There’s no escaping it. These are challenging times for you in filing personal taxes, given the changes in tax as well as uncertainties in the market. Here is the summary of tax tips that put you in a comfort seat when filing your 2022 personal tax. (I mean 2022 taxation year only!)
What is the first thing that you should start with?
Definitely organize all your paper/PDF documentation before keying the numbers in the tax programs. Easier said than done. If you look back the previous years, how much time that you have spent with the banks or search in your Inbox to locate the documents for tax purposes? A LOT. The documentations may include T slips, contributions to registered retirement accounts, investment statements, work-related expenses, medical expenses statement, union dues, childcare expenses as well as charitable donations. If you are self-employed, don’t forget to itemize the expenses incurred for the business during the year. Once the basic work is completed, you take a deep breath and bring back your memory of any significant matters that may trigger taxes or credits during the year. If you have doubts, do your research or consult your accountant. Also, remember the benefit from the organized documentations is not only for the current year’s filing, but also it means a fast turnaround when the CRA comes back with a request/a review.
When the tax filing is due?
Generally speaking, the last day of April is the deadline but in 2023, the last day falls on a Sunday, so the deadline has been pushed to May 1 ,2023. You have plenty of time to get your paper/pdf sorted out. If you are self-employed, I mean you have to file T-2125, your submission is due by June 15, 2023. What about the tax due date? If you owe any tax, the due date is May 1,2023.
Related to the housing
Property sold
The CRA exempts the entire capital gain resulting from the sale of a principal residence from taxes. Form T2091, Designation of a Property as a Principal Residence by an Individual (Other Than a Personal Trust) has to be filed to claim this exemption.
Claiming CCA on investment property
This is not new. You can take the tax depreciation (so called CCA) for your depreciable rental property – the building not the land. You are allowed to write off 4% of the total capital cost of the property including the purchase price, legal fees associated with the purchase. Looks great! But remember, the CRA has put his hand in your pocket when the property is sold, the tax depreciation has to be included back into income. So, claiming CCA wisely. Sometimes, it can be a great solution to reduce your tax bills. You may be interested in reading this article as well. (https://www.franklyca.com/claim-cca-on-the-rental-property-a-second-thought/)
Property purchased
If you qualified as a firs time homebuyer, then you may be eligible for claiming a non-refundable tax credit of up to $1,500 when purchasing a qualifying home in 2022. The tax credit is called “the First-Time Home Buyers’ Tax Credit”, which has increased from $750 in 2021.
Home renovations and tax credits
There are tax credits available for home renovation projects in your property. Federal tax credits for renovations include substantial renovation tax rebate and home accessibility expense tax credit. If you are an individual who substantially renovated mobile home or a new or substantially renovated floating home for use as your primary place of residence, you may be eligible for a new housing rebate for some of the GST/HST paid. This is what the substantial renovation tax rebate is about. You can refer to the link here.( https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/b-092/substantial-renovations-gst-hst-new-housing-rebate.html)
Regarding home accessibility expenses tax credit, individuals with disabilities and those over the age of 65 can claim a deduction on their annual income tax return for certain renovations. These must be completed in their primary residence to improve accessibility and safety, for example to get around better. The eligible expenses include materials, fixtures as well as labour, up to a maximum of $10,000.
In Ontario, there is a tax credit available, similar to home renovation tax credit on the federal side.
Lastly, there is another grant program sponsored by the Federal government. It is called “The Canada Greener Homes”. You can get back a portion of your costs for eligible home retrofits. Since this grant is not included in your regular T1 personal tax return, I will not expand the details here. You can have a good read over here. (https://www.nrcan.gc.ca/energy-efficiency/homes/canada-greener-homes-initiative/canada-greener-homes-grant/canada-greener-homes-grant/23441)
The Residential Property Flipping Rule
Starting on January 1, 2023, profits arising from dispositions of residential property (including a rental property) that was owned for less than 12 months would be deemed to be business income. That means 100% taxable. Here is more details. ( https://www.franklyca.com/2023-tax-update/)
The Prohibition on the Purchase of Residential Property by Non-Canadians Act
Beginning January 1, 2023, non-Canadians will be subject to a two-year ban on the purchase of certain residential real estate in Canada – and anyone who knowingly helps a non-Canadian buy a house could be subject to significant penalties.
