Regarding taxes, programs and credits seem to change every year. This isn’t really true. Many of the past tax credits you think of are the same year after year. This article discusses the basics of getting organized for tax season, changes that could impact you for 2022 and some of the things to watch for in 2023. It’s important to research prior year tax rules or consult a professional if you need to file back taxes.
Although new credits and rules seem to appear every year, a lot of getting your taxes done on time comes down to being organized and not procrastinating. Feel free to contact us anytime for our Personal Tax Bookkeeping Template. The cost is signing up for our newsletter.
Oh, and don’t forget that we offer early-bird specials! 25% off if you get all your information to us by March 31st, and 10% off if you get it to us by April 15th.
Most Importantly – Know Your Financial Situation
It’s your money, right, and responsibility to understand what’s going on with it. If you’re unsure about what you have, where it is or what it’s doing, the best time to address these concerns is now. If you don’t mind your money, somebody else will.
Common Investing Mistakes
One common mistake we see is people contributing to RRSP and TFSA accounts and then not investing them. If you hold large cash balances in these accounts, speak with a financial planner about getting them invested appropriately. As of this writing, markets are down, and as the adage goes – buy low and sell high. Remember, saving is for losers!
Another mistake we see is people paying more tax than they must. Knowing where and how you’re invested is important to optimizing your tax savings. If you have money in an unregistered account and have RRSP or TFSA room, now is the time to consider changing. Why pay more tax than necessary?
If you receive a T3, T5 or T5008, this is an indicator that you have unregistered investment income that is taxable.
You need to compile your records if you’ve been doing any trading or investing of any sort, including cryptocurrencies. Securities trading in unregistered accounts results in the issuance of a T5008 slip. Over the years, we’ve frequently seen mistakes with these slips indicating that the investor’s book value of their trade was $0. The onus of proof is on you as the taxpayer, so ensure you’re keeping good records so you don’t pay more tax than you deserve.
Cryptocurrency platforms have not provided tax slips historically. You are responsible for reporting any trading activity and the related gains and losses. Download your exchange records periodically to ensure you have a backup.
Missing Investment Deductions
Remember that if you have taxable investment income, any expenses directly related to that investment – such as your accountant, financial institution fees and interest – might be tax deductible.
Limitations of this Article
This article will help you get organized and ready for tax season. We won’t be discussing specific tax credits that you may automatically qualify for, like the Canada Workers Benefit (for those receiving a T4) or the Climate Action Incentive Payment (which a good tax preparer should apply for on your behalf, regardless.) If you have specific questions about your situation, please check our FAQ page and our blog or contact us.
We also won’t be speaking about situations specific to self-employed individuals. Please contact us if you have questions about deductions as a self-employed person.
We also can’t speak about every single tax credit or specific situation in this article, so we discuss those that will impact the most people.
CRA My Account and My Business Account
We highly recommend that if you haven’t already registered for CRA My Account (or My Business Account for individuals with an HST number), do it! Setting this up in advance is important as you will have to wait for a letter from CRA with an access code to complete your registration. However, once you’re registered, you can log in to see balances owing, tax credit payments coming your way, tax credits, tax slips, RRSP and TFSA room and more! You can also set up direct deposit to get any refunds faster!
Stop reading and get this done now… Once you’ve started the process and are waiting for the letter from CRA, come back and finish reading the article.
Who Needs to File
Anyone who was a Canadian resident during 2022 and earned income must file a tax return. You still need to file taxes if you entered or left the country in 2022. Any government benefits will be prorated based on your entry or exit date.
It’s important to file taxes to get your benefits. Some young people who are below the basic personal amount may get a refund and things like the GST tax credit. It’s also important for them to file so any tuition tax credits can be transferred to a parent or guardian.
The 2022 tax payment for Canadian individuals is April 30th, 2023. However, this year, that falls on a Sunday, so you can get your payments in up to May 1st, 2023. For the sake of this article, we’ll continue to refer to April 30th as the key deadline.
Most individuals must file by April 30th, but self-employed tax returns are due June 15th. It’s important to remember that even if you’re self-employed, your tax payments are due April 30th, just like everyone else. If you aren’t sure, you can pay extra and get the overpayment refunded when you file on June 15th. Spouses or common-law partners of self-employed individuals can file until June 15th without being considered late.
For self-employed individuals who are registered for GST/HST as annual remitters, your HST payments are due April 30th as well, and your filing deadline is June 15th.
When to File
We recommend filing after the first week of April. Some tax slips are not due until March 31st, so if you file early, you may not have all the information. Waiting for the first week of April to go by lets you check your email, snail mail and online portals for these slips. Assuming they were filed on time, they should be available on CRA My Account by the end of the first week of April.
See What CRA Says
Don’t take their advice about filing as soon as possible; remember, some slips arrive in the first week of April.
