either case, any taxes owing must be paid on or before May 1, 2023. Here are some key changes for the 2023 tax season that may have an impact on your situation, including new credits and deductions that you may be eligible for. We have summarized the most important changes for you below.

COVID-19 benefits

If you received COVID-19 benefits from the CRA in 2022, such as the Canada Recovery Sickness Benefit (CSRB), Canada Recovery Caregiving Benefit (CRCB), Canada Recovery Benefit (CRB) or Canada Worker Lockdown Benefit, you will receive a T4A slip with the information you need to fill out for your tax return.

In certain situations, you may end up owing additional tax on the COVID-19 benefits that were received as taxes withheld on the benefits may not have been enough. In addition, some benefits may need to be repaid if your net income is above a certain threshold. For example, if you received the CRB and your net income after certain adjustments is more than $38,000, then you may have to repay all or part of the benefits you received in 2022.

Work from home expenses

Similar to 2021, if you worked from home in 2022 due to COVID-19, you may be eligible to claim a deduction of up to $500 using the flat rate method, provided you worked more than 50% of the time from home for a period of at least four consecutive weeks due to Covid-19. If you have been keeping track of your expenses, you may be able to claim your actual expenses using the detailed method. To do this, you employer will need to provide you with a completed Form T2200 or Form T2200S.

Eligible expenses include utilities, home internet, rent, and maintenance and repair costs. Commission employees can also claim home insurance, property taxes, and the lease of electronics such as cellphone, laptop, tablet, etc.

Digital news subscription tax credit

For 2020 to 2024, if you paid for a digital newspaper app or website, you may be able to claim the digital news subscription tax credit which is worth 15 per cent on qualifying expenses up to $500. The amounts must have been paid to a qualified Canadian journalism organization for a digital news subscription with content that is primarily written news. A list of qualifying digital news subscriptions can be found here.

Rates and limits

To keep up with inflation and maintain the buying power of Canadians, several tax rates and limits have been changed in 2022.

Federal Tax Brackets: the new federal tax brackets have been adjusted. The adjustment upwards means that Canadians might find themselves shifted into a lower tax bracket and pay less taxes because of it. The new federal tax brackets for 2022 are as follows:
- $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%)

Basic Personal Amount (BPA): the government has increased the basic personal amount to $14,398. This means that all taxpayers can claim the BPA as a tax deduction up to this amount.
Employment Insurance: effective January 1, 2023, the maximum insurable earnings will increase from $60,300 to $61,500 for 2023. Employment Insurance (EI) premiums are also increasing from 1.58% to 1.65% in 2023.
Canada Pension Plan (CPP): the maximum pensionable earnings under the CPP for 2023 will be $66,600—up from $64,900 in 2022. The basic exemption amount for 2023 remains at $3,500. The employee and employer contribution rates for 2022 will be increasing to 5.95%, up from 5.70% in 2022 (6.4% for the Quebec Pension Plan), up from 5.70% in 2022. The employee’s and employer’s maximum contribution for CPP is $3,754.45 and $4,038.40 for QPP.
RRSP: The maximum RRSP contribution limit for 2022 is $29,210. For 2023, the limit has been increased to $30,780.
Old Age Security (OAS): If you receive OAS, the repayment threshold for 2022 and 2023 is $81,761 and $86,912 respectively, meaning your OAS will be reduced if your taxable income is above this amount.
Canada Child Benefit (CCB): CCB will continue to be indexed to inflation. For the 2022-2023 benefit year, the maximum a parent can receive is $6,997 for children under age 6 and $5,903 for children ages 6 to 17.
Child Disability Benefit: For parents of disabled children under the age of 18, the Child Disability Benefit has increased to $2,985 for the July 2022 to June 2023 benefit period.

