Tax filing season is right around the corner, and many new changes have been put into effect for the 2022 tax year that may have an impact on your situation, including new credits and deductions that you may be eligible for.
To make things simple, we’ve provided a breakdown of how these changes will affect you, and put together 9 of the most important changes you should know about when filing your return in 2023.
- Tax brackets and many contribution amounts and limits have been increased to account for rising living costs.
- Work-from-home tax credit amount remains at $500 this year.
- There’s a number of new or updated credits and deductions that you may be eligible for.
1. Repaying COVID-19 benefits
If you received COVID-19 benefits from the CRA in 2022, such as the Canada Recovery Benefit (CRB), Canada Sickness Recovery Benefit (CSRB) or Canada Recovery Caregiving Benefit (CRCB) you will receive a T4A slip with the relevant information you need for your tax return.
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.
If you have repaid all or parts of COVID-19 benefits in 2022, you can choose which year to claim the tax deduction. You can either claim the deduction in the year you received the benefit, or the year you repaid it.
Plus, any one-time provincial payments to help you through COVID-19 will not be taxable, and you don’t need to report them as income on your 2022 tax return.
2. You can claim up to $500 for work-from-home expenses
Making a return from last year, you can once again claim the work-from-home tax credit. If you’ve been keeping track of your expenses, you can go ahead and claim your calculated total. Otherwise, you can use the flat rate method of $2 for each day worked from home during the pandemic.
3. The Basic Personal Amount (BPA) has been increased
As part of their policy to continue increasing it over time until it reaches $15,000 in 2023, the government increased the Basic Personal Amount for the 2022 tax year to $14,398. This means that every Canadian will get a slight boost to their return this year, and it’s likely you can expect another increase next year as well.
4. Tax brackets have shifted to account for inflation
The government has adjusted tax brackets for 2022 to maintain buying power for Canadians as prices of goods continue to slowly increase.
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%)
The adjustment upwards means that Canadians on the edge of a tax bracket might find themselves shifted into a lower bracket this year and pay less taxes because of it.
5. The TFSA limit has been increased
The TFSA contribution limit has increased to $6,500 for the year. This means that if you’ve had an account since 2009, were 18 years of age and have been a resident of Canada throughout that period, the cumulative total you can have in your TFSA is now $81,500.
6. New OAS limit amounts
The OAS is designed to provide retirees with a source of income to support their retirement. However, if your income is over certain limit amounts, you might find your OAS amount reduced, and even canceled entirely.
For the 2022 tax year, if your taxable income was over $81,761, you would need to repay some of your OAS. Similarly, if your taxable income was over $134,626, you would not have received any OAS payments. Thanks to the CRA’s new Affordability Plan, seniors aged 75 and over received an automatic 10% increase of their Old Age Security pension, as of July 2022.
7. Canada Pension Plan maximum contributions have been increased
The Canada Pension Plan (CPP) and Québec Pension Plan (QPP) have been increased by 2.7%, the maximum pensionable earnings are $64,900, with a basic exemption of $3,500 for 2022. For CPP, the Employee and employer maximum contribution is $3,039.30; for QPP it is $3,315.60.
Québecers also have the option to increase their Québec Pension Plan premiums, by making extra contributions, to the enhanced plan. The enhancement of the QPP will provide future retirees with an increase in their pension premiums from 25% to 33.33%.
Note that any self-employed individuals must account for both the employer and the employee sides of the contribution. For 2022, their maximum contribution amount for the CPP is $6,078.60 and for the QPP it is $6,999.60.
8. RRSP dollar limit is increased
The RRSP annual dollar limit for tax year 2022 is $29,210. Remember that your RRSP contribution limit is capped at 18% of your earned income in the previous year. This means the dollar limit is the maximum amount you can contribute regardless of your income.
9. Changes to tax credits you need to know
Some credits have been added, changed, reinstated, or expanded for the 2022 tax year.
Below are some of the Federal changes to tax credits:
- Air Quality Improvement Tax Credit: Eligible businesses including sole proprietorships, can claim 25% of their qualifying ventilation upgrades to a maximum of $10,000, creating a $2,500 tax credit.
- Automobile Income Tax Deduction Limits: The changes include an Increase in Capital Cost Allowance (CCA) ceiling limits for zero emission and passenger vehicles, deductible monthly leasing costs also increased by $100, and 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.
- Home Accessibility Tax Credit (HATC): If you’re 65 or older, are eligible for the disability tax credit, and have remodeled your home for safer access, you can claim up to $20,000 of your related HATC expenses.
- Labour Mobility Deduction (LMD): This new deduction allows tradespeople, apprentices, and employees working in construction to claim meals and lodging expenses paid to earn income at a temporary work location.
Below are some of the changes to tax credits by province:
- The Children’s Sports and Arts Tax Credit: is a new $500 credit to help cover the costs of registering in sports and the arts for kids under 19 years old in 2022.
- The Rebate for Fertility Treatments, Surrogacy-related Medical Expenses: is a refundable tax credit equal to 40 % of the cost of fertility treatments and surrogacy-related medical expenses. Treatment must take place in Nova Scotia by a qualified medical practitioner or clinic.
- The Ontario Staycation Credit: is a one time tax credit for Ontarians who’ll be 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.
- The Ontario Seniors Care at Home Tax Credit: is a refundable personal income tax credit to help 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 Seniors’ Home Safety Tax Credit: 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.