Tax Insights

Tax changes for 2023 tax year

Prepared by png tax services team – February 2023.

(Sources: Canada Revenue Agency CRA publications & tax bulletins)

• Increase in a Registered Retirement Savings Plan (RRSP) limit – RRSP is a tax deduction that reduces personal tax payable by a contributor. It results in tax refund. As at 2022, the contribution room was 18% of earned income subject to a maximum of $29,210. This has now been increased to $30,780 starting from 2023 tax year.
• Increase in Tax-Free Savings Account (TFSA) limit – TFSA helps taxpayer to save tax free. It is not a tax deduction, and no taxes are payable when withdrawal is made. The total TFSA room has now been increased by $6,500.00.
• First Home Savings Accounts (FHSA) – designed to help save up for home purchase. Create tax deductions like RRSP. Available to withdraw tax free when ready to purchase a home. Has a lifetime limit of $40,000 and annual limit of $8,000. Any used yearly contribution can be carried forward to subsequent year. For example, if only $3,000 is contributed in 2023, $5000 is carried forward to future years. To be eligible, taxpayer must be at least 18-year-old and a first-time buyer or a buyer who has not lived in a house purchased as a principal place of residence in the last 5 years. (Our tax advisor can help review your eligibility).
• Increase in Canada Pension Plan (CPP) rate – CPP is the Federal pension plan. In 2022, the rate was 5.7% of employee insurable earnings subject to a maximum of $3,499.80. This has now been increased to 5.95% max of $3,754.45. CPP is paid by both employees & employers.
• Change in federal tax bracket – In other to account for inflation, the federal government has increased the amount of taxable income for each of the tax groups. The rates are however, remain the same but the taxable income for each rate has increased (excluding provincial tax rates).
• Increase in basic personal amount (BPA) – This is the tax credit claimable by all taxpayers in Canada. It allows workers to earn up to a basic personal amount without paying any federal taxes. In 2022, the BPA was $14,398. It has now been increased to $15,000.
• Lifetime capital gains (LTCG) – This is the tax break provided for small business owners of qualified small business to sell the shares of their business at a significant gain without having to pay any tax. In 2022, it was $913,630. In 2023 it has increased to $971,190
• GST tax credit doubles for six months – This is paid quarterly to qualifying individuals and families. The total amount payable depends on the family size. For July 2022 through June 2023, it was $467 for single individual and $612 plus $161 per child for families. A family with an income below $40,000 will receive full amount of the credit. For a combined family income above $40,000, & more, the amount payable become lower. In 2023, the full credit amount will be doubled for 6 months only.

If you have any questions about how these changes might impact you, please call our tax expert not or send WhatsApp message to +1 (437) 374-8765. You can also email your questions to info@pngtax.ca