JBS BUSINESS SERVICES
“B U I L D I N G S U C C E S S T O G E T H E R”
778 Rossland Ave, Trail, BC, V1R 3N3
250 364 2235 info@jbsbiz.ca www.jbsbiz.net
TAX PREP CHANGES & REFRESHERS
Below is an overview of some of the more universal changes for 2023 tax prep. This list is not exhaustive. Do your research. Talk to a tax professional or visit the CRA website.
Below the current changes listed for 2023, is a “refresher” of changes over past years so not all detail may still be current.
What’s New for tax year 2023?
… still to come
Changes over the past few years (all may not still apply)
2022
Start with perhaps the best “what’s new” … the $1,000 Staycation Credit … but only available in Ontario.
On to serious info. Reminder April 30 falls on a Sunday this year so the tax filing and payment deadline is Monday, May 2, 2023.
There’s recently been lots in the news about support for first time home buyers, in particular the newly introduced First Home Savings Account (FHSA) that comes into effect in 2023. The basic tax benefits are summed up like this. The FHSA is like an RRSP in terms of the contributions being tax deductible, and the FHSA is like a TFSA in terms of the withdrawal not being taxable income as long as it is used to purchase a home, or transferred to another registered account. Many more details to come in 2023.
In the meantime, there is other news for the first time home buyer that is really not new, just better. The First Time Home Buyers Tax Credit that has been around for a number of years, has been doubled from $5,000 to $10,000. It’s simply claimed during tax return preparation. To qualify, a person can’t have owned a home within the four years prior to the year the home was purchased, and this includes a spouse or common-law partner. And just to be nice, this doubling of the credit is applicable to homes purchased from January 1, 2022, onward.
Sticking with real estate, the recently announced “anti-house flipping” rule does not apply for 2022. The new rule denies the capital gains exemption if a house is bought and sold within 365 days, with some defined exceptions to the rule.
From real estate to renovations. The “home accessibility renovation” expense limit has been increased from $10,000 to $20,000, to support people to remain living at home. To be eligible you must qualify for the Disability Tax Credit, or be 65 years of age.
Recently announced but not applicable until 2023, the new “multi-generational home renovation credit” is a refundable tax credit of 15% of expenses to a maximum of $50,000. This is designed to transition a family member into a home owned by another family member.
On the medical front, the government has expanded the list of allowable expenses to include fertility clinic and donor bank services provided to an individual and also for a surrogate mother. In addition, some costs incurred for a surrogate or donor are considered eligible expenses.
Also with medical, the government has now deemed type 1 diabetes as an acceptable diagnosis to grant a Disability Tax Credit, conditional on the person requiring a specific weekly regimen of medical life sustaining therapy.
New for the construction industry, the government has introduced the Labour Mobility Deduction for tradespeople and apprentices working in the industry who have to live away from home on a temporary basis. The maximum claim is $4,000 for relocation expenses and must be supported by paid receipts and reported on Schedule T777.
Remaining with the work theme, continuing from the COVID days of 2020, again for 2022 the government is offering a business use of home expense claim for those employees who worked from home in 2022 who would not normally have worked from home. For those people preferring simplicity, CRA is again offering the COVID $2/day “flat rate” method, to a maximum of $500. To claim more than $500, the COVID “simplified” method must be used, and it’s really not that simple.
Speaking of COVID, for those who were required and did repay COVID benefits they had received, if the repayment was made in 2022, the government is allowing the repayment to be reported in either 2020 or 2021 to reduce income in the person’s preferred year, not necessarily the year the COVID benefit was received. Form T1B has been created to simplify this tax reporting.
The CND-USA 2022 annualized exchange rate is 1.3013. The annualized rate is used when related multiple conversions spread throughout the year are necessary. However, in the case of one-off transactions, the exchange rate for that particular month, or even day, should be used. This is the protocol for converting all foreign currency to Canadian funds. Check CRA or the Bank of Canada for rates.
2021
Face masks: If you own a business that requires face masks to be worn by staff and/or clients and you supply the face masks, you can expense the cost of the masks against income on your financial statement. If you wear a mask in your workplace and supply them at your own expense, if your employer completes a T2200 Conditions of Employment Schedule stating that you have to buy your own face masks, you can deduct that cost as an employment expense by reporting it on Schedule T777. If neither of those two options define your situation and you buy and wear your own face masks, you will need a doctor’s note stating that the wearing of a face mask by you is medically necessary, and then you can claim the cost of the masks as a medical expense on Schedule T1-Medical.