Changes in Tax Credits

Below are some of the Federal and provincial (Ontario) tax credit changes for the 2022 tax year:

Federal	Ontario
Automobile Income Tax Deduction Limits: There is an increase in the Capital Cost Allowance (CCA) ceiling limits for zero-emission and passenger vehicles. The deductible monthly leasing costs have also increased by $100. In addition, the per kilometer rate paid by employers to employees who use their personal vehicle for work has increased by 2 cents per km from last year.	Ontario Staycation Credit: This is a one time tax credit for Ontarians who are able to claim 20% of their stay in an Ontario hotel, cottage or campground, during 2022 up to $1,000 individually or $2,000 as a family.
Home Accessibility Tax Credit (HATC): The HATC is a non-refundable tax credit that is available for expenses incurred in connection with alteration of a home to make it more accessible for a qualifying individual, which includes an individual who is over 65 years old or one who is entitled to the disability tax credit. Starting in 2022 and subsequent taxation years, this credit has been increased to $20,000. This means that eligible individuals can receive a tax credit of up to $3,000 (previously $1,500).	Ontario Seniors Care at Home Tax Credit: This is a refundable personal income tax credit to help low-income seniors with eligible medical expenses, including expenses that support aging at home. The credit is equal to 25% of your eligible medical expenses up to $6,000, for a maximum credit of $1,500. The credit is reduced when family net income is over $35,000 and eliminated at $65,000
Labor Mobility Deduction (LMD): For 2022 and subsequent years, a new deduction is available for certain tradespersons or apprentices (Eligible Workers (EW) who work in temporary work locations. This credit allows eligible workers to deduct certain travel and relocation expenses incurred to earn income at a temporary work relocations.	Seniors’ Home Safety Tax Credit: This is a new credit that supports seniors in making their homes safer and more accessible, with a credit of 25% up to a maximum of $10,000 in eligible expenses. The maximum credit is equal to $2,500 per year.
Air Quality Improvement Tax Credit: This is a refundable credit, where eligible entities that incurred expenditures between September 1, 2021 and December 31, 2022, can claim up to 25% of their qualifying ventilation and air filtration system upgrades to a maximum of $10,000 per qualifying location and a maximum of $50,000 across all qualifying locations. The tax credit is available to sole-proprietors and Canadian-controlled private corporations(but not trusts), and members of a partnership that are qualifying corporations or individuals (other than trusts).
Medical Expense Tax Credit for Surrogacy and Other Expenses: For 2022 and subsequent taxation years, medical expense credit has expanded to include a variety of expenses related to the areas of surrogacy, sperm, ova or embryo donations.
Home Buyers’ Tax Credit: For 2022 and subsequent tax year, the non-refundable tax credit of $5,000 for first -time home buyers has been increased to $10,000. The enhanced credit will provide up to $1,500 in tax relief to eligible first-time home buyers. This measure will apply to homes purchased on or after January 1, 2022.

The 2023 tax season is quickly approaching and it's important to be prepared for the changes that may come with filing your 2022 tax return. Reach out to our tax experts for help if you need assistance with filing your taxes this 2023 tax season. We will ensure that we maximize your refund or minimize your tax liability through utilization of all applicable tax credits and deductions. If you require further information about any of the above credits or you would like to know whether you meet the eligibility criteria, please contact us.

Disclaimer

The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting/tax professionals. NBG Chartered Professional Accountant Professional Corporation will not be held liable for any problems that arise from the usage of the information provided on this page.

Toronto’s New Vacant Home Tax

Ensuring housing affordability has become a critical issue of concern for Federal, Provincial and Municipal governments in Canada. In an effort to address this issue, the City of Toronto implemented a new Vacant Home Tax. Under this new tax, Toronto homeowners with vacant properties will have to pay an additional Vacant Home Tax on their home, effective January 1, 2022.

This new policy is the result of Consultation on the Underused Housing Tax with interested members of the public from August 2021 to December 2021, alongside the Department of Finance, and was announced in Budget 2021 by the Government of Canada. During the December 2021 meeting, City Council amended the City of Toronto Municipal Code and added Chapter 778, Taxation, Vacant Home Tax.

What is the Vacant Home Tax?

The Vacant Home Tax (VHT) is intended to incentivize owners to rent or sell their empty homes, and thereby increase the supply of affordable housing in Toronto. It will be levied at 1% of the property's current value assessment for the year the home is vacant. The tax is based on the property's occupancy status for the previous year. For example, if a vacant home is assessed at $1,200,000 in 2022, the owner will be subject to a $12,000 annual tax that will become payable in 2023. The City will use the funds from the Vacant Home Tax to fund initiatives that will help alleviate the housing shortage in Toronto, such as providing additional affordable housing.

