With strong inflation in 2022, many tax changes are expected in 2023.
Changes in Tax Brackets
The federal income tax brackets for 2023 have been indexed to inflation. The new federal brackets are as follows:
Zero to 53,359 (15%)
>53,359 to 106,717 (20.5%)
>106717 to 165,430 (26%)
>106,430 to 235,675 (29%)
>235,675 33%
Basic Personal Amount
The BPA is the income a Canadian taxpayer can earn without paying any federal tax. As a result of inflation, this amount increased to 15,000 in 2023. Taxpayers are saving $2,250 on federal taxes.
High-income individuals may not qualify for the full increase in the BPA, since there is an income test.
CPP Contributions
The CPP contribution rate for 2023 is 5.95%, with the maximum contribution by the employee and the employer being $3,754.45.
EI Premiums
EI premiums also rise, with an employee premium rate of 1.63% up to a maximum premium of $1,002.45 on maximum insurable earnings of $61,500.
First Home Savings Accounts (FHSA)
The program is scheduled to launch on April 1, 2023. This registered program saves potential first-time homebuyers $40,000 tax-free on the purchase of their first home in Canada.
Like RRSP, contributions to an FHSA will be tax deductible, but withdrawals to purchase a ‘FRIST HOME”, including from any investment income or growth earned in the account will, like a TFSA- be non-taxable.
Multigenerational Home Renovation Tax Credit
Jan 1st 2023 also starting a new credit which is equal to 15% of eligible expenses (Upto 50,000) incurred for a qualifying renovation for an eligible person (such as Senior or a person with a disability) to live with a relative.
Principle Residence Exemption
The principal residence exemption will not apply to the sale of your home if you have owned it for less than 12 months (with some exceptions).
Instead, the gain will be 100% tax, business income.
*This is not advice or recommendation, this section is for public education purposes only. Please consult the CRA website for further clarity or contact us for further information. A&J Tax and Financial shall not be responsible for financial losses incurred.
