2023 Tax Changes

In this article we will review a few of the changes to be aware of heading into the 2023 T1 personal tax season. Please note this article is not exhaustive of all changes, but rather touches on some of the items that could affect many taxpayers.

Residential property flipping: Beginning on January 1, 2023, new property flipping legislation is in effect whereby if a home is owned for less than 12 months and sold or “flipped”, the profits will be taxed as business income. Previously such property may have been eligible for capital gains treatment which is typically taxed more favourably. This also captures principal residences, meaning a taxpayer may not be eligible to claim their principal residence exemption. There are however, a number of exemptions from this new legislation including death of a taxpayer, a breakdown in marriage, relocation for work or school, involuntary termination of employment, insolvency, expropriation of property. See CRA guidance “Residential Property Flipping Rule” for more detailed information.

Working from home: For tax years 2020, 2021 and 2022 a temporary “flat rate method” was available to claim home office expenses. Effective for the 2023 tax year this method is no longer available. For employees who are planning to claim home office deductions for 2023 tax year, they will need to apply the detailed method for calculation. To be eligible in 2023 you must have worked at least 50% from home for at least 4 consecutive weeks. Also remember that you will need to obtain a signed T2200 from your employer. A full list of eligibility criteria and a list of eligible expenses can be found on the CRA website.

COVID-19 repayments: Should you have a had to repay a federal, provincial or territorial COVID-19 benefit between January 1, 2023 and December 31, 2023, you can deduct the repaid amount on your 2023 income tax return. For many of these repayments you should receive a T4a or a letter stating the amount of repayment.

Multigenerational home renovation tax credit: This refundable tax credit of up to $7,500 allows an eligible individuals to claim up to $50,000 in qualifying expenditures where the eligible individual renovates their home such that they create a secondary unit for a qualifying individual to reside. The criteria to qualify for this credit are quite substantial, but briefly the renovations must be such that a self-contained unit is created (private entrance, kitchen, bath, etc.). The self contained unit must be for an immediate relative who is over 65 years old, or over 18 years old if they are eligible for the disability tax credit. For more information on this credit please visit CRA’s website.

BC Renter’s tax credit: New for the 2023 tax year there is a renter’s credit of $400 for households earning less than $60,000 with a reduced amount for households with income between $60,000 and $80,000. 

To be eligible the following criteria must be met:

   •  You should have paid rent under a tenancy agreement in BC for at least 6 one-                 month periods (does not have to be consecutive months).
   •  You were a resident of BC on December 31, 2023, who was at least 19 years of age
   •  The rent paid was not:

  • Under a rent-to-own plan
  • Paid to someone non-arms length (typically immediate family) from yourself
  • Paid by your employer unless it was included in your income

    •  You were not:

  • The spouse of a renter who has already claimed the credit (maximum of one claim per couple)
  • In prison on December 31, 2023 or for any periods more than 6 months during the year
  • Deceased before the end of the year
  • An employee of a foreign country
 

See the Province of BC’s website for additional details.

First Home Savings Account (FHSA): Effective April 1, 2023 Canadians can contribute $8,000 per year to a FHSA and receive a tax deduction for the amount contributed. There is a lifetime cap of $40,000 that can be contributed to the account. When you purchase an eligible first home you can use the money in your FHSA without any tax consequences. Should you withdraw the funds for a non-qualifying withdrawal you will be taxed on the withdrawal. For example if you did not purchase a home and decided to rent instead, when you withdraw funds from the FHSA the amount is included in income in the year of withdraw. There is an option to transfer your FHSA to another registered plan being an RRSP, RRIF, or other FHSA with no tax consequences. For more information on the FHSA visit the CRA website.

Canada’s tax system is ever evolving and can be quite complex. Should you require assistance in determining applicability of tax changes to your scenario please contact one of our tax advisors at DMC. 

Untitled design (8)

Untitled design (8)

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