Here are 6 of the Canadian tax changes coming in 2023. They include everything from doubling the First-Time Home Buyer's Tax Credit to changes to Old Age Security and the Canada Pension Plan
New Tax Brackets
These are the adjusted tax brackets for the 2022 tax year. These changes may mean paying a lower rate on more of your income.
The Basic Personal Amount, or BPA, is a non-refundable tax credit that can be claimed by anyone who files income taxes in Canada. The goal of the BPA is to give individuals making less than a certain amount a full deduction from income tax. Taxpayers who make more than this basic amount receive a partial reduction. The BPA is increasing to $14,398 for the 2022 tax year.
First-Time Home Buyers’ Tax Credit doubled
The First-Time Home Buyers Tax Credit, also known as the HBTC, is a federal government initiative to make homeownership more affordable for some Canadians. Eligible first-time home buyers can now claim a $10,000 non-refundable income tax credit — double what they could before — which could result in tax savings of up to $1,500.There’s no need to apply or be approved for the HBTC; just enter the Home Buyer’s Amount of $10,000 on Line 31270 of your income tax return. The credit will result in a rebate on taxes you owe.
Old Age Security income limits changed
Old Age Security, or OAS, is a government program that has been created to provide retired Canadians with a source of income to help throughout their retirement. However, seniors who make too much income are sometimes asked to pay back some of their OAS.
The new thresholds for the 2022 tax year are as follows:
Canada Pension Plan earning and contribution increase
Rules governing the Canada Pension Plan are changing in 2023. The new calculations are based on a CPP legislated formula that is based on the average growth rate of salaries and weekly wages earned throughout Canada.
The maximum pensionable earnings under the CPP will be $66,600 in 2023, up from $64,900 in 2022. The basic exemption amount stays the same at $3,500 in 2023.
CPP contribution rates have also been adjusted accordingly. Employee and employer contribution rates are now 5.95% (up from 5.70% in 2022) for a maximum contribution of $3,754.45. For self-employed individuals, the contribution rate will be 11.90% in 2023 (up from 11.40% in 2022) for a maximum contribution of $7,508.90.
RRSP dollar limit increase
The annual dollar limit for Registerd Retirement Savings Plans, or RRSPs, is $29,210 for the 2022 tax year, up from $27,830 in 2021. However, keep in mind that your individual contribution limit is still capped at 18% of your entire earned income.
Jim Perks is a Calgary REALTOR who divides his time working with both sellers of houses and buyers of homes. He has been an agent since 2010