10 Personal Tax Changes in 2023 You Should Know About
Taking control of your taxes means positioning yourself to be one step ahead of your tax requirements. A major component of being prepared for tax season is having the knowledge you need to take full advantage of all the limits, benefits, credits and deductions available to you. With that in mind, let’s look at some of the important tax changes for this year that you should be aware of:
Changes for Individuals
Increase to the Basic Personal Amount
The Basic Personal Amount (BPA), a non-refundable tax credit claimed by all individuals, has increased to $15,000 in 2023, up from $14,398 in 2022. This means that Canadians can expect an increased reduction to their taxable income. At income levels between $165,430 and $235,675, the BPA is gradually clawed back until it reaches $13,521.
TFSA Limit Increase
The TFSA contribution limit increased by $6,500 as of January 1, 2023, which is $500 more than the limit increases of the past four years. The cumulative total for Canadian residents that had reached the age of 18 since 2009 is now $88,000.
RRSP Limit Increase
The RRSP annual contribution limit has increased to $30,780 in 2023, up from $29,210 in 2022. It’s important to note, however, that contribution limits are capped at 18% of earned income from a previous year. The dollar limit is the maximum amount regardless of your level of income.
Tax Bracket Adjustments
Combined Federal and BC tax rate brackets have increased in 2023. This means that you’re likely to be in a lower tax bracket than expected, as the lowest bracket has increased to $45,654 in 2023, up from $43,070 in 2022, and the highest bracket to $240,717 in 2023, up from $227,092 in 2022.
You can find a full breakdown of all tax rates on the Tax Rates page of our website. Here’s a quick summary of the combined rates for reference:
|First $45,654||First $43,070||20.1%|
|$45,655 to $53,359||$43,071 to $50,197||22.7%|
|$53,360 to $91,310||$50,198 to $86,141||28.2%|
|$91,311 to $104,835||$86,142 to $98,901||31.0%|
|$104,836 to 106,717||$98,902 to $100,392||32.8%|
|$106,718 to $127,299||$100,393 to $120,094||38.3%|
|$127,300 to $165,430||$120,095 to $155,625||40.7%|
|$165,431 to $172,602||$155,626 to $162,832||44.0%|
|$172,603 to $235,675||$162,833 to $221,708||46.1%|
|$235,676 to $240,716||$221,709 to $227,091||49.8%|
|More than$240,716||More than $227,091||53.5%|
Changes for Families
The new Canada Dental Benefit program is an interim dental benefit that offers up to $1,300 per child over two years depending on your adjusted net family income, and is only available for two periods. The first benefit period is for children under 12 years old as of December 1, 2022 who receive dental care between October 1, 2022 and June 30, 2023.
Housing & Real Estate Changes
Tax-Free First Home Savings Account (TFHSA)
In the 2022 Federal Budget, the government announced the new Tax-Free First Home Savings Account, which is designed to help first-time home buyers save up to purchase their first home and includes elements from both the TFSA and RRSP.
The TFHSA has an annual contribution limit of $8,000 per year for up to five years, for a total of $40,000. Contributions will be tax deductible whereas withdrawal will be non-taxable. Rules come into effect on April 1, 2023, so read our previous post on the TFHSA for more details.
New Anti-Flipping Rules Effective January 1, 2023
Starting January 1, 2023, where a residential property was owned for less than 365 consecutive days, any gain realized is taxable as business income (100% taxable) and not as a capital gain (50% taxable). Additionally, “flipped property” will not have access to the principle residence’s exemption which would otherwise treat the gain as tax-free. There are some life event exceptions including: death of an individual, illness, work relocation, insolvency and others.
Home Accessibility Tax Credit
The Home Accessibility Tax Credit, a non-refundable tax credit for qualifying home renovations or alterations to increase accessibility for renovation costs for seniors over 65 or persons with disabilities, has been doubled from $10,000 to $20,000.
Multigenerational Home Renovation Tax Credit
The new Multigenerational Home Renovation Tax Credit allows families to claim 15% of up to $50,000 (to a max of $7,500) in eligible renovation and construction costs to build a secondary housing suite to accommodate seniors over 65 or adults with disabilities.
Other Tax Changes
CPP & EI Premiums Increase
The maximum pensionable earnings under CPP 2023 rise to $66,600 in 2023, up from $64,900 in 2022, with maximum contributions being $3,754.45 in 2023, up from $3,499.80 in 2022.
The maximum insurable earnings for employment insurance premiums rise to $61,500 in 2023, up from $60,300 in 2022, with a maximum contribution of $1,002.45 in 2023, up from $952.74 in 2022.
Old Age Security (OAS)
Seniors over 75 years old received an automatic 10% increase in their OAS payments as of July 2022. If you receive OAS, the repayment threshold for 2023 is set at $86,912, meaning your OAS will be reduced in 2023 if your taxable income is above this amount. If taxable income is over $134,626, you will not receive any OAS payment.
Taxes can be complicated, and knowing what to expect each year is the first step in preparing yourself to get the most value out of your limits, benefits, credits and deductions and—most importantly—your hard-earned income. If you have any questions about your tax situation, reach out to your DMCL advisor and they’ll be happy to help.
Article written by Nav Pannu, CPA