Related to work
Foreign tax credit
Canadian tax residents must declare their worldwide income in Canada in order to calculate the Canadian income tax amount. You may be able to claim the federal foreign tax credit for foreign income or profit taxes that you paid on income you received from outside Canada and reported on your Canadian tax return. Always remember to keep documentation tidy. For example, taxes paid in foreign countries, pay stub or employment letter. The CRA has frequently sent out the review letter on the foreign tax credit claimed on the tax returns.
Canada training credit
The Canada Training Credit is a refundable tax credit to help Canadians with the cost of training fees. The credit accumulates at a rate of $250 per year, up to a lifetime training amount limit of $5,000. The credit could be used to claim a refundable tax credit for up to half of the eligible tuition and fees for taking a course or enrolling in a training program. An individual’s training amount limit would be included in Notice of Assessment for each year.
Canada workers benefit
It is also a refundable tax credit that helps low-income working families and individuals. The maximum amount for a single individual to receive is $1,395.
Home office expenses for a T4-ed taxpayer
Hopefully you are back to your cubicle now. But in 2022, if you had been working from home, you are granted to claim home office expenses. The simple way is to use the flat rate when you worked more than 50% of the time from home for a period of at least four consecutive weeks in the year due to the COVID-19 pandemic. $2 clamed for each WFH day and the maximum is $500. If you like to use the detailed approach, then you need to collect all the related home expenses.
Finally, related to your vacation
The Ontario Staycation Tax Credit is still available for 2022. This tax credit aims to encourage Ontario families to explore the province, while helping the tourism and hospitality sectors recover from the financial impacts of the COVID 19 pandemic. If you are Ontario residents, you can claim 20% of the eligible 2022 accommodation expenses, for example, for a stay at a hotel, cottage or campground, when filing their personal Income Tax and Benefit Return for 2022. You can claim eligible expenses of up to $1,000 as an individual or $2,000 if you have a spouse, common-law partner or eligible children, to get back up to $200 as an individual or $400 as a family. Don’t forget about this credit as it has been removed after 2022.
Related to assets outside Canada that are held by Canadian residents.
Form T1135 is designed to help the CRA obtain information on the amount of certain types of assets outside Canada that are held by Canadian residents. All Canadian resident taxpayers who, at any time in the year, owned certain assets outside Canada with a total COST amount of more than $100,000 (Canadian), even if some was sold before the end of the year, must file form T1135. Don’t get confused that for shares in foreign companies that were held by a Canadian brokerage are not required in T1135. It has to be included!
What if I own shares in foreign companies? If a Canadian corporation or individual has an interest in a foreign affiliate, whether controlled or not, it will need to complete a T1134 information return. It is complex and it requires more attentions from you. You can refer to the details on this article. (https://www.franklyca.com/i-own-a-company-outside-of-canada-do-i-owe-any-tax-to-the-cra/)
Not sure if it’s the CRA calling?
A legitimate CRA staff will identify themself when they contact you, providing you with their name and phone number to call them back, if needed. If you’re feeling uncomfortable, you can make sure the caller is a CRA staff before providing any information over the phone. Here’s how:
Tell the caller you would like to first verify their identity. Request and make a note of their:
name
phone number
office location
End the call. Then check that the information provided during the call was legitimate by contacting the CRA. Please do this before you provide any information to the caller.
The above approach is recommended by the CRA. My suggested approach is to tell the caller, “Thanks for the call, let me call you back with your contact information.” Nothing is more urgent than understanding the issue before taking actions.
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