10 things you should know about the 2022/2023 Federal tax budget

1. The new Federal income tax brackets

2021 Brackets2021 tax rates2022 Brackets2022 tax rates
Up to $49,02015%Up to $50,19715%
$49,020 – $98,04020.5%$50,198 – $100,39220.5%
$98,040 – $151,97826%$100,393 – $155,62526%
$151,978 – $216,51129%$155,626 – $221,70829%
Over $216,51133%Over $221,70833%

2. The introduction of the tax-free home savings account (FHSA). This new account will help Canadians to save for a down payment for their first home. Individuals will be able to save up to $40,000 using this fund, it will be tax deductible and will be available at the start of 2023. The beginning contribution limit will be $8,000 for the first year. To open a tax-free first home savings account, you will need to be over the age of 18 and have not lived in a home you’ve owned. Unlike a RRSP or a TFSA the unused contribution room on a FHSA cannot be rolled forward, however you can transfer any amounts from a FHSA to a RRSP or RRIF account. Once you have withdrawn from the account you must close it within one year and you will not be able to open another one.

3. The home buyers plan is still in effect and allows you to withdrawal up to $35,000 from your RRSP account tax free to purchase or build a home.

4. The residential property flipping rule will take place this year. This rule will implement the full taxation on profits from flipping residential real estate. This rule applies to residential properties that are owned for 12 months or less and it will not be eligible for capital gains treatment. The exceptions for this rule include, the death of the taxpayer or related person, household additions including the addition of a new family member or the care of a new dependent, the separation from a spouse, personal safety concerns, disability or illness and the change of employment. This new rule will apply to residential properties sold after December 31, 2022.

5. Labor mobility deductions for tradespeople. This deduction will apply for certain travel and relocation expenses for construction industry workers. This deduction will be similar to the one that was already in place, in order to qualify for this deduction your relocation must be over 150kms from your home based, and it must last for at least 36 hours. The deduction cannot exceed 50% of your employment income from construction, and will have a capped amount of $4,000, this deduction will apply to the 2022 tax year forward.

6. The multigenerational home renovation tax credit is new this year. This tax credit will allow homeowners to create a secondary unit within their home for a senior family member or disabled adult family member. This tax credit will allow a 15% refundable credit up to $50,000 in eligible expenses for renovations to build this secondary unit. This tax credit will be available in 2023.

7. The home buyers credit amount had increase from $5,000 to $10,000 at 15% for a credit refund that has increase from $750 to $1,500.

8. The home accessibility tax credit has also increased, the annual expense limit has increase from $10,000 to $20,000 at 15% tax rate.

9. The medical expense tax credit allows couples trying to conceive a child with the help from a sperm donor or surrogate. This tax credit allows the taxpayer to be reimbursed for expenses related to the surrogate mother or sperm donor.

10. Financial institutions will now be required to include fair market value amounts on both RRSP and RRIF accounts.

Sources:

https://www.ey.com/en_gl/tax-alerts/canada-s-federal-budget-2022-23-focu…
https://budget.gc.ca/2022/report-rapport/tm-mf-en.html#a2_1

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