What's New for Individual 2023 Tax Returns?

Tune in as we will be talking about personal tax season and some things that you should look forward to or that you might be interested in.

 So, what's changed for the 2023 personal tax returns?
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Transcript

0:35 
Good afternoon, you beautiful entrepreneurs and welcome to another episode of Your Business Unleashed podcast. This one's a real quick one, we're just going to be talking about personal tax season and some things that you should look forward to or that you might be interested in.

0:50 
So, what's changed for the 2023 personal tax returns? First of all, the Advanced Canada Workers Benefit Payments is live, meaning you no longer have to apply for it using form RC201. It's now automatic. So go ahead and read about that through our link on the CRA’s website.

1:06 
If you're a tradesperson, as in, you likely don't have a Corp because you'd be deducting them in the Corp. So, if you're a tradesperson employee, you can deduct up to a thousand dollars of tradespersons tools, that's increased from $500 last year in 2022.

1:20 
There's the First Home Savings Account. Now, this works fairly similar to an RRSP. So, this lets you put in up to $40,000 so you can save eight grand a year over the lifetime of the eight FHSA and have it be a deduction against your income similar to an RRSP contribution. So, you can build up that balance to 40,000 bucks. And then when you're ready to buy your home, you can make a qualifying withdraw and there's definitions around what that means and you pull that out and it does not cost you any tax and of course, you can move money from an RRSP over to an FHSA which also helps out with your first home buyers withdrawal from your RRSP. So, these can be used in combination. So that's a pretty good one.

2:11 
Moving on to the Multigenerational Home Renovation Tax Credit. That's quite a mouthful. So, you can see the CRA's website, but basically what this is meant to do is if you're looking at moving a qualified person in, so that could be qualified individual, it can be somebody who's 65 years of age or older or is 18 and qualifies for the disability tax credit or a qualifying relation.

2:37 
Meaning, you can have somebody who's over 18 years of age and is your parent, grandparent, child, grandchild, brother, sister, niece, nephew into the renovated suite within your home, you can get up to 7500 bucks from the back from the government.

2:49 
I imagine that this is a measure that they are putting in place to try and get some housing going. We've got a lot of people living at home with their moms because they can't afford houses and that type of thing. So that's what this is going to be designed for.

3:02 
The new Residential Property Flipping Rule has come into effect and listen out for our podcast about how much the various governments across Canada hate short-term rentals and property flippers.

 
3:13

This is just another piece of legislation with regards or in that same line. And we've got a blog here on our website about the residential property flipping rules.

3:22 
But basically, what happens is if you own a house for less than 12 months and you sell it, that's going to be considered a flip and not only will your principal residence exemption be denied, but you might not get capital gains treatment either or you very likely will not get capital gains treatment.

 
3:39

It will be taxed at full tax if there's any gain during those 12 months. And to make matters worse, if you lose money on the flip property, those losses are going to be denied. So, you won't be able to use those losses against any other type of income.

3:53 
Now, there are certain circumstances where you can flip a property during a year if life events come up like you have a kid or you get married, or you get sick or you lose your job, those types of things are going to exempt you from this.

 
4:06

I'm not sure why this law got put in. We kind of already had laws set up to call flip property.

4:13 
If you're in the business of flipping property, it already gets turned into business income under existing laws. But this just puts a nice bright line 12-month test on it so that it's super easy to track down.

4:23 
When the CRA goes and checks into land titles and sees who's owned a house for less than a year, they can start drilling into this one.

 
4:29

The temporary flat rate method that came up during COVID for claiming home office expenses that's gone. And now you need to use the detailed method and you need to go back to having that signed form by your employer. Form T2200, the declaration of conditions of employment saying that your employer is requiring you to use your home office in order to earn business income.

4:53 
Okay, so then there's going to be some more automatic filing. So, in 2022, 53,000 Canadians took advantage of the automatic filing service offered by the CRA in a lot of cases for lower income people. The CRA had and even not lower income people.

5:09 
The CRA has almost all the information that they need to file a tax return for you.

And so, what is happening here is up to 2 million people are going to be eligible in 2023 to have their return automatically filed by the CRA, sorry 2 million people by 2025.

 
5:25

And what that does is a lot of low-income people are missing out on benefits because they don't file tax returns because they don't know any tax.

