We’re well into the New Year, which means new tax changes have been put into effect. Many of us felt some financial crunches in 2022 as the cost of living dragged the world up a steep incline, setting records for inflation that we haven’t seen in a generation!
Fortunately, the government has accounted for some of that turbulence, adjusting income brackets and contributions, and introducing new credits and deductions.
Find out what you need to know when filing your 2022 tax return and discover other benefits you may be eligible for.
Tax Brackets Have Changed
Last year, inflation hit a 40-year high. Groceries, gas, and other necessities shot up in price, putting many into an uncomfortable pinch at best, or dire straits at worst.
To help Canadians afford the increasing cost of goods, the government has shifted the federal tax brackets up for the 2022 tax year. This upwards adjustment means that some Canadians might find themselves in a lower bracket than before, which means paying less in taxes.
|$0 to $50,197||15%|
|$50,197.01 to $100,392||20.5%|
|$100,392.01 to $155,625||26%|
|$155,625.01 to $221,708||29%|
Numerous Federal Limits have been Increased
For the 2022 tax year, the government has increased annual dollar limits across the board to help boost the economy. New limits are in place for the Basic Personal Amount (BPA), Canada Pension Plan (CPP), Old Age Security (OAS), Registered Retirement Savings Plans (RRSP), and Tax-Free Savings Accounts (TFSA).
Take note at tax time the following increases:
- The BPA has increased its limit to $14,398 for TD1 and TDBC1 and is promised to increase once more until it reaches $15,000 in 2023.
- CPP has increased by 2.7%, with the maximum pensionable earnings being $64,900 and a basic exemption of $3,500 for 2022. The employee and employer maximum contribution limit is $3,039.30. These limits are due to increase again in 2023.
- The First-Time Home Buyer’s Tax Credit has doubled to $10,000, which means eligible home buyers could receive a tax credit of up to $1,500.
- OAS limits have increased by 10%. For the 2022 tax year, seniors earning over $81,761 would be required to repay some of their OAS. Meanwhile, those whose taxable income was over $134,626 would not receive any government support at all. Thanks to CRA’s new Affordability Plan, seniors 75+ will be granted a 10% increase taking effect as of July 2022.
- Increased TFSA contribution limit of $6,500, with a cumulative total of $81,500 if you are a Canadian resident who has held that account since you were 18 years of age in 2009.
- Increased RRSP annual contribution limit of $29,210, capped at 18% of your earned income in the past year. Find your RRSP deduction limit.
Changes to Federal Tax Credits & Benefits
You will also want to pay attention to some changes made to tax credits that you may be eligible for:
The Air Quality Improvement Tax Credit means eligible businesses can claim 25% of their qualified ventilation renovations, up to a maximum of $10,000 for a $2,500 credit.
Automobile Income Tax Deduction Limits for zero emission and passenger vehicles now include an increase in Capital Cost Allowance ceiling limits, a $100 increase to deductible monthly leasing costs, and an increase of 2 cents per kilometer in the employer-paid rate reimbursed to employees who use their personal vehicles for work.
The Canada Housing Benefit will provide eligible Canadians a one-time tax-free top-up of $500 to help ease the burden of inflation. Applications are open until March 31, 2023. Learn more about who can apply and how.
The Goods and Services (GST) Tax Credit will be doubled for six months this year. Eligible couples with two children will automatically receive an additional $467, while single Canadians without children will receive up to an extra $234.
The Home Accessibility Tax Credit will allow Canadians aged 65 and older or persons eligible for the disability tax credit to remodel their homes to accommodates their safety needs, and then claim up to $20,000 of their related expenses.
The Labour Mobility Deduction now provides construction industry tradespeople, employees, and apprentices the opportunity to claim meal and lodging expenses when earning their income at a temporary location.
The Work-from-Home Tax Credit allows Canadians to claim $500 incurred from work-from-home expenses. Alternately, those who worked at home during the pandemic may also claim the flat rate of $2 a day.
Hopefully 2023 will be a kinder year to the economy, as many of us recalibrate our budgets for the year ahead. Or at the very least, these tax increases and credits should help to provide some reprieve and a bright little boost to our bank accounts when we need it most.
Let’s take the stress out of filing your 2022 taxes – contact our team at 250-590-5162 to get started.