Vehicles that qualify to be used as an expense: The traditional Class 10 vehicle is now Class 54, and has had it’s maximum recorded initial value for tax purposes raised to $34,000. More interesting is the change to Class 16 vehicles. This is now Class 55 and includes zero emission vehicles with a maximum recorded initial value for tax purposes of $59,000. Additionally, Class 56 has been created for zero emission automotive equipment that are not road licensed motor vehicles (aircraft, watercraft, rail craft, etc).
Canada Training Credit (CTC): It will work in the background accumulating by $250 in credit per year to a lifetime maximum of $5,000 that you can use toward fees for skills training. The CTC will be shown on your Notice of Assessment like RRSP and TFSA contribution room.
Medical: Perhaps as no surprise, medical cannabis with a doctor prescription is now a legit medical claim. Some other new items have been added to the ever growing eligible Medical Expense list. The costs associated with medically assisted pregnancy is now claimable, as are the costs to design a personal therapy plan in some situations, and also allowable to claim are the costs for service animals to aid persons with severe diabetes.
Registered Disability Savings Plan: A person who has a life expectancy of 5 years or less may now withdraw more from the plan annually without adversely affecting the tax situation.
Family Caregiver Tax Credit: is an additional $2,000 non-refundable tax credit available if you are supporting a disabled or infirm dependant as defined by a spouse or an eligible dependant.
Adoption Expense: has been increased to $15,000 per adopted child. This is a non-refundable tax credit calculated by adding up eligible expenses and subtracting reimbursement received, if any. The net amount can be split between adoptive parents.
Tuition Tax Credit: Has been expanded so that fees paid to an educational institution, professional association or government ministry for a required examination to obtain professional status recognized by provincial or federal statute or necessary for licensing or certification in order to practice a profession or trade in Canada are now an acceptable tuition expense.
Foreign Courses: For those who enroll in educational courses offered in foreign countries, the 13 consecutive week full-time enrolment rule has been reduced to only 3 weeks to qualify for the Tuition and Education Tax Credits.
Registered Education Savings Plans: There is now greater flexibility with the sharing of funds from between siblings without tax implications and repayment of federal education grants.
T2091 Sale of Principal Residence: this is a form that’s been around for years but now is being enforced by CRA. You are required to report the sale of your home (principal residence). CRA is likely trying to identify house flippers escaping taxation by claiming the principal residence capital gain exemption.
T5008 Statement of Securities Transactions: started appearing for 2015 tax prep and will likely continue to increase in usage this year as a result of CRA’s increased reporting requirements for investors. It shows a summary of trading information completed by a professional manager, although the original acquisition price for the securities sold may be absent on the form, a very important part to this reporting on your tax return.
T5018 Statement of Contract Payments: is issued by a company that contracts the services of a self-employed construction tradesperson. The tradesperson uses this information for input into their T2125 Business Activity Schedules or T2 Tax Return.
Pension Income Splitting – not new, but each year “new” retirees enquire:
Since 2007, Canadian residents were allowed to split certain pension income with their resident spouse or common-law partner. This can be done if the following conditions are met:
- the pensioner and spouse or common-law partner were not, because of a breakdown in marriage or common-law partnership, living separate and apart from each other at the end of the year and for a period of 90 days commencing in the year (if living apart at the end of the year for medical, educational, or business reasons, pension income can still be split)
- the pensioner and spouse or common-law partner are residents of Canada on December 31 of the year; or
- if deceased in the year, resident in Canada on the date of death; or
- if bankrupt in the year, resident in Canada on December 31 of the calendar year in which the tax year (pre- or post-bankruptcy) ends.
- the pensioner received pension income that is eligible for the pension income amount tax credit.
- definitions: pension transferor – the one who receives qualified pension income; pension transferee – the one to whom the split-pension is transferred (the recipient of the transfer).
No funds are actually transferred using pension splitting. It’s simply a method for reducing the taxable income of one spouse by allocating income on the tax return, to the other spouse. The transfer must be agreed upon by the spouses and form T1032 filed with each spouses’ return. And both spouses have to sign both forms.
Up to 1/2 of eligible pension income may be allocated to the pensioner’s spouse when the tax returns are filed. Doing the pension split shares the income between the two spouses, effectively reducing the overall household tax liability if the two spouses would have been in different tax brackets without the split.
In addition, there is a federal pension income tax credit on the first $2,000 of eligible pension income*. The pension split may increase, or even create, a pension tax credit for the transferee – definitely a bonus to the pension split itself.
Notably, even if the spouses are in the same tax bracket and pension splitting doesn’t provide the benefit of a reduction in the marginal tax rate, the pension split may still be financially beneficial if it creates or increases a pension tax credit for the transferee.
* Pension splitting will only create a pension income tax credit for a pension transferee who is under age 65 if the pension transferor has received qualified pension income, which is eligible for the pension income tax credit for a taxpayer of any age.
