Happy New Year! Believe it or not, another year has gone by and we are already in 2023. At the beginning of the year, I have summarized the following tax tips and benefits that may affect you, your business, and your family:
Apply Now: Alberta Affordability Payments
Application for the $600 affordability payments to offset inflation is now open. Families with household incomes under $180, 000 and have dependent children under the age of 18 may apply. Albertans 65 years or older with incomes under $180, 000 and who do not receive the Alberta Seniors Benefit are also eligible. Please apply at https://affordability.alberta.ca/welcome or in person at a registry or Alberta Supports location.
For more information, please watch this video:
Canada Dental Benefit
This dental benefit has been on the news. It provides tax- free payments to cover dental expenses for children under 12 years old with no dental coverage. In my opinion, the benefit is not significant and it’s hard to qualify for.
There are two payments for this program. Period 1 is from December 1, 2022 to June 30, 2023; and Period 2 is from July 1, 2023 to June 30, 2024. The benefit per child per period ranges from $260 to $650 depending on the family’s income level.
To qualify, the family adjusted net income needs to be under $90,000 (Line 23600). Period 1 is determined using 2021 income and Period 2 using 2022 income. If your family’s income is just a little bit over the $90,000 threshold, consider purchasing RRSP to reduce your income level.
I would not however recommend buying large RRSPs just to get this benefit as it may not be worthwhile.
The application is now open and you can apply through My CRA Account. For more information, visit: https://www.canada.ca/en/revenue-agency/services/child-family-benefits/dental-benefit.html
Tax-Free Saving Account
The 2023 contribution room for TFSA is $6,500. For people who have never contributed, the cumulative contribution room is $88,000. If you are planning to contribute to TFSA, it’s better to do it in the beginning of the year than at the end of the year. For example, with a GIC rate at 5% per annum, you have earned yourself an extra $325 tax-free interest by contributing $6,500 earlier in January than in December. Yes, time is money! Please check your TFSA contribution room through your CRA Online Account before contributing. CRA charges 1% per month for over-contribution.
Don’t Forget to Pay Installments
With the current interest hike, CRA now charges 8% annual interest rate compounded daily for underpaid or overdue tax installments. It could result in nasty interest charges if you are not on top of these payments. Unlike individual taxpayers who are receiving installment reminders, CRA do not send out any reminders to corporations and GST/HST registrants. Business owners are responsible for making their own installments on time. For all our corporate clients, we have been including the installment schedule in the year end letter. Please check there to avoid unnecessary CRA interest. If you are still unclear, send us an email or give us a call before it’s too late.
This new residential real estate anti-flipping rule that was first introduced in 2022 budget is now law. Effective January 1, 2023, the gain for any residential property that was disposed of in 2023 with a holding period of less than 365 days will be deemed to be business income (100% taxable) not capital gain (50% taxable). There are exceptions to this new rule such as when the cause of the disposition is due to a life event. The other implication of being a business income is that GST/HST need to be considered on the transaction.
Underused Housing Tax
Effective January 1, 2022, the Underused Housing Tax is 1% annual tax on the taxable value or fair market value of the real estate property. This tax will mostly apply to non-citizens or non-permanent residents of Canada; however, it could impact Canadian residents. Underused housing is defined as less than 180 days of occupancy. The rule is quite complex and there are many exemptions. Please contact our office if you think you might be impacted by this rule.
Multi-Generational Home Reno Credits
Effective January 1, 2023, the Canadian government has introduced a new multi-generational home renovation credit to help Canadians take care of their seniors. It allows 15% of a maximum $50,000 eligible renovation cost that is used to build a second unit in an existing home for related seniors who are over 65-years-old or with disability. The unit must have a private entrance, a kitchen, a bedroom, and a bathroom.
If you have any questions, please reach out and book an appointment with our team.