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What do you want to know?

Are you putting off filing your taxes for 2023? Don’t worry, you’re not alone, and the good news is there’s still time!

The deadline for most Canadians to file their 2023 tax returns and make any payments is April 30, 2024. Those who are self-employed have until June 15, 2024 to file their 2023 tax return.

With tax season well underway, we’re here to help you understand the latest changes that may affect you when you file your return. Many new changes have been implemented for the 2023 tax year, including new deductions and credits that could save you money.

So, what’s different from last year? We’ll walk through important changes for 2023 filing, why it’s important to file your taxes on time, and how doing your taxes can help pay off debt.

Tax changes

1. The benefits of COVID-19 are gone.

For the 2023 tax season, you can’t claim $500 for work-from-home expenses due to COVID. The Canada Worker Lockdown Benefit (CWLB), which provided temporary income support during the COVID-19 pandemic, ended in 2022 so you can’t claim it on your 2023 taxes either.

2. TFSA and RRSP limits have increased.

Tax-Free Savings Account (TFSA) The contribution limit has increased. Up to $7,000 for 2023. With this year’s limit increase, your contribution room is now up to $95,000 if you’ve qualified for a TFSA every year since it started in 2009.

Registered Retirement Savings Plan (RRSP) Annual dollar limit $30,780 for the 2023 tax year, up from $29,210 in 2022. However, it is important to remember that your individual contribution limit is still limited to 18% of your earned income for the previous year.

3. New OAS Limit Amount

Old Age Security (OAS) is a government program designed to provide retired Canadians with a source of income to support their retirement. However, retirees with incomes above certain thresholds may have their OAS amount reduced or even canceled.

The OAS limits for the 2023 tax year are as follows:

  • Minimum income recovery threshold: $80,761
  • Maximum recovery limit for ages 65 to 74: $134,626
  • Maximum recovery limit for persons age 75 and older: $137,331.

4. The maximum contribution to the Canadian pension plan has increased.

Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) have increased by 6.5% as part of the government’s continued implementation. Increase in CPP. Income and contributions are based on a new calculation taking into account the average growth rate of salaries and weekly wages earned across Canada.

Maximum pensionable earnings are $66,600, with a basic exemption of $3,500 for 2023. The employee and employer contribution rates for 2023 are 5.95% (up from 5.7% in 2022) with a maximum contribution of $3,754.45, and the self-contribution rate. 11.9% (up from 11.4% in 2022) with a maximum contribution of $7,508.90.

Looking at 2024 filings, the first pensionable earnings limit will be $68,500 with the basic exemption remaining the same. A second limit took effect on January 1, 2024, up to $73,200. Earners above the first and below the second threshold will be subject to an additional CPP contribution calculated as a percentage of wages. For 2024, the employee and employer contribution rates, as well as the contribution rate for the self-employed, will remain the same as in 2023.

5. New grocery rebate

To ease the burden of rising food prices, the Canadian government introduced a new Grocery rebate. If you filed your tax return in 2021 and met the criteria for the GST/HST credit, you will be eligible for the grocery rebate. This exemption is equivalent to doubling the GST/HST credit you receive in January 2023. For those filing their tax returns in 2022, you should have received the payment in July 2023.

6. Disability Tax Credit

The CRA has simplified the process of applying for the Disability Tax Credit by going digital. If you are applying, you can now complete Part A of the application online. Once the reference number is issued, you can provide it to your medical practitioner who can then complete Part B digitally. You no longer need to physically print and bring the form to your medical practitioner.

7. First Home Savings Account

If you have opened tax free. First Home Savings Account (FHSA) In 2023, you can claim up to $8,000 in contributions made through December 31 as an FHSA deduction.

Introduced on April 1, 2023, the First Home Savings Account combines the features of both TFSAs and RRSPs. Contributions are tax-deductible against income when deposited like an RRSP, but tax-free on withdrawals like a TFSA (assuming the money is used to buy a home, or in an RRSP is inserted). Canadians can contribute up to $8,000 a year to help buy their first home, up to a lifetime maximum of $40,000. Contributions are tax-free on withdrawals, like TFSAs, and tax-deductible against earnings, like RRSP contributions.

What are the new tax increases for 2023 Canada?

