What’s New for the 2023 Tax-Filing Season?
Home office expenses for employees What the changes are
During the pandemic, when approximately 5 million Canadians were forced to work from home, the federal government introduced a temporary flat rate method for claiming work from home expenses for the 2020, 2021 and 2022 tax years. However, starting with the 2023 tax year, employees must now use the detailed method and obtain a completed form T2200, reviewed and signed by their employer to claim home office expenses for 2023.. The temporary flat rate method does not apply to the 2023 tax year.
New Canadian Dental Care Plan (CDCP)
Seniors age 87 and above: December 2023 Seniors age 77 to 86: January 2024 Seniors age 72 to 76: February 2024 Seniors age 70 to 71: March 2024 Seniors age 65 to 69: May 2024 Adults with a valid Disability Tax Credit certificate: June 2024 Children under the age of 18: June 2024 All remaining eligible Canadian residents: Starting 2025. Applicants must have filed an income tax return for the previous year before applying for the CDCP. Families making less than $90,000 per year without dental insurance with children under the age of 12 may already be eligible for the Canada Dental Benefit that offers a tax-free payment of $260, $390 or $650 per child (depending on family net income). Applications are open until June 20, 2024 and families can apply to the CRA for a maximum of two payments per child for dental care received between July 1, 2023 and June 30, 2024.
The TFSA limit has been increased
The TFSA contribution limit has increased to $6,500 for 2023 and $7,000 for 2024 The contribution deadline for a TFSA is technically December 31, but your contribution room gets rolled over each year. If you have never opened a TFSA, by the end of 2023, if you were at least 18 in 2009, you would have $88,000 in unused TFSA room.
The Canada Pension Plan (CPP) and Québec Pension Plan (QPP)
Box 16A: employee’s Second Additional CPP Contributions (CPP2) Box 17A: employee’s Second Additional QPP Contributions (QPP2) Second additional CPP and QPP contributions begin in 2024. After January 1, 2024, any employee who contributes to the CPP or QPP will make CPP2 or QPP2 contributions if and when their annual income surpasses the first earnings ceiling, the Year’s Maximum Pensionable Earnings (YMPE). Employers will make a matching CPP2 or QPP2 contribution. The YMPE for 2024 will be made available at the beginning of November 2023.
RRSP AND FHSA CHANGED
The RRSP annual dollar limit for tax year 2023 is $33,780. Remember that your RRSP contribution limit is capped at 18% of your earned income in the previous year. This means the dollar limit is the maximum amount you can contribute regardless of your income. A first home savings account (FHSA) is a registered plan which allows you, if you are a first-time home buyer, to save to buy or build a qualifying first home tax-free (up to certain limits). If you opened an FHSA in 2023, you can claim up to $8,000 in FHSA contributions you made by December 31, 2023, as an FHSA deduction on your 2023 income tax and benefit return.
New Tax brackets to account for inflation for 2023
Up to $53,359 of income is taxed at 15% Income between $53,359 and $106,717 is taxed at 20.5% Income between $106,717 and $165,430 is taxed at 26% Income between $165,430 and $235,675 is taxed at 29% Above $235,675, income is taxed at 33%. The basic personal amount (BPA) has changed as well. This is a non-refundable tax credit that can be claimed by all individuals filing their taxes. So if you earn $60,000 a year, you can use the BPA to reduce your overall tax liability. The basic personal amount was increased to $15,000 for the 2023 taxation year. It will be indexed for inflation in subsequent years going forward.
