The Canadian tax filing checklist
Despite the ups and downs we faced in 2022, there may be one thing we can count on: the arrival of tax season. Here’s our quick guide for filing your 2022 tax return.
Tax season may not be your favourite time of the year, but if there’s one motivating factor to get your taxes done, it’s this: The sooner you file, the quicker you may be able to get your tax refund back if you’re eligible. And while tax season may often be considered somewhat of a constant — with only small rule changes year to year — there are several key updates Canadians should be aware of as they prepare to file in 2023.
Last year was a difficult year for many people, with the effects of high inflation, rising interest rates and a volatile stock market still being felt across the country. Nicole Ewing, Director, Tax and Estate Planning, TD Wealth, says that people may be surprised to learn that inflation and rising interest rates play a role when it comes to our taxes as well, with both positive and negative effects.
“Our tax brackets are indexed to inflation, for example, which was much higher last year than it has been previously. On the other hand, the interest rate is also much higher than it has been in the past, so you don’t want to be late when paying your taxes because any interest accrued will be much more substantial,” she says.
As you prepare to file, here’s our quick guide to help you through it.
When are the tax deadlines?
For those who are not self-employed, this year’s tax filing deadline is May 1, 2023. Generally, the deadline is April 30, but in 2023 this date falls on a Sunday. For those who are self-employed (or have a spouse or common-law partner who is) the filing deadline is June 15, 2023. It’s important to note, however, that any amount owing on your taxes must be paid on or before May 1, 2023. In Quebec, both the filing and payment deadlines are also May 1.
What is my Basic Personal Amount (BPA) limit?
The BPA is a non-refundable tax credit that can be claimed by all individuals. If you have a net annual income equal to or less than $155,625, your federal BPA for the 2022 tax year is $14,398. If you have a net annual income of $221,708 or more, it’s $12,719. Between those incomes, there is a gradual decrease in your BPA. 1
“Last year’s inflation rate was used to calculate the tax brackets, and it was around three times what it usually is. As a result, we’re seeing some higher numbers,” says Ewing, adding that higher tax brackets can mean an opportunity for greater savings.
For more information on BPAs and to find your tax bracket, visit the Canada Revenue Agency’s (CRA) website.
How much can I contribute to my Registered Retirement Savings Plan (RRSP)?
Until March 1, 2023, you can contribute to your RRSPs to help reduce your 2022 taxable income. Your annual contribution limit is 18% of your 2022 earned income, to a maximum of $29,210, less your pension adjustment if applicable, plus any unused RRSP room from previous years. Spouses may wish to consider making spousal RRSP contributions to allow investments to grow on a tax-deferred basis in their spouse’s name. Ewing says Canadians should be aware that any withdrawals from a spousal RRSP may be subject to attribution rules if they are withdrawn within three taxation years of the contribution — meaning the withdrawn funds would be included as taxable income for the contributing spouse.
How much can I contribute to my Tax-Free Savings Account (TFSA)?
Although TFSA contributions are not strictly a “tax time” event, thinking about RRSPs may inspire you to consider this other tax-efficient investment as well. The federal government confirmed that the TFSA contribution limit is $6,500 in 2023. For those who have not yet contributed to a TFSA but have been eligible since the TFSA was first introduced in 2009, the cumulative contribution limit is now $88,000. Similarly, if you withdrew any funds from your TFSA in 2022, that contribution room is now available to you once more.
To find out more about your personal RRSP and TFSA limits, you can log into My Account on the CRA website, or use the MyCRA app.
What about maximum pensionable earnings?
The maximum annual pensionable earnings increased to $64,900 for 2022, with the basic exemption amount remaining at $3,500.
A closer look: credits and deductions you can consider
If you worked from home in 2022
This may be the last year Canadians are able to claim their home office expenses using the temporary flat rate method. First introduced in 2020, the program is currently set to expire this year as many employers encourage their employees to return to the office. If you were an eligible employee who worked from home more than 50% of the time for a period of at least four consecutive weeks in 2022, you can claim $2 a day to a maximum of $500 per individual for those using the “flat rate method,” without needing your employer to provide you with a completed and signed Form T2200. If your work-from-home expenses exceeded $500, you can claim the full amount using the “detailed method” for calculation. Information pertaining to the flat rate calculation method versus the detailed calculation method, including a list of eligible expenses, can be found on the CRA’s website.
