This text is taken from Courrier de l’économie. Click here to subscribe.
Tax season is upon us! You should soon (before the end of February) receive your tax statements, and you have less than a month left (by March 1) to make your contributions to your RRSPs for the year 2022… In short, c time to get out the calculator. To help you properly prepare and understand your tax returns, here are several important points to keep in mind.
Low indexing
Each year, the income thresholds and the amounts of the tax credits, among other things, are indexed — that is to say, they are adjusted according to inflation, to take into account the evolution of the cost of life…
However, for the year 2022, the indexation rate of the personal income tax system is 2.64%. This is quite low, compared to the high inflation that has hit in recent months.
But this is explained by the fact that the indexation for the fiscal year 2022 was determined, as is always the case, according to the inflation recorded during the previous year (in this case in 2021 ).
The inflation that we experienced in 2022 will therefore be reflected in the indexation provided for taxes for 2023. The indexation rate of the personal income tax system will then be 6.44%.
“It is to fill this gap that the government has sent checks to balance the effect of inflation on household portfolios,” recalls Tommy Gagné-Dubé, assistant professor in the Department of Taxation at the University. of Sherbrooke.
The news
If not, what changes will apply for the impending tax return? Here are some of them listed by Mr. Gagné-Dubé.
- Enhancement of the refundable tax credit for senior assistance. The maximum amount of the tax credit per eligible individual aged 70 or over has been raised and may reach $2,000.
- Improvement of the tax credit for home accessibility for eligible persons with disabilities and seniors over 65. The annual expenditure limit for this tax credit is increased to $20,000.
- Credit enhancement for the purchase of a first property. The value of the first-time home buyers’ tax credit has increased from $750 to $1,500 for a qualifying home purchased after December 31, 2021.
- New eligible maternity medical expenses. The list of medical expenses eligible for a tax credit has been revised to include amounts paid to fertility clinics and donor banks in Canada to obtain donor sperm or eggs. In addition, certain expenses incurred in Canada for a surrogate or donor are considered medical expenses.
Not for now
Some measures, which you have no doubt heard about in recent months, are however not applicable for the 2022 tax year.
- Tax reduction. The tax reduction promised by the Coalition avenir Québec during the last election campaign is not yet in effect. The CAQ has promised to lower the first two tax brackets by 1% as of 2023 – so this does not apply to your return for 2022.
- The famous tax-free savings account for the purchase of a first property (TFSAP). Announced in the last federal budget, it should come into force from April. So you’ll have to wait until your next tax return to take advantage of this new program, which allows you to save up to $40,000 by combining the tax advantages of an RRSP and those of a TFSA.
- Credit for multigenerational home. This new credit, which came into effect on January 1 of this year, “is not however retroactive,” warns Tommy Gagné-Dubé, of the University of Sherbrooke. It will therefore be applicable for the next tax season.
- Tax “anti-flip real estate”. As of January 1, 2023, anyone who sells real estate, held for less than 12 months, would be deemed to have 100% taxable business income, not a 50% taxable capital gain. This therefore does not apply for the 2022 tax year.
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