Tax Rule Changes for 2023 and beyond
Tax-Free First Home Savings Account
The Tax-Free First Home Savings Account (FHSA) rules should become effective April 1, 2023. You can contribute up to $40,000 over your lifetime and up to $8,000 for any one year, including 2023. Click here to read our article about this new program.
Multigenerational Home Renovation Tax Credit
This took effect January 1, 2023. It provides a 15% tax refund on expenses of up to $50,000 to a maximum credit of $7,500 for expenses related to building a secondary suite for a family member who is a senior or an adult with a disability.
Residential Property Flipping
The residential property flipping rule came into effect on January 1, 2023, and is part of a continuing effort to discourage residential property flipping and ensure profits are fully taxed. It represents a major change for people who buy and sell residences within a year.
The profits from any sale must be deemed an income inclusion versus a capital gain. They will be fully taxable in the year of sale and the Principal Residence Exemption will no longer apply.
Exceptions include life events such as the death of the individual or related party, an addition to the household, separation or divorce, a threat to personal safety, serious illness or disability, work relocation or termination, insolvency, natural disaster, or expropriation of the home.
Basic Deduction Increases
- Basic personal amount has increased to $15,000 from $14,398 in 2022 for individuals in the 20.5% or 26% bracket
- Age amount has increased to $8,396 from $7,898 in 2022 for individuals with net income below $42,335
- Disability amount has increased to $9,428 from $8,870 in 2022
Registered Plan Contribution Changes
- The RRSP dollar limit has increased to $30,780 from $29,201
- The TFSA dollar limit has increased to $6,500 from $6,000
- The annual money purchase limit for RPPs has increased to $31,560 from $30,780
The indexation factor has increased to 6.3% for 2023 (from 2.4% in 2022). This impacts various tax bracket thresholds, amounts relating to non-refundable credits and certain income-tested benefits.
CPP Pensionable Earnings
The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2023 will be $66,600 up from $64,900 in 2022.
OAS Repayment Threshold
The Old Age Security (OAS) pension repayment threshold based on net income for 2023 has been increased to $86,912 from $81,761.