Each year, there are changes to Canadian tax laws that may affect the credits and deductions which apply to individual taxpayers. Understanding these changes is essential to ensure that you file your taxes correctly and take advantage of all the tax benefits you are eligible for under the law. If you have any questions about filing your taxes or tax changes, contact the office of Jeremy Scott Tax Law. We have over 20 years of experience advising clients on Canadian tax law and helping them resolve their tax issues. Contact us at (902) 403-7201 or online today.
Tax changes made during the 2022 tax year will apply when you file your taxes in 2023. The tax filing deadline for 2022 taxes, as stipulated by the Government of Canada, is April 30, 2023. This is also the payment due date for 2022 taxes. Since April 30 is a Sunday, the deadline is actually May 1, 2023. For self-employed individuals, the deadline to file 2022 taxes is June 15, 2023.
Tax Changes You Need to Know About for Filing Your 2022 Taxes
Below is a summary of the key tax changes for 2022 that will apply when you file your taxes in 2023.
Tax Bracket Increases
A taxpayer’s income determines their tax rate, also referred to as a “tax bracket.” 2022 tax changes included a slight increase in tax brackets from the previous year. For some taxpayers, this may mean they fall into a lower tax bracket and, therefore, will pay lower tax rates on their income.
Basic Personal Amount (BPA) Increase
The Basic Personal Amount (BPA) is a non-refundable tax credit available to all Canadian taxpayers. Those whose taxable income is below the BPA receive a full reduction in their federal income taxes. Those who earn more than the BPA receive a partial reduction.
In 2019, the Government of Canada proposed to increase the BPA to $15,000 by 2023. The increase is being rolled out gradually each year. In 2022, the BPA was increased to $14,398. An increase in the BPA will translate to many taxpayers receiving a tax credit on a greater proportion of their income, thereby reducing the amount of taxes they own. If a taxpayer’s tax credits total an amount higher than the amount they own, they will not receive a refund, however.
Canada Pension Plan (CPP) Increases
The maximum pensionable earnings amount for the Canada Pension Plan (CPP) has been increased to $64,900. This is the maximum salary amount from which a taxpayer is required to contribute to the CPP. A basic exemption of $3,500 also applies, which has not changed. Contribution rates for the CPP have also been increased to $3,039.30.
The Quebec Pension Plan (QPP), which is governed separately from the CPP, now also provides the option to make extra contributions to their plan. For the QPP, the maximum pensionable earnings amount was also increased to $64,900 in 2022, and the employer maximum contribution was increased to $3,315.60.
Old Age Security Income Limit Increases
Old Age Security (OAS) is a monthly payment provided by the government to Canadians aged 65 and over. The amount an individual receives depends on their income and how long they have lived in Canada. In July 2022, a 10 percent increase was applied to all OAS payments.
In 2022, the minimum income threshold was set at $80,761, meaning that anyone who made more than this amount may have to pay back a portion of their OAS payments. The maximum income threshold was set at $134,626 for those aged 65-74 years and $137,331 for those aged 75 years and above. Those who made more than the maximum income threshold may have their OAS canceled.
Registered Retirement Savings Plan (RRSP) Limit Increase
A registered retirement savings plan (RRSP) allows individuals to save and invest their money for retirement. It offers tax advantages since contributions are tax deductible and income earned from the plan are tax-free. The maximum amount a taxpayer could contribute to an RRSP was increased to $29,210 in 2022. The individual contribution limit remained unchanged at 18 percent of income.
If you have any questions about tax changes or tax compliance as it relates to your situation, contact the office of Jeremy Scott Tax Law today.
Tax-Free Savings Account (TFSA) Contribution Limit Increase
A Tax-Free Savings Account (TFSA) allows individuals to save money tax-free. Contributions and income earned on these types of investments are tax-free, including when withdrawn. The government sets a yearly contribution limit for TFSAs. For 2022, this was increased to $6,500, meaning that an individual could contribute that amount to their TFSA without any tax penalties.
Work-From-Home Tax Credit Remains in Effect
The work-from-home tax credit allows individuals to claim home office expenses of up to $500 for the year. Individuals can calculate home office expenses by tracking them throughout the year or using the Government of Canada’s flat rate method of $2 for each day worked from home.
COVID-19 Benefit Repayments May Be Required
A taxpayer who received COVID-19 benefits may be required to repay some or all of them to the Canada Revenue Agency (CRA). A T4A slip will be provided in this case providing all the information needed for repaying benefits and filing a tax return. Those required to repay their benefits can claim a tax deduction on this payment. The CRA offers payment plan arrangements for those who are unable to repay their benefits in full.
Tax Credit Changes
Several changes to tax credits were also made for the 2022 tax year. These include:
- Automobile Income Tax Deduction increases, which allow business owners and self-employed individuals to claim a Capital Cost Allowance (CCA) for zero-emissions vehicles and expense benefits for vehicle leasing costs and mileage.
- Home Accessibility Tax Credit increase, which allows those aged 65 and over who are eligible for the disability tax credit to claim up to $20,000 in tax credits for expenses related to renovating their home to make it safer or more accessible to them.
- Air Quality Improvement Tax Credit increase, which allows businesses to claim 25 percent of the cost of upgrades related to improving air quality, up to $10,000.
How Jeremy Scott Tax Law Can Assist
Whether you are a business owner, an employee, or retired, numerous tax changes apply to filing your taxes for the 2022 tax year. Failing to understand them may result in you foregoing some of the tax benefits you are eligible for, resulting in you paying more taxes than necessary. If you have any questions about the tax changes that apply to the 2022 tax year or are looking for advice on any tax-related matters, contact the office of Jeremy Scott Tax Law at (902) 403-7201 or by filling in our online form.