It’s that time of year when a work-life balance becomes a distant memory for hardworking accountants. With the tax filing deadline of Monday, May 1, 2023 looming large, long hours become the norm for many accountants from January through to the end of April as they work hard to ensure that clients’ personal and business taxes are prepared accurately and filed on time. This involves reviewing documents, verifying information, and making sure that any deductions taken were legitimate, all while keeping tax laws top of mind. For 1.3 million businesses and over 29 million Canadians. Add on to this, the fact that Canada Revenue Agency (CRA) introduces new tax changes every year that must be followed.
Here we have rounded up a selection of these 2022 tax changes for easy reference.
Changes Affecting Homeowners and Prospective Homeowners
As housing supply shortages and increasing interest rates continue to garner national attention, there were some new amendments introduced last year specific to homeowners and prospective homeowners:
- Underused housing tax – introduced as part of the 2018 federal budget, this is a tax levied against vacant or infrequently occupied homes. To comply, individuals must file each year proving that their home is actively being used either for self-occupation purposes or as a rental property.
- First-time home buyers’ tax credit – this is a measure by the Government of Canada that helps first-time buyers with the costs associated with purchasing a new home. The amount used to calculate the tax credit has increased to $10,000 for a qualifying home bought after December 31, 2021
- Home accessibility tax credit - introduced in 2016, eligible homeowners over the age of 65 are able to receive a non-refundable income tax credit based on the amount spent on making adaptive changes to their premises. The tax credit also applies to homeowners under the age of 65 who have dependent people living with them that are mentally or physically infirm. This annual expense limit was increased to $20,000 last year.
Changes to Medical Deductions
For 2022, the Canadian government authorized several new tax credits for medical expenses to help offset the costs associated with healthcare. To qualify for these credits, the expenses must meet specific requirements and be incurred in Canada on behalf of the taxpayer or their spouse or common-law partner. Some of the eligible medical expenses include:
- In vitro fertility program costs
- Certain expenses incurred for a surrogate or donor
- Type 1 diabetics may now be eligible to have their condition recognized under the disability tax credit
A full list of eligible medical expenses that can be claimed on a tax return is available here.
Other Changes to 2022 Income Tax Rules
Here are the remaining changes to keep top of mind while preparing 2022 returns:
- COVID-19 benefits – for individuals who received benefit payments (including the Canada Recovery Benefit and the Canada Recovery Sickness Benefit), they will receive a T4A with instructions on how to report these funds. The government also extended the simplified use of home office deductions for 2023 as well, giving taxpayers a $25/day deduction up to $500 for the days they worked from home.
- Air quality improvement tax credit – this new measure was introduced to encourage individuals and businesses in Canada to invest in green energy sources with the goal of improving air quality. This program provides income tax credits for investments made in clean technology that reduces air pollution like solar panels, electric/hybrid cars, or green-energy heating systems. Anyone who was self-employed or a member of a partnership in 2022 may be eligible to claim a refundable tax credit equal to 25% of their total ventilation expenses.
- Labour mobility deduction – this credit was designed to help self-employed people, or those working in non-traditional workplaces, who need to travel for work. It allows workers to deduct their expenses incurred for travel or other related costs, such as accommodation or meals, when they are travelling away from home to participate in business activities. Eligibility can be complex, so it is important to review all provinces and territories to ensure it is applicable.
- Critical mineral exploration tax credit – this is a program designed to incentivize exploration of new resources by providing a 30% investment tax credit for the costs associated with critical mineral exploration (of specified minerals). This credit applies to expenditures related to eligible flow-through share agreements entered into between April 7, 2022 and April 1, 2027.
Random Canadian tax trivia:
- 5.3 million Canadians received neither a refund or a balance owing in 2021
- The federal government paid out over $37 billion in refunds to 17.8 million Canadians last year with an average return of $2,093
- On the flip side, 8.1 million Canadians owed the government last year with an average payable of $7,426
- Canadians in the top 1% in 2020 reported an average income of $512,000
- 15.3 million Canadians had a TFSA in 2019
- 5.1 million tax filers made a charitable donation in 2020, with the median donation being $340
Best of luck this busy tax season. If your accounting firm is interested in learning more about the Integrated Advisory network and how we can help alleviate your workload and enhance your client experience, we'd love to connect after May 1st.
The Integrated Advisory Network consists of progressive CPA firms, along with best-in-class professional advisors, service, and product specialists, who work together to deliver an elevated and holistic client experience. One that optimizes both their personal and professional lives with an integrated financial strategy designed to help clients reach their goals.