What is considered a vacant home?

A vacant home is defined as a residential property that has been unoccupied and not used as a principal residence for more than six months in the previous calendar year. If a home is left unoccupied for more than six months after January 1, 2022, the owner will be subject to the vacant home tax the following year. The Vacant Home Tax also applies to non-residents and non-Canadian property or real estate owners. Owners who rent out their vacant homes are exempt from this tax. This provides an incentive for owners to find tenants and helps ensure more homes are available for people in need.

What are the exemptions for the Vacant Home Tax?

There are a few eligible exemptions for the Vacant Home Tax, which must be noted on the declaration and supported by documentation. If you meet the following criteria, you will be exempt from Vacant Home Tax:

Property was vacant for six months or more in the previous year due to the death of an owner.
Property is unoccupied because its undergoing renovations or repairs and all the following conditions have been met.
1. normal occupation is prevented for at least six months of the year
2. all requisite permits have been issued for the repairs and renovations
3. the City's Chief Building Official believes the work is being carried out “without unnecessary delay”.
Property was vacant due to the principal resident residing in hospital, long term care home, etc. for at least six months of the year. This exemption can be claimed for up to two consecutive taxation years.
Property was vacant for six months or more due to transfer of legal ownership to an arm’s length buyer.
Property is vacant because the property is required for occupation for employment purposes for at least six months of the year, by its owner who has a principal residence outside the Greater Toronto Area.
Property was vacant due to a court order which prohibits occupancy for at least six months of the taxation year.

How to make the declaration?

To ensure compliance with the Vacant Home Tax, all residential property owners must make a declaration of occupancy status. The City of Toronto has set up an online declaration portal that will open in mid-December 2022. The deadline to submit the declaration is February 2023 for the 2022 taxation year. Owners of residential properties that have remained unoccupied for six consecutive months or more during the taxation year, and without an eligible exemption, will be required to pay the Vacant Home Tax. A Vacant Home Tax Notice will be issued to the property owners in March/April, with payment due on May 1.

If the owner fails to make the annual declaration and/or provide supporting documentation by the deadline, the residential properties will be deemed vacant. A fine of $250 to $10,000 may be imposed for failure to declare or making a false declaration. In addition, any overdue Vacant Home Tax amount will be subject to interest until the amount is paid.

It is essential that all property owners in Toronto comply with the Vacant Home Tax and make their declarations on time. This tax will help ensure that more homes are available for people in need, as well as generate revenue to fund important initiatives such as providing additional affordable housing. If you have any questions or concerns about the new Vacant Home Tax, and eligible exemptions, please contact us. We are here to help!

Disclaimer

Year-End Tax Planning Tips - 2022

While it is important to take care of tax-planning throughout the year, a strategic approach at the end of the year can help you make sure that you’re making the most of your tax situation and taking advantage of any year end tax planning opportunities available before the December 31st deadline. As we enter the final weeks of 2022, here are some tips to consider for your year end tax planning.

Personal Tax Tips

1) Accrued Capital Losses/Capital Gains

If you have investments that have decreased in value over the course of the year, ensure you trigger the disposition to create a capital loss before year end. This loss can then be used to offset any capital gains realized during the same calendar year, carried back three years or carried forward indefinitely to reduce capital gains in future years. In order for the loss to be available for 2022, ensure that the transaction settles before December 31st, which means that the last trade date should be no later than December 28, 2022.

If you purchased investments in a foreign currency, be mindful of the impact of the currency fluctuations on your capital gain or loss. In certain cases, the gain or loss may be larger or smaller than you anticipated.

Similarly, if you have accrued capital gains on your investments, consider delaying the sale until 2023 and thus deferring the capital gain. This could be advantageous if you anticipate your tax rate to be lower in 2023.

