It’s that time of year again: tax season! We get it – in tough economic times, your taxes may be the last thing you want to do. If it feels like you’re paying too much in taxes or missing out on potential deductions, we’re here to help.
Taxes are complex, and there isn’t a one-size-fits-all approach. In fact, the Canadian Revenue Agency (CRA) has outlined over 400 deductions and credits to cater to the various tax scenarios you could have. So, we put together a list of things to consider when filing your 2022 taxes to help you save more, and get a better refund.
1. Home office expenses
If you worked from home because of COVID-19 in 2022, you can still claim home office expenses, such as a portion of your rent, internet, and utilities. You can deduct the actual expenses you paid or use the $2 per day for each day you worked from home in 2022 “flat-rate method,” up to a $500 maximum.
2. COVID-19 business benefits
If you work for yourself or run your own business, you can get benefits like the Canada Recovery Hiring Program, Tourism and Hospitality Recovery Program, and Local Lockdown Program. These benefits should also be included in your income for the year.
3. Your Basic Personal Amount (BPA)
In Canada, your Basic Personal Amount (BPA) is the amount of income that you can earn without having to pay federal income tax on it. The BPA increased to $14,398 in 2022, up from $13,808 in 2021, which means you can claim slightly more this year to reduce the federal taxes owed.
4. TFSA limit increase
Have a Tax-Free Savings Account (TFSA)? A TFSA is a type of savings account that allows you to earn interest, dividends (the distribution of corporate earnings to eligible shareholders), and capital gains (when you sell an asset for more than what you originally paid for it), tax-free. In 2023, you can contribute $6,500, which is more than the $6,000 you could have last year.
5. RRSP limit increase
A Registered Retirement Savings Plan (RRSP) is a savings plan that allows you to contribute and invest money for your retirement, while reducing your taxable income.
The amount of money you can contribute in 2022 increased to $29,210. You can contribute up to 18% of your earned income from the previous year, but only to the maximum of $29,210 (whichever is less). Also, keep in mind that if you didn’t contribute the maximum amount in previous years, you could add that unused contribution room to your limit this year.
6. The Canada Pension Plan (CPP) contribution increase
Contribution rates for 2022 and 2023 for the Canada Pension Plan (CPP) will increase by 0.25%. If you’re self-employed, the rate will increase by 0.5%.
7. The First-time Home Buyers’ Tax credit
If you were a first-time home buyer in 2022, you could be eligible to receive a tax credit to reduce how much tax you’ll have to pay. The First-time Home Buyers’ Tax Credit amount increased to $10,000 in 2022 from $5,000 in 2021, which could provide a tax credit of up to $1,500 for eligible home buyers.
8. The Climate Action Incentive Payment
The Climate Action Incentive Payment (CAIP) is a tax-free amount given to Canadians living in Alberta, Saskatchewan, Manitoba, and Ontario. There are two parts of the program – the basic amount, and an extra amount for people who live in rural areas. To qualify for the amount, you must file a tax return, even if you didn’t earn any money in 2022. If you qualify, you’ll receive payments every three months.
9. Medical expenses
Did you have a significant medical expense to cover in 2022? Whether it was a dental implant or laser eye surgery, you can claim medical expenses on your tax return as non-refundable tax credits. Just remember to keep all your receipts, prescriptions, and paperwork for up to 6 years in case the CRA wants to see them later.
The bottom line
While tax season may seem tiring, there are ways you can make the most of it. By taking advantage of deductions and credits available to you and keeping track of your expenses, you could potentially get more money in your pocket at refund time.
If you’re stressed or overwhelmed about your personal finances this tax season, contact us at Farber Debt Solutions today. We’re here to listen and give you the tools to help get you back on track with your money.