What’s new for your 2022 tax return?
In my blog post I’m going to give you insight into what’s happening in the Canadian tax world.
Get the inside scoop on the “new” items from CRA and those being discontinued.
If you haven’t done your taxes yet or you’re thinking ahead to next year, find out how to get the best tax refund.
You will learn:
- How today’s high inflation affects your taxes.
- How the work from home (WFH) trend affects tax returns.
- How to save tax on Covid-19 benefits you had to repay.
- New tax credits & deductions this year.
- What deductions & credits are discontinued in 2023?
- What’s the difference between a tax deduction and a tax credit?
- How to estimate your tax refund from a deduction or credit.
- How to avoid CRA scams.
- Effective use of the FHSA – the “Renter’s RRSP” coming in 2023.
- Why are Ed’s clients getting such huge tax refunds this year?
Here are the important changes:
Most tax brackets & limits have been increased by 6.3% for inflation.
It was 2% from 1992-2020.
Higher tax brackets mean you can get a raise for inflation and stay in the same tax bracket.
- Deductions give you a refund based on your marginal tax bracket.
- Tax credits give you a refund based on the lowest tax bracket – 20%.
Repaying Covid-19 benefits (deduction):
Most of these benefits continued into 2022.
You should receive a T4A for any of the benefits you received and a deduction for amounts you repaid.
- There was little or no tax withheld from these benefits or from EI, so if you received them, you should expect to owe some tax or get a smaller tax refund.
- If you repaid federal COVID-19 benefits (CERB, CESB, CRB, CRCB, or CRSB) in 2022 that you received in 2020 or 2021, you can:
- Claim the deduction on line 23210 of your 2022 return.
- Claim the deduction on your return for the year that you received the benefits. Decide which year to claim the deduction on form T1B. Claim the deduction in the year that you have the highest taxable income or are in the highest tax bracket.
Home office expenses (deduction):
You have always been able to claim employment expenses that are detailed on a T2200 form signed by your employer. You can claim any expenses that your employer specifically allows on the T2200.
For 2022, there are 2 options available, like last year. If you worked from home because of Covid for at least 4 consecutive weeks, each spouse can claim one of these or the T2200:
- Flat rate method: Claim up to $500 each with no employer form or need to keep receipts. Claim $2/day for up to 250 days when you worked more than 50% from home. Enter # of days on our Tax Summary Sheet.
- Detailed simplified method: Claim detailed expenses with simplified T2200S form signed by your employer. Fill out Work-space-in-the-home and Work from Home sections of the Business or Employment Expenses Worksheet. You can only claim space in the home, office supplies and cell phone with this simplified form. If you have more expenses, you will need the full T2200 from your employer to detail them.
There are no proposals to extend the flat rate method or the T2200S simplified form for 2023.
For 2023, likely only the full T2200 form will be available. It asks many questions and some employers hesitate to fill them out.
Many people are still working from home (WFH) and this has become long-term in many cases. The T2200 form will likely be used extensively for 2024 and future years.
If you work from home, talk to your employer now to make sure they will fill one out for you – and that they will include all the expenses you pay, such as space in your home, car expenses, cell phone & internet.
If your main office is at work, then driving to work is considered personal. If your main office is at home, then driving to work now & then can be tax-deductible.
Get your employers HST or GST number. It gives you a larger refund, because you can claim the HST or GST on work from home expenses.
New tax credit for disabled:
Lots of tax credits for disabled. Many people don’t know about them.
One of the most under-claimed credits is the caregiver tax credit. If your spouse, child, grandchild, parent, grandparent, brother, sister, uncle, aunt, niece, or nephew has a physical or mental impairment (not clearly defined) with day-to-day living such as food, shelter or clothing and their income is below the basic personal exemption ($14,000), you can claim the caregiver credit between $2,350 and $7,525.
Home Accessibility Tax Credit (HATC): If you’re 65 or older, are eligible for the disability tax credit, and have remodeled your home for safer access, the tax credit has been increased to $20,000 of your expenses.
New deduction for tradespeople & construction employees:
Labour Mobility Deduction (LMD): New deduction. Allows tradespeople, apprentices, and employees working in construction to claim meals & lodging expenses paid to earn income at a temporary work location.
Limit $4,000/year or 50% of earnings at that location.
3 new Tax Credits for Ontario (most provinces have other ones):
Ontario Staycation Credit: A one-time tax credit for Ontario to claim 20% of your stay in an Ontario hotel, cottage or campground during 2022 up to $1,000 individually or $2,000 as a family.
This credit was for 2022 only for the pandemic reopening. Gone for 2023.
Ontario Seniors Care at Home Tax Credit: A refundable personal income tax credit to help seniors with eligible medical expenses that support aging at home. The credit is equal to 25% of your eligible medical expenses up to $6,000, for a maximum credit of $1,500.
Variety of other provincial tax credits:
First-time home buyer’s tax credit: The tax credit has increased to $10,000.
Sign-up for CRA My Account: It is worthwhile to be set up with CRA My Account. It allows you to see the figures & slips CRA has for you. If you are missing any T-slips, such as T4s, T4As or T5s, you should be able to download and print them from the CRA site.
- You might get free money if they ever sent you a cheque that got lost. Check “Uncashed Cheques”.
- Avoid CRA scams by logging into My Account instead of clicking on any links in emails you receive.
Tax-Free First Home Savings Account (FHSA). We call it the “Renter’s RRSP”:
Expected to be available by mid-2023. Contribute up to $8,000/year for up to 5 years ($40,000 total) if you do not own a home.
Contributions are tax-deductible in addition to your RRSP room. If you use it to buy a home, you can withdraw tax-free (in addition to the Home Buyer’s Plan for RRSPs).
If you don’t buy a home or ever intend to, you can keep the tax deductions and merge your FHSA into your RRSP. Best account to save for a home. Free RRSP room for renters.
Huge refunds for our clients.
Our clients are paying more in tax-deductible interest with interest rates rising 7 times last year, especially the clients with large investment loans. Many refunds between $20,000 and $90,000!
How do you get a huge tax refund?
- Refinance your home and make a huge RRSP contribution.
- Smith Manoeuvre + large investment loan, such as $1 or $2 million.
If you get a large tax refund, do something smart with it. Don’t just spend it.
Planning With Ed
Ed Rempel has helped thousands of Canadians become financially secure. He is a fee-for-service financial planner, tax accountant, expert in many tax & investment strategies, and a popular and passionate blogger.
Ed has a unique understanding of how to be successful financially based on extensive real-life experience, having written nearly 1,000 comprehensive personal financial plans.
The “Planning with Ed” experience is about your life, not just money. Your Financial Plan is the GPS for your life.
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