These are a direct reduction of your income – so there’s a big bang for your buck! Make sure you claim RRSP contributions for the appropriate year and check CRA My Account for your RRSP deduction limit. Your RRSP room goes up 18% of your net income yearly, with a cap of $29,210 for 2022.
You can claim eligible medical expenses for you and your spouse. However, the minimum is 3% of your net income or $2,479, so consider if it is worth doing the math to figure it out. If you have employer-provided benefits and didn’t have any unusual out-of-pocket expenses, it’s probably not. This is part of the non-refundable tax credits, so you get a 15% tax break if you qualify. These deductions are frequently reviewed if the amounts are large. Please make sure you aren’t double-dipping. Don’t claim the complete medical expense if insurance paid for it (you can still claim the portion you paid and the medical insurance premium!)
In our post-pandemic world, many people have been able to continue working from home. To be eligible to deduct work-from-home expenses, your employer must provide you with a T2200 indicating that you work from home more than 50% of the time. These deductions are getting reviewed more and more often as many people have claimed illegitimate expenses in the past two years or claimed these expenses when they were not eligible.
Real Estate Sales
Consistent with last year, any sale of real estate needs to be disclosed with your tax return. CRA is becoming increasingly vigilant with house-flippers and capital gains exemptions. If you sold your principal residence and it was your principal residence the entire time you owned it, you don’t pay capital gains taxes on the sale. If you change the use of a property, it’s important to file the correct election to defer paying capital gains taxes.
If you received COVID benefits in 2022, watch for a T4A slip. This income needs to be reported on your tax return. Also, if you received benefits in 2020 or 2021, CRA is contacting individuals who did not qualify and are clawing those benefits back. Be sure to open that brown envelope if you get one!
Child Care Expenses
Remember to organize your childcare receipts as they may present a claim opportunity.
Charitable and Political Donations
Charitable and Political Donations must have a valid tax receipt. If you don’t have a receipt, don’t make a claim. These can also be used strategically to mitigate taxes later in life.
Depending on the situation, moving costs might be deductible. There are conditions to meet, such as moving at least 40 kilometres closer to your workplace and what can be included. There’s also a special form to be completed.
What’s New for 2022?
Increased First-Time Home Buyer’s Tax Credit
The amount used to calculate the first-time home buyer’s tax credit for a home purchased after 2021 has increased to $10,000. This is not the entire amount of the tax credit but the amount that is used to calculate it. It has gone up $2,500!
Educator School Supply Tax Credit
Eligible educators can claim up to $1,000 on eligible school supplies purchased in 2022 and receive a 25% refundable tax credit. Before making your claim, save those receipts and check what constitutes an eligible educator and an eligible school supply.
Provincial Tax Credits
Different provinces have different opportunities. The big one for our client base that is new, albeit temporary, is the Ontario Staycation Tax Credit. An Ontario resident can get 20% back for accommodations while travelling in Ontario up to a maximum claim of $1,000 ($200 back). Families can claim up to $2,000 ($400 back). This was intended to promote tourism close to home after the pandemic.
Other provinces may have similar opportunities, so keep an eye out for them!
Coming for 2023
First-Time Home Buyer’s Savings Account
This is very exciting!
This program behaves like a hybrid between the RRSP and TFSA programs. Contributions are deductible, like an RRSP, and income earned on the investment is tax-free, like a TFSA. Combining this new program with the existing RRSP First-time Home Buyer’s Plan creates significant tax savings and deferral opportunities for first-time home buyers. Be sure to check out our blog post on the subject for more details.
Canada Dental Benefit
The Canada Dental Benefits program is now open for applications. Families making an adjusted net income of less than $90,000 may qualify for these payments for children 12 and under as of December 1, 2022. The family must receive the Child Care Benefit, and the child cannot access private dental insurance. The family must have filed their 2021 taxes to qualify.
Increased TFSA Room
TFSA Contribution room has gone up for the first time in years for 2023. For 2023, it’s $6,500! If you turned 18 in 2009 or earlier, you have a total contribution room of $88,000. That’s $88,000 you can invest and earn tax-free!
Increased RRSP Cap
The increased RRSP cap for 2023 is $30,780. This is an increase of almost 5.4%. That’s a good jump for high-income earners!
Federal Tax Brackets and the Basic Personal Amount
2023 tax brackets have increased, resulting in fewer taxes for all Canadians. This means that more of your income is taxed at lower rates. For instance, the lowest federal tax bracket has increased by almost 9%! This is similar but lower for subsequent tax brackets.
The basic personal amount has been increased to $15,000. That’s an increase of about 8.6%! This is the single largest non-refundable tax credit available to Canadians.
Note that these are the federal amounts, and different provinces and territories will have their own changes too.
Increased CPP Contributions
You’ve probably experienced this already. In 2023, there was a fairly large jump in both the employee and employer contributions to CPP. In 2022, the max was $3,499.80, which jumped to $3,754.45 for 2023. You’ll get a smaller net pay for most of 2023 until you reach the maximum CPP pensionable earnings of $66,600.