Are you ready to dive into the world of tax changes in Canada for 2023?
In this blog, we’ll explore some important updates that may affect your financial planning.
Whether you’re a seasoned taxpayer or just starting your journey, we’ve got you covered with all the information you need.
So, let’s get started and navigate through the recent tax changes together.
Increase In RRSP Contribution Limit
In the past, the maximum amount you could add to your RRSP contribution room each year was 18% of your earned income, up to a maximum of $29,210.
But in 2023, the rules have changed. The maximum annual limit for contributions has gone up. It’s still based on 18% of your earned income, but now you can contribute up to $30,780.
This means that the maximum amount you can contribute each year has increased by $1,570. This is especially good news for people who earn more than $165,000 per year.
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Increase In TFSA Contribution Limit
In 2023, the TFSA contribution limit has increased from $6,000 to $6,500. This means that you can save more money in your TFSA and enjoy tax-free growth and withdrawals.
If you’re looking for tax preparation services, find tax professionals who can assist you in navigating the tax landscape.
TFSAs For New Canadians
A new tax change that has benefited new Canadians is the introduction of TFSAs for new Canadians. Started from January 1, 2023, new Canadians who become residents of Canada after 2009 will be able to open a TFSA and contribute up to $6,500 for 2023.
First Home Savings Account (FHSA)
The FHSA is a special savings account that allows Canadians aged 18 to 40 to save up to $40,000 for their first home purchase and withdraw it tax-free when they are ready to buy. The FHSA also offers some advantages over other savings options such as RRSPs and TFSAs.
However, the FHSA also has some rules and restrictions. For example you cannot transfer funds from other accounts to your FHSA, and you can only:
- Contribute up to $8,000 per year and up to $40,000 in total to your FHSA.
- Withdraw money from your FHSA for a qualifying home purchase within four years of opening your account.
- Open one FHSA in your lifetime.
Increase In CPP Contribution Rate
Another tax change that has affected many Canadians is the increase in the CPP contribution rate.
- For employees, the contribution rate has increased to 5.95%, and the maximum amount they need to contribute will be $3,754.45.
- Employers are also impacted by this change because the increased costs have passed on to employers.
- Self-employed individuals are responsible for both the employee and employer contributions, which means they will have to pay the full amount. If a self-employed person earns more than $66,600, they will have to pay a total of $7,508.90 in CPP contributions to the government. This includes the employee portion of $3,754 and the employer portion of $3,754.
If you reside in or around Milton and require professional tax assistance, hiring a tax accountant in this specific location can offer several advantages.
Federal Tax Bracket
Let’s talk about some positive news for taxpayers.
In 2023, although the tax rates themselves have stayed the same, the income thresholds within each bracket has increased.
Any Canadians earning:
- Less than $53,359 in taxable income per year will be subject to the base 15% tax rate.
- Between $53,359 and $106,717 in taxable income per year will be subject to a 20.5% tax rate.
- Between $106,717 and $165,430 in taxable income per year will be subject to a 26% tax rate.
- Between $165,430 and $235,675 in taxable income per year will be subject to a 29% tax rate.
- More than $235,675 in taxable income per year will be subject to a 33% tax rate.
Increase In Basic Personal Amount
In 2023, the basic personal amount has increased from $14,398 to $15,000 for most Canadians. This means that you can earn up to $15,000 in taxable income per year without paying any federal income tax.
Lifetime Capital Gains Exemption
In 2022, if you owned a small business corporation in Canada and sold its shares for a profit of around $914k or less, you didn’t have to pay any taxes on that profit, thanks to the Lifetime Capital Gains Exemption.
However, in 2023, the exemption amount went up to $971,190. This means that now you can sell your business shares for a gain of $971k or less without having to pay any taxes on that gain.
It’s a fantastic benefit for Canadian business owners who own a small business corporation and are selling it for a profit.
You should consult a tax professional near me if you have any questions or doubts about the LCGE.
Goods And Services Tax Credit Doubles
Another tax change that has benefited many low- and modest-income Canadians is the doubling of the goods and services tax credit (GST credit) for six months.
In 2023, the GST credit has doubled for six months.
During the benefit year from July 2022 to June 2023, individuals who meet the eligibility criteria can receive the following amounts:
- Singles without children can receive $467.
- Married or common-law partners can receive $612.
- Single parents can also receive $612, and an additional $161 for each child under the age of 19.
Wrapped Up!
As you can see, there are many tax changes coming in 2023 that will affect your personal finances. Some of these changes will benefit you by increasing your savings or reducing your tax bill, while others may increase your tax burden or affect your cash flow. It is important to be aware of these changes and plan ahead for the 2023 tax-filing season.
If you need help with your taxes near me, you can find a tax professional near me or tax accountants Milton who can assist you with your tax preparation near me and tax filing near me.