Tax changes in 2023. What is important for Canadians to know?
Every resident of Canada keeps track of own tax payments, filing returns and calculating interest.
The unstable world situation and high inflation have forced the government to revise tax payments. We've picked up several changes that are important to be aware of when filing your returns in 2023.
On January 1, 2023, tax changes start working:
1. The inflation rate will be 6.3%. Accordingly, federal income tax will increase for 5 categories of income. Tax deductions depend on income:
- $0 CAD to $53,359 CAD would be 15%;
- $53,359 CAD to $106,717 CAD would be 20.5%;
- $106,717 CAD to $165,430 CAD would be 26%;
- $165,430 CAD to $235,675 CAD would be 29%;
- anything above this is taxed at 33%.
Most income tax amounts, as well as all benefits, are indexed for inflation. All benefits from the government will also increase in 2023.
Your tax-free savings account raises the limit in 2023. You can now keep or use in investments up to $6,500 CAD. It was $6,000 CAD.
3. Income limit on Old Age Security.
Old Age Security, or OAS, is a government program created to provide retirees with a source of income to help them through retirement. However, seniors who earn too much are sometimes asked to give back a portion of their OAS.
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In 2023:
- minimum income threshold: $80,761 CAD;
- Maximum threshold for those aged 65-74: $134,626 CAD;
- Maximum threshold for persons age 75 and older: $137,331 CAD.
If you earned more than the minimum amount ($80,761 CAD), you will have to return some or all of your OAS. If your income exceeds the maximum amount for your age group, your OAS may be canceled. Contributions to your pension fund will also increase.
4. Payment of COVID-19 benefits.
During the pandemic, the government paid benefits:
- on emergency response;
- emergency handbook for students;
- on the care of the sick;
- on sickness and after recovery;
- on the isolation of workers.
Those who received such benefits because of COVID-19 in 2022 will receive a T4A receipt with all the information they need for their tax return.
But the government has said that certain categories of people with incomes over $38,000 CAD will have to pay back some or all of the benefits received.
5. Real Estate Savings Account.
In 2022, it was decided to create a tax-free program (FHSA), which will be launched on April 1, 2023. This means first-time home buyers can save $40,000 CAD on a tax-free basis to buy their first home in Canada.
Everyone who makes money in Canada pays taxes there. But the self-employed pay differently than traditionally employed workers, residents file taxes differently than non-residents. There are online tax programs to help you file your taxes correctly.
Rules for filing a declaration:
- To avoid penalties, you must file by April 30, 2023.
- Take advantage of all the benefits that the state provides and to which you are entitled;
- Claim any tax benefits you may qualify for;
- Maximize your retirement savings plan, but don't exceed it;
- Maximize your tax-free savings account, but don't exceed the limits.
