Greetings during the 2023 tax season! We’d like to gently remind you of the following important update.
Federal Income Tax Brackets
The Federal bracket thresholds for 2023 will be adjusted to account for inflation. The new federal tax brackets for 2023 are as follows:
- $0 to $53,359 of income (15%)
- More than $106,717 to $165,430 (26%)
- $235,675 and higher (33%)
- More than $53,359 to $106,717 (20.5%)
- More than $165,430 to $253,675 (29%)
Underused Housing Tax
Underused Housing Tax (UHT): 1% annual federal tax in Canada starting January 1, 2023. It mainly targets foreign owners of empty homes but can affect certain Canadians too. If you own a residential property and fall under UHT rules, file by April 30 of the next year. Late filing incurs minimum penalties of $5,000 for individuals and $10,000 for corporations. Use form UHT-2900 and keep thorough records to support claims.
First Home Savings Account (FHSA)
FHSA is a special plan to help you save up to $40,000 tax-free for your first home. This plan combines the advantages of RRSP and TFSA, providing tax deductions on contributions, tax-free growth on investments, and the option to carry over unused contributions. Should you have surplus funds, transferring them tax-free to an RRSP is also an option. You can contribute up to $8,000 annually, with a cumulative lifetime cap of $40,000. If you want to know more details, you could check here:First Home Savings Account/
Residential Property Flipping Rules
Under the new rule, profits from the sale of a flipped property are now considered business income. This means that these profits cannot be treated as capital gains (50-per-cent income inclusion), and the Principal Residence Exemption is not applicable if the property is sold within 365 consecutive days from the date of purchase. This marks a departure from previous years when individuals could treat profits from the sale of a residential property held for personal use or rental income as capital gains. Additionally, any losses incurred from the sale of a flipped property are now deemed nil and cannot be used to reduce taxable income.
Multigenerational Home Renovation Tax Credit (MHRTC)
MHRTC is a new refundable credit introduced in the 2022 budget by the Canadian government .This credit is especially helpful if you’re creating a “Secondary Unit” for a qualifying individual, like a senior or an adult eligible for the disability tax credit, to live with a qualifying relation. You can claim the credit for renovation expenses incurred after December 31, 2022, for services or goods acquired after that date. The best part? The maximum refundable credit is $7,500, which is 15% of renovation expenses up to $50,000.
Tax-Free Savings Account (TFSA)
The Tax-Free Savings Account (TFSA)’s annual contribution limit for 2023 is $6,500. And you always can login your my CRA account to check the total room you have.
GST/HST Implications of Consignment Sales
Under the current GST/HST rules, an assignment sale made by a person that their newly constructed or substantially renovated residential housing is not or not intending to be their principal residence is generally taxable. In the past, whether an individual’s assignment sale was taxable or exempt depended on the original purpose of their home purchase agreement. However, there’s a new rule in place: now, all assignment sales, even those by individuals, for such properties are taxable for GST/HST purposes. The good news is that if an assignor paid a deposit to a builder, that deposit is not included in the taxable amount, given certain conditions are met. This change is effective for assignment agreements made after May 6, 2022.