 
5:31

So, this is an automatic service to get your tax return in, probably don't know any tax, and all of a sudden you can get your benefits.

 
5:38

We're going to do some more posting on the Canada Dental Care Plan. There are going to be some boxes on the T4 that we have to worry about.

5:47 
And so go read about that there. Indexation for personal tax rates, so the basic personal amount for 2023 has gone up to $15,000. Your spouse and common law amount go up to $17,500. An eligible dependent will go up to $14,500, disability tax credits up to $9,428, old age security claw back threshold starts at 80 nearly $87,000.

6:12 
Your TFSA limit for 2023 is going to be 6,500 bucks and it's going up to $7,000 in 2024. So, in 2023 your lifetime contribution, what you could have contributed to your TFSA over since it came into effect is 88,000 bucks. And next year in 2024 or I guess that'd be this year you could do another $7,000 for a total of $95,000 that you could put into that.

6:35 
The Canada child benefit for kids under six years old is going up to $7,437. And then if you have a kid from 6 to 17 years old, it's $6,275 per kid. And the RRSP contribution maximum is $30,780 next year it's going up to $31,560.

6:56 
The maximum CPP, and we've got articles about this on our blog about how much the CPP is going up in 2023, it's going to be $3,754.

7:04 
Remember if you're self-employed, you double that amount because you got to chip in the employer's contribution as well. And in 2024 it's going up to over 4,000 bucks. So, we're going to be over $8,100 for self-employed CPP in 2024.

7:15 
EI is following suit. It's going up quite a bit every year.

7:26 
Interest on overdue taxes has gone through the roof with our inflation and the interest rates going up in Q 1 2023.

 
7:33

So, a year ago it was 7%. Now it's 10%. And in most of 2023 it was 9%. So it's probably a very bad idea to use CRA as your bank and finance through CRA by not paying your taxes, you want to find other sources of financing because the interest rate at the CRA is very expensive.

7:53 
Not to mention that they're one of the worst creditors. You can imagine they have a lot of wide sweeping powers given to them through the Income Tax Act.

8:02 
All right, the immediate expensing of capital properties. If you own a corporation, that was a great thing last year. But it did expire last year.

8:10 
Now, if you're an individual with business income, as in you're a proprietorship or you're a member of a partnership individually, you get to have those benefits for another year. So go out and buy some stuff.

8:22 
As long as it's available for use before January 1st, 2025, you're good to go. And the CRA are easing into their new electronic payments over $10,000.

 
8:33

So, if you owe more than 10,000 bucks, they're going to want you to remit that electronically or face a penalty that is in effect now.

8:43

But the CRA has mentioned that they're going to give a grace period and do more education than enforcement for the next little while.

 
8:48

And there's been some big changes to the UHT specifically to change the definition of who has to fill out these UHT (Underused Housing Tax) returns.

 
8:58

Quite a few corporations and partnerships and trusts are now excluded. So, go ahead and take a look at the article on our website about that.

 
9:01

And we've done a big blog on the denial of deductions for short term rentals.

 
9:11

So, back to our theme here of how various governments really dislike Airbnb and VRBO, they think that it's impacting our housing stock when the numbers and the data and the statistics frankly say otherwise. If you have an illegal short-term rental and the local municipality or your province doesn't want short term rentals or Airbnb’s or VRBOs in that area, the CRA are going to deny your rental expenses.

 
9:41

And so, you won't be reporting net income on those, you'll be reporting gross income.

 
9:46

And in many cases, we've got a blog on here about this and we've got an example in here about how you could actually lose money on an Airbnb or a VRBO.

9:54

So, you really, really want to be aware of this and particularly do you have an illegal locally, like locally, provincially, whatever, if it's illegal, this is going to get very, very expensive for you.

 
10:05

And so, your options are to become compliant, converted into a long-term rental, which I think is what they want you to do or sell the property.

 
10:12

And by the way, the CRA has a pile of tools to figure out where these people are and where the properties are.

 
10:19

And so, they're gonna be getting into information sharing and requesting information from the rental platforms. So just watch out for that one.

10:28 
We'll have more to come on that in a later blog.

 
10:32

So that's it.

 
10:32

If you have a corporation with us or you own a corporation at all and you're interested in figuring out how to pay less tax personally, we'd love to chat with you and thank you so much for listening to this episode of Your Business Unleashed podcast.