2) Set up a prescribed rate loan

A prescribed rate loan is a tax-effective strategy for transferring income from a person in a higher tax bracket to one in a lower tax bracket, such as your spouse, common-law partner, children or even a family trust. This type of loan involves lending funds to the recipient and charging interest at the rate of interest that is set every quarter by the Canada Revenue Agency (“CRA”), currently 3%. This is an excellent way for anyone with investment funds earning more than 3% and whose spouse is in a lower tax bracket than them to save tax.

Due to the latest interest rate increases, the prescribed interest rate will increase from 3% to 4% on January 1, 2023. As a result, if a loan agreement is entered into before December 31, 2022, the lower 3% prescribed interest rate will apply as long as the loan remains in good standing. To avoid attribution of income, interest on the loan must be paid each year at the prescribed rate by January 30th of the following year, and interest payment should be recorded.

If you want to read an in-depth analysis of how prescribed rate loans work, see our article, "Benefits of Using Prescribed Rate Loans to Save Tax".

3) Registered Retirement Savings Plan (RRSP) Contributions

Contributing to a RRSP can help reduce your taxable income, as well as provide tax-sheltered growth for the future. Contributions made by December 31st are eligible for deductions on your 2022 tax return. You also have the option to defer your RRSP contribution deduction if you expect to be in a higher tax bracket in the near future.

It is important to note that the deadline for making RRSP contributions for the 2022 tax year is March 1, 2023 and your maximum 2022 deduction is limited to 18% of income earned in 2021, to a maximum of $29,210 less pension adjustment.

If you turned 71 in 2022, you must make your final RRSP contribution by December 31, 2022, before your RRSP is converted into a RRIF or registered annuity. If you still have unused RRSP contribution room even after making the contribution to your RRSP in 2022, you have the option to use your contribution room after 2022 to make contributions to a spousal RRSP until the end of the year your spouse or partner turns 71. This will not work if your spouse has already turned 71.

4) Make Registered Education Savings Plan (RESP) Contributions

The deadline for making RESP contributions for the 2022 tax year is December 31, 2022. Contributions made before December 31st are eligible for the Canada Education Savings Grant (CESG). The CESG is an additional grant from the Government of Canada, equal to 20% of annual RESP contributions of $2,500 or maximum annual grant of $500 per child.

Hence, before December 31, take a few minutes to check your RESPs to make sure that you are on track to receiving the full CESG for the year. If not, consider making a catch-up contribution to ensure that you don't miss out on any free grant money. For more information on how you can maximize your RESPs, read our article, "How to Maximize your RESP?".

5) Pay tax-deductible expenses in 2022

Plan ahead to pay any deductible expenses before December 31st in order to reduce your taxable income for 2022 and claim these deductions and credits on your return. These include but are not limited to the following:

Charitable donations to registered charities;
Childcare expenses;
Medical expenses;
Union and professional membership dues;
Investment management fees and interest;
Deductible legal fees;
Moving costs;
Tuition Fees and interest on student loans.

6) Plan your move to a different province or territory

For tax purposes, individuals are taxed on their income based on where they live on December 31st. If you are planning to move between provinces, consider:

Moving before year-end if you’re going to a province or territory with a lower tax rate.
Waiting until 2023 if you are moving to a province with a higher tax rate.

Note that if you moved to be closer to work, your moving expenses may be deductible.

7) Pay your tax installments

If you are an individual and are required to make quarterly installments, make sure to review your 2022 tax liability and make your final tax installment on or before December 15th to avoid late interest charges.

If you have missed an earlier payment and need to catch up, make sure you do so before December 15th as the CRA will apply a late interest charge on any unpaid tax installments.

8) Review your income tax deductions at source

If you anticipate your taxable income to be lower in 2023 or will have excess tax deductions or non-refundable tax credits, you can request your employer to deduct less by filing federal Form 1213.

9) Income timing

You may want to consider deferring certain employment income from 2022, to 2023 if you anticipate your taxable earnings to be lower in 2023. This could include deferring bonus or commission income (if allowed by your employer).

Business Tax Tips

1) Pay your salaries and/or dividends

As a business owner, you should consider paying reasonable salaries to yourself and family members who work in your business before December 31, 2022. This will help to reduce your corporate income tax bill while providing your family members and yourself RRSP contribution room for 2022.

