Changes affecting 2022 Tax Returns
The 2022 individual income tax season is starting soon.
Please check important deadlines for the 2022 tax returns being filed in 2023
While we intend to capture tax changes and updates Canada-wide, please note that these updates focus on the taxpayers of Ontario and Alberta.
New Changes & Updated for 2022 Individual Tax Returns
Below is the list that’s affecting 2022 individual tax filings
- Individuals can now deduct repayments of federal covid-19 in a prior year. More details are here.
- The basic personal amount is increased to $14,398 for 2022. Further tax brackets are also adjusted due to high inflation.
- First-time home buyer’s amount is now $10,000 if you purchased a qualifying home after 2021/12/31. For prior years, the limit is $5,000.
- The annual expense limit for the Home accessibility tax credit is now $20,000 for 2022.
- Medical expense tax credit (METC) for surrogacy and other expenses is expanded now. More details are here.
- A new deduction is available for Tradespersons, Labour Mobility Deduction, that allows claiming eligible relocation expenses.
- Ontario staycation tax credit: A temporary tax credit equal to 20% of eligible accommodation expenses. Details are here.
- Old age security (OAS) benefits need to be repaid if the taxable income is above $81,761 and no OAS benefits are available if the taxable income is more than $134,626.
- RRSP dollar limit set for 2022 is $29,210.
- The temporary $500 deduction for work-from-home is still available for individuals in 2022.
- A refundable tax credit for self-employed individuals, Air Quality Improvement Tax Credit. This credit is 25% of eligible expenses to improve the ventilation and air quality at their place of business.
- A temporary immediate expensing of certain eligible property, up to $1.5 million, for self-employed individuals. The property must be purchased after 2021/12/31 and must be available for use before 2025.
- Underused Housing Tax
Deduction of Covid-19 Benefits in the prior year – New
This is a very important change for the individual taxpayers who received covid-19 related benefits and later on had to repay.
If CRA found you ineligible and you repaid those benefits in 2022, such as CERB or CRB, you have the option to request:
- Apply for the full payment in the prior year when the benefits were received, or
- Split the amount between your tax year 2022 and the year of receipt of benefits
For this purpose, please inform your tax preparer that you intend to apply repayment to a prior year, in full or part. For this purpose, T1B needs to be filled out and there is no need to amend or adjust the prior year’s tax return. Once the tax return is filed, CRA reassesses your prior year’s tax return.
If you made a repayment after the 2022/12/31 cut-off date, you cannot request this treatment.
Tax Changes affecting Canadians in 2023
The below changes are not applicable for 2022 but applicable in 2023 and can help individuals with their planning.
- The inflation adjustment factor is 6.3% which is used to index tax brackets and other tax amounts such as the OAS clawback threshold.
- Basic personal amount for 2023 is $15,000.
- Payroll deductions and contributions are changing. For the 2023 tax year, the CPP contribution rate is changed to 5.95% with a maximum contribution of $3,754.45 on maximum pensionable earnings of $66,600. Similarly, EI rates are also changing, the contribution rate is increased to $1.63% on maximum insurable earnings of $61,500 (Employee contributions max $1,002.45 and employer’s max is $1,403.43).
- TFSA limit for 2023 is $6,500
- RRSP dollar limit for 2023 is $30,780.
- A new Tax-Free Home Savings Account is starting effective April 01, 2023.
- Residential property anti-flipping rules may be the biggest highlight of 2023. The rules are now applicable starting 2023/01/01. More details on residential properties’ anti-flipping rules are here.
- A brand new refundable tax credit, the Multigenerational home renovation tax credit, is 15% of up to $50,000 eligible expenses for a qualifying renovation. Qualifying renovation involved situations where a secondary dwelling unit is added so that a senior or a person with a disability can stay with a qualifying relation.
Other major changes for 2023
Some of the other changes that are applicable for 2023 are:
- The small business deduction (SBD) is now accessible to more Canadian corporations. The taxable capital limit where SBD starts phasing out is raised from $15 million to 50 million.
- New trust reporting rules (and expanded rules) are applicable after 2022/12/30.
- New Excessive Interest and Financing Limitations (EIFL) Rules.
- Proposed amendments to General Anti Avoidance Rules (GAAR)
- New mandatory disclosure rules
- Hybrid mismatch arrangement
- Digital services tax
- Exchange of tax information on digital economy platform sellers