As the tax season approaches, it's crucial to stay updated on changes to contribution limits, thresholds, and exemptions before filing personal taxes. The deadline for filing 2023 personal income tax returns is April 30, 2024, with an extension until June 17, 2024, applicable to self-employed individuals. However, any outstanding tax balance must be settled by April 30, 2024.

 

 

Here's a comprehensive overview of important updates to consider before filing taxes this year:

Investment Updates:

1. RRSP Contributions:
• Contribution limits for RRSPs allow up to 18% of the previous year's earned income or a maximum of $30,780. The deadline for 2023 tax year contributions is February 29, 2024.
2. TFSA Limits:
• The annual limit for Tax-Free Savings Accounts (TFSAs) in 2023 has increased to $6,500 from $6,000.
3. FHSA:
• The First Home Saving Account (FHSA) caters to first-time homebuyers, offering a lifetime limit of $40,000 and an annual cap of $8,000. Similar to a TFSA, it enables tax-free income growth, with contributions being tax-deductible like an RRSP.

 

 

Capital Gains, Deductions, and Tools Expenses:

1. Lifetime Capital Gains Exemption:
• Individuals can now benefit from a lifetime capital gains exemption of $971,190 in 2023, allowing eligible gains from qualified asset sales to be tax-exempt.
2. Home Buyers' Amount:
• Homebuyers can claim up to $10,000 of the purchase cost and receive a non-refundable tax credit of up to $1,500.
3. Increased Deduction for Tools Expenses:
• Notably for the 2023 tax season, the deduction for Tradespeople's Tool Expenses has increased to $1,000 from $500.

Dependents, Credits, and Notable Additions:

1. Medical Expenses Threshold:
• The maximum threshold for claiming medical expenses in 2023 is 3% of net income or $2,635, whichever is lower.
2. Canada Caregiver Credit:
• Under specific circumstances in 2023, clients with dependents may qualify for an additional $2,499 in non-refundable tax credits.
3. Disability Benefits:
• The disability amount for 2023 is $9,428, with supplemental benefits available for individuals under 18, potentially affected if childcare expenses are claimed.
4. Child-Related Benefits:
• Families caring for a child under 18 with severe impairment may receive tax-free child disability benefits of up to $3,173.
5. Canada Child Benefit:
• The maximum CCB benefit for 2023 is $7,437 per child under six and up to $6,275 per child aged six through 17.

 

 

Additional Property Tax Measures:

1. Multigenerational Home Renovation Tax Credit:
• Introduced in Budget 2022, this credit offers a refundable 15% tax credit for eligible expenses incurred during a qualifying renovation starting from January 1, 2023. A qualifying renovation involves creating a secondary dwelling unit to accommodate an eligible person, such as a senior or a person with a disability, living with a qualifying relation.

2. Residential Property Flipping Rule:

• Effective from the 2023 tax year, Budget 2022 outlined a new rule classifying profits from selling flipped residential or rental properties as business income. When applicable, gains from property sales won't be considered as capital gains and won't qualify for the Principal Residence Exemption.

 

 

New Rules for 2024:

Starting in the 2024 tax year, Budget 2023 aim to modify the Alternative Minimum Tax (AMT) for high-income individuals. These revisions involve broadening the AMT base, raising the AMT rate to 20.5%, and improving the AMT exemption to around $173,000, adjusted annually for inflation.

Key changes in the AMT system include:

• Broadening the AMT Base: Capital gains, stock options, donations of publicly listed securities, certain deductions, and non-refundable credits would be included in the AMT base, subject to different inclusion rates.
• Raising the AMT Rate: The AMT rate would increase from 15% to 20.5%.
• Improving the AMT Exemption: The exemption amount is set to rise to approximately $173,000 for 2024 and will be adjusted yearly for inflation.

 

In addition, there are proposed regulations to facilitate the use of Employee Ownership Trusts (EOTs) for purchasing and holding shares in a business. EOTs are trusts that hold shares for the benefit of employees. Changes include extending the capital gains reserve period to 10 years, exceptions to shareholder loan rules, and exempting EOTs from the 21-year deemed disposition rule. These changes would take effect as well on January 1, 2024.

 

For further assistance with tax matters, including navigating these updates, or any other tax-related inquiries, please feel free to contact us at info@pkfantares.com. Our team of experienced tax advisors is here to support and guide you through the tax season complexities, addressing concerns with your 2023 personal tax returns or any other specific tax-related matters you might encounter.