Before paying dividends to any other family members, speak with your tax advisor to review the possible application of the Tax on Split Income (TOSI) rules.

2) Declare your bonuses

Consider declaring your year-end bonuses before December 31st to take advantage of the corporate tax deduction in 2022. A bonus is generally deductible to the corporation in the year it is accrued, if it is paid within 179 days of the corporation's year-end and appropriate source deductions and payroll taxes are remitted on time following payment of the remuneration.

Also, it is generally taxable to the individual as employment income when it is received. Hence, since you will receive the bonus in 2023, the taxes on that bonus will be deferred by a year.

3) Repay your shareholder loans

If you have a shareholder loan from your corporation, ensure that you pay back the loan within one year following the end of the taxation year of the corporation in which the loan was made to avoid having a personal tax income inclusion. There are exceptions to these rules. For more information on the tax rules with respect to shareholder loans, read our article, "Shareholder Loans and Their Tax Implications".

4) Purchase capital assets for your business before December 31st

If your business needs new capital equipment, consider making those purchases before December 31st, so you can claim depreciation on the asset for tax purposes in 2022, provided that the assets are available for use in 2022.

5) Pay your final corporate tax balances

The deadline to pay your final corporate income tax balances is two months after year end for most corporations (three months for certain CCPCs). Please ensure you are caught up on your payments to avoid non-deductible interest charges.

It is important to review your strategies from year-to-year in order to keep up with changing regulations and understand how they may impact your specific tax situation. Be sure to consult a qualified tax professional before making any major financial decisions in order to ensure that you are getting the best advice tailored to your personal situation.

Disclaimer

The New Luxury Tax in Effect Now

As part of the 2021 Federal Budget, the Government of Canada proposed the introduction of a tax on the sale of certain new luxury cars, aircraft, and boats. On September 1, 2022, the Select Luxury Items Tax Act (the Luxury Tax Act), a part of Bill C-19, came into force.

What items are subject to Luxury Tax?

The Luxury Tax Act now imposes a new "Luxury Tax" on the sale, lease or import of certain vehicles and aircraft worth more than $100,000, as well as certain vessels or boats that are worth more than $250,000. The items subject to tax are discussed in more detail below:

Vehicles

Most passenger motor vehicles manufactured after 2018 that are equipped to accommodate 10 or fewer passengers and have a gross vehicle weight rating of 3,856 kilograms or less. Exceptions apply to certain recreational vehicles, emergency vehicles, military vehicles, and any other vehicle with a seating capacity for more than 10 individuals

Aircraft

Any aeroplane, helicopter, or glider manufactured after 2018 that has a maximum capacity of 40 passengers. Exemptions include commercial aircraft, military aircraft, and cargo aircraft.

Vessels

Any boat designed for leisure, recreation, or sporting activities manufactured after 2018 (i.e yachts, sailboats, deck boats, waterskiing boats etc.) Exemptions are available for certain types of boats (including cruise ships and boats equipped for commercial use).

How is the Luxury Tax calculated?

The Luxury Tax is generally calculated using the taxable amount of the subject items. This means that luxury tax is applicable on the following when retail value is over:

$100,000 for vehicles
$100,000 for aircraft
$250,000 for vessels

*Please note that retail value includes the fair market value of the item, freight fees, and any amount paid for the improvements (excluding accessibility modifications). When the item is imported, the retail value includes the sum of any taxes, duties, or fees (other than GST/HST) levied on importation or as assessed by the seller (for example environmental levies).

The Luxury Tax is calculated at the lesser of:

10 percent of the full retail value of the item; and
20 percent of the amount exceeding the set threshold (($100,000 for vehicles and aircraft, and $250,000 for vessels).

For purposes of calculating GST/HST, Luxury Tax is added to the cost of the item. As a result, the Luxury Tax is subject to GST/HST.

