New Guidelines 2024 : How the Changes to the Canadian Income Tax System Will Affect You

As we approach the new year, we wanted to keep you informed about the upcoming changes to the Canadian income tax system for the 2023 tax year.

Whether you’re an employee, self-employed individual, or retiree, these changes may impact your tax obligations and benefits.

Here’s a breakdown of the key updates for 2023: 

Tax Bracket

The Federal bracket thresholds for 2023 will be adjusted to account for inflation. The new federal tax brackets for 2023 are as follows:

$0 to $53,359 of income (15%)     More than $53,359 to $106,717 (20.5%)
More than $106,717 to $165,430 (26%)   More than $165,430 to $253,675 (29%)
$235,675 and higher (33%)  

First Housing Savings Account (FHSA)

A special plan to help you save up to $40,000 tax-free for your first home. It’s like a mix of RRSP and TFSA benefits, offering tax deductions on contributions, tax-free investment growth, and flexibility to carry over unused contributions. If you have extra, you can transfer it tax-free to an RRSP. You can contribute up to $8,000 each year, with a total lifetime limit of $40,000.Offering popular women’s necklaces such as pendants, chokers and chain necklace. Shop for jewelry in a variety of metals and gemstones to suit any occasion

Underused Housing Tax (UHT)

Meet the Underused Housing Tax (UHT), a 1% annual federal tax in Canada starting January 1, 2023. It mainly targets foreign owners of empty homes but can affect certain Canadians too. If you own a residential property and fall under UHT rules, file by April 30 of the next year.  Late filing incurs minimum penalties of $5,000 for individuals and $10,000 for corporations. Use form UHT-2900 and keep thorough records to support claims. 

Flipped Property

Under the new rule, profits from the sale of a flipped property are now considered business income. This means that these profits cannot be treated as capital gains (50-per-cent income inclusion), and the Principal Residence Exemption is not applicable if the property is sold within 365 consecutive days from the date of purchase. This marks a departure from previous years when individuals could treat profits from the sale of a residential property held for personal use or rental income as capital gains.  Additionally, any losses incurred from the sale of a flipped property are now deemed nil and cannot be used to reduce taxable income.

Multigenerational Home Renovation Tax Credit

MHRTC is a new refundable credit introduced in the 2022 budget by the Canadian government .This credit is especially helpful if you’re creating a “Secondary Unit” for a qualifying individual, like a senior or an adult eligible for the disability tax credit, to live with a qualifying relation. You can claim the credit for renovation expenses incurred after December 31, 2022, for services or goods acquired after that date. The best part? The maximum refundable credit is $7,500, which is 15% of renovation expenses up to $50,000.

Tax-Free Savings Account (TFSA)

The Tax-Free Savings Account (TFSA) is a registered account that allows Canadians to earn tax-free investment income. The annual contribution limit for 2023 is $6,500, which means that someone who has been eligible since the introduction of the TFSA in 2009 would have a total of $88,000 in contribution room available for 2023.

Assignment Sale

Under the current GST/HST rules, an assignment sale made by a person that their newly constructed or substantially renovated residential housing is not or not intending to be their principal residence is generally taxable. In the past, whether an individual’s assignment sale was taxable or exempt depended on the original purpose of their home purchase agreement. However, there’s a new rule in place: now, all assignment sales, even those by individuals, for such properties are taxable for GST/HST purposes. The good news is that if an assignor paid a deposit to a builder, that deposit is not included in the taxable amount, given certain conditions are met. This change is effective for assignment agreements made after May 6, 2022

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