Hello, the tax filing season is here again!
Are you aware of the recent changes that will affect your taxes this year and their impact on your potential payables, deductions and credits?
Below are 6 of these key tax changes we’ve put together to keep you updated as you file your return;
1. Inflation adjustment factor/Tax brackets for 2023:
In response to the increased annual inflation rate, each tax bracket has been slightly increased from the 2021 thresholds. This implies you will pay a lower rate on more of your income. The new federal brackets and tax rates are:
- $0 to $50,197 of income is taxed at 15%.
- Income between $50,197 and $100,392 is taxed at 20.5%.
- Income between $100,392 and $155,625 is taxed at 26%.
- Income between $155,625 and $221,708 is taxed at 29%.
- Anything above $221,708.01 is taxed at 33%.
2. Basic personal amount (BPA):
The BPA is one of the non-refundable tax credits every Canadian resident is entitled to claim on their income tax return. This amount differs from year-to-year to keep up with inflation. The Canadian government increased the BPA for the 2023 tax year to $15,000 from $14,398. What this means is that every Canadian tax payer will get a small boost to their return this year.
3. Tax-free savings account (TFSA) limit:
The 2023 TFSA contribution limit has increased for the first time since 2019 to $6,500 from $6,000. So, if you’ve had an account since 2009, were 18 years of age, have been a resident of Canada throughout that period, and never contributed to a TFSA, the cumulative total you can have in your TFSA is now $81,500.
4. Canada Pension Plan maximum contributions have been increased:
Another vital change for this tax year is the increase of the Canada Pension Plan (CPP) and Québec Pension Plan (QPP) by 2.7%. And if you are in Québec, you also have the option to increase your QPP premiums by making extra contributions to the enhanced plan. The enhancement of the Québec Pension Plan will give future retirees an increase in their pension premiums from 25% to 33.33%.
5. First Home Savings Accounts (FHSA):
This new registered plan gives potential first-time homebuyers between the ages of 18 and 71 the ability to save $40,000 on a tax-free basis, with an annual contribution limit of $8,000 towards the purchase of their first home in Canada. This is in a bid to reduce the burden of a down payment for a house.
6. The Registered Retirement Savings Plan (RRSP) dollar limit is increased:
The amount you can deduct from contributions made to your RRSP, PRPP, SPP, and your spouse’s or common-law partner’s RRSP or SPP for the entire calendar year is known as your Registered Retirement Savings Plan (RRSP) Deduction Limit.
The RRSP annual dollar limit has been increased from $29,210 from 2022 tax year to $30,780 for this 2023 tax year.
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