Let's look at an example:

An Ontario resident is purchasing a $155,000 vehicle. The taxpayer has incurred $8,000 in delivery charges and improvements. The applicable Luxury Tax is calculated as:

Luxury Item (Vehicle)	Retail value	Luxury Tax
Retail price of vehicle	$163,000
Calculation of luxury tax Lesser of : a) 10 percent of the full retail value of the item; b) 20 percent of the amount exceeding the set threshold		$16,300 $12,600
Luxury tax amount (lesser of a and b)	$12,600
Subtotal	$175,600
HST	$22,828
Total cost of vehicle	$198,428

If you have any questions or concerns about the new Luxury Tax, and how it could impact your purchases of certain items, please contact us. We are here to help!

Disclaimer

How to Maximize your RESP?

As we approach the end of the year, there are a few things to keep in mind when it comes to your RESP. The Registered Education Savings Plan (RESP) is a government-sponsored savings plan that helps parents save for their children's post-secondary education. The RESP allows parents to save money in a tax-sheltered account and receive government grants to help grow their savings.

One of the main benefits of the RESP is that it offers tax-sheltered growth on investment earnings. This means that any money you make from investing your RESP savings will not be taxed. In addition to offering tax-deferred investment growth, RESPs have another benefit that can be leveraged. Through the Canada Education Savings Grant (CESG), RESP also offers government grants to help boost your savings.

However, the RESP has a few important rules to keep in mind, such as:

Maximum grant per year: The Canadian Education Savings Grant (CESG) is a government grant that adds 20% to your RESP savings, up to a maximum of $500 per year. Therefore, if you contributed $2,500 in a given year, you'll qualify for the full $500 in grant.

Carry-forward option: If you don't get the full grant amount each year, any unused grant room accumulates and carries forward until the year a child turns 17. You can go back one year at a time to make up for missed contributions; the accumulated carry forward cannot be utilized simultaneously.

Limits: The maximum lifetime grant is set at a limit of $7,200 per child and the maximum lifetime contribution limit of $50,000. This means that only $36,000 would qualify for the 20% CESG grant to reach the lifetime $7,200 grant limit.

What

What is the ideal RESP contribution strategy for maximizing CESG?

Now that we know the rules, the ideal RESP contribution strategy for maximizing CESG is one where you are making annual contributions of $2,500 starting the year your child is born. Parents who have delayed starting an RESP or haven't been able to contribute enough each year to receive the maximum grant amount might be able to use their carry-forward option to take advantage of that "free" government grant money. Hence the carry-forward option effectively allows you to double up on contributions to help you catch up on missed grant money.

However, even though the carry forward deadline is available until the child reaches 17, it can be very difficult to catch up on utilizing any unused grants. This is primarily due to the carry-forward rule noted above, which only allows one to go back one year at a time to make up for missed contributions. This means that the maximum grant available in a given year is $1,000, which is based on a $5,000 contribution.

If you begin catching up when your child is young, it may still be possible to play catch up. However, if you wait until your child is much older to start saving, you may never be able to receive the maximum annual grant of $500 per child or a lifetime grant amount of $7,200 per child. Let's look at two examples.

Example 1
You decide to wait until your child is nine years old to start an RESP. In this scenario, you can contribute $4,500 annually until the child turns 16 years old and still receive the full $7,200 of lifetime grant money within the eligible timeframe.
Example 2
You decide to open an RESP in the calendar year your child turns 12. In this situation, you could have six years to contribute and you can play catch up on your CESG by doubling up on the grant amount every year through the carry forward option. Thus, a contribution of $5,000 annually would allow you to receive $1,000 of grant money each year ($500 for the current year and $500 for unused room from a previous year). This would mean a total grant amount of $6,000, which is less than the lifetime grant of $7,200.

As you can see in "Example 2", the longer you wait to contribute to an RESP, the harder it’ll get to play ‘CESG catch up’ and in certain situations, you may be giving up free grant money. As a general rule, if you are starting later, but still want to get the maximum amount in CESG, you’ll have to start making RESP contributions no later than the time your child turns 10.

The Canada Education Savings Grant is a great way to save for your child's future education. By understanding the rules and contribution limits, you can ensure that you are making the most of your RESP and maximizing your benefits. Before December 31, take a few minutes to check your RESPs to make sure that you are on track to receiving the full CESG for the year. If not, consider making a catch-up contribution to ensure that you don't miss out on any free grant money.