In addition to the changes described above, Canada’s tax brackets are revised every year. To help Canadians keep up with the cost of inflation, the federal government Adjusted tax bracket for 2023, raising them slightly above the 2022 limit. For some, the adjustment may result in paying a lower rate on higher income.

The new brackets and tax rates for 2023 are as follows:

  • Income up to $53,359 is taxed at 15%
  • Income over $53,359 to $106,717 is taxed at 20.5%.
  • Income from $106,717 to $165,430 is taxed at 26%.
  • Income over $165,430 to $235,675 is taxed at 29%.
  • Above $235,675, income is taxed at 33%.

What is the basic personal income for taxation in Canada 2023?

As part of its policy to continue to increase it over time, the Government of Canada has increased it. Basic Personal Amount (BPA) $15,000 for the 2023 tax year. The BPA is a non-refundable credit that can be claimed by anyone who files income taxes in Canada. This credit gives a full deduction from income tax to those earning less than a certain amount, while those earning more than the basic amount get a partial reduction.

How filing your taxes affects debt

There can be feelings of dread when filing a tax return — especially if you A balance is due on your return. – Filing is still important, especially if you have debt.

Failure to file a current tax return can have major financial consequences, including penalties, interest charges and/or the temporary loss of certain government benefits until the taxes are filed and processed.

Costly fines

It’s important to file your return and pay taxes by the deadline to avoid costly penalties.

If you owe a balance but file your tax return on time, you will be subject to interest fees starting May 1 until the balance is paid. The interest rate that CRA charges. Fixed interest rate And every three months can vary.

If you owe a balance and you file late, you will be subject to this. Interest and late filing penalty. The late filing penalty is 5% of your 2023 arrears, plus an additional 1% for each month late for up to 12 months.

Also new this year, if the CRA collects a late filing penalty from you for 2020, 2021 or 2022 and requests a formal demand for refund, your late filing penalty for 2023 will be equal to the amount you owe. will be 10%. You will be charged an additional 2% for each full month you file after the due date, up to a maximum of 20 months.

If you can’t pay your balance in full, you can work with the CRA to pay off your personal income tax debt (plus interest) over a longer period of time in installments. Penalties and interest do not apply if there is no outstanding balance on your tax return.

Government benefits

If you are receiving certain benefits from the federal government, such as the Canada Child Benefit or Old Age Security, filing your return on time can be very important. If you don’t, these benefits may stop.

Eligibility for some government benefits depends on the numbers entered on your tax return. The benefit amount is also tied to the total income reported on your return. If you fail to file by the deadline, the government won’t have the numbers to close and you risk a delay in your benefits, so it’s important to get it on time. You also won’t be able to apply for any new benefits, such as the Canadian Dental Care Plan, without filing your 2023 tax return.

Income records

In addition to the financial impact, not filing a current tax return can affect other aspects of your life. Information on your filed tax return is used to determine:

  • Loans, such as student loans, mortgages and lines of credit
  • Student grants as well as certain bursaries and scholarships
  • Low-income grants for programs including home repair and heating rebates

If something happens where you suddenly need a loan or grant, you may not qualify if you haven’t filed your tax return.

Failure to file your return on time can have many consequences. If you can’t pay your balance by the deadline, you should file on time to avoid late filing penalties. This will save you money and pain in the future.

Income tax planning

Knowing the latest changes that may affect your tax return can help you save money and prioritize financial planning strategies for next year. Understanding the latest tax laws and benefits can help you make the most of your money or create a plan to minimize the negative impact of the changes, including:

  • Understanding what tax bracket you are in so you can set achievable financial goals for the coming year based on your income. By doing this, you will be able to budget accordingly and manage your debt better.
  • Contributing to an RRSP each year to reduce your taxable income. Definitely take advantage if your employer offers a company RRSP plan with matching contributions, which will help you save better for retirement.
  • Take advantage of homebuyer tax perks if you’re looking to buy your first home, such as the First Home Savings Account (FHSA) and the First-Time Homebuyers Tax Credit (HBTC).
  • Checking your eligibility for federal and provincial child care benefits if you’re a parent.

Repayments can help pay off debt.

If you’re receiving a refund on your 2023 taxes, consider using it to pay down debt you may have, such as credit card debt. While you might want to treat yourself to a luxury shopping spree or even a vacation with what feels like “free money” (it’s actually money you’ve overpaid the government in 2023), if The more you spend, the more you will benefit in the long run. Fund wisely.

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