If you’re saving for your first home
This year we’ll also see the introduction of the new Tax-Free First Home Savings Account (FHSA) — that has the characteristics of both RRSPs and TFSAs. The FHSA allows Canadians to shelter up to $40,000 of savings from tax (like a TFSA), as well as receive a tax deduction for any contribution made up to the limit (like an RRSP). “It’s a really great opportunity for first-time home buyers,” says Ewing, “and, although it’s not technically a tax season consideration, it’s really good to be aware of from a planning perspective.” Ewing says that, in addition to contributing new funds, Canadians will also be able to move money over from an RRSP to their FHSA without having to pay tax. Moreover, unlike a regular withdrawal from an RRSP, you won’t have to pay any tax when you withdraw from the FHSA to buy a home. For more information, visit the CRA website.
If you purchased your first home in 2022
If you purchased your first home in 2022 (congratulations, by the way!), you may claim up to $10,000 of your purchase via the First-Time Home Buyers’ Tax Credit (HBTC) and receive a return of up to $1,500. To be eligible, the home must be registered in your name or that of your spouse or common-law partner, and the home must be located in Canada. While this tax credit typically applies to first-time home purchases, it could also apply if this is the first home you’ve owned during the preceding four years (plus the year of acquisition).
Properties purchased for rental purposes are not eligible, and new homeowners must intend to occupy the home or have a related person with a disability occupy the home as their principal place of residence within a year. For more details, see here.
If you had capital gains or losses
The markets were volatile in 2022, with many stocks having negative returns throughout much of the year. If you had capital gains or losses in 2022, you may have some flexibility to select which tax year in which to recognize them. Ewing says that if this applies to your situation, for example, you may have chosen to wait until 2023 to trigger a capital gain because the tax bracket ceilings are higher than in 2022. Similarly, it may make sense to carry back losses to a previous year rather than saving them for use in a future year. “Simply put, with the income brackets going up, it could change some of the planning you’re doing. Having the highest marginal rate kicking in at a higher amount could mean paying less tax on the same gain,” says Ewing.
If you hold U.S. assets
If you hold certain kinds of foreign property, with a combined cost of over CDN$100,000 (including securities and rental properties), you’ll need to file a T1135 form with your tax return. Ewing cautions that those who hold foreign property should be looking at the combined cost of all their foreign assets, rather than each asset individually: “That’s usually where people slip up,” she says. She adds that when calculating the cost for tax purposes, Canadians should remember that the value is based on the exchange rate used when the asset was acquired, rather than the current exchange rate.
Here’s something else to consider: If you own U.S. property and rent it out, you’ll need to report your rental income within your Canadian filing, even though the property is located in the U.S. If you hold other assets in the U.S. and are required to file in both countries, you may be able to receive a foreign tax credit, but Canadians should be cautious before making any assumptions since tax law, and particularly foreign tax law, can be complicated. “Definitions between the U.S. and Canada can be different when it comes to what qualifies,” says Ewing. “It’s usually a good idea to speak to a cross-border tax specialist when it comes to these sorts of situations,” she says.
If you’re retired or nearing retirement
Continued increases to the Canadian Pension Plan (CPP) and Old Age Security (OAS) benefits are part of a multi-year federal and provincial effort to help boost contributions and benefits. Regular annual hikes are indexed to inflation, which as noted, has been higher than in previous years. 2 If you’re a retiree or nearing retirement, Ewing recommends being mindful of these ongoing changes, but cautions that the changes may not have an appreciable impact in the short term. Those aged 75 and older, however, will have seen an automatic 10% increase of OAS pension as of July 2022. 3
If you had any medical expenses
If you, your spouse, common-law partner or eligible dependent incurred a medical expense in 2022, you may be eligible to claim the medical expense non-refundable tax credit. “There’s a huge list of eligible medical expenses available on the CRA website, including a few that may surprise people,” says Ewing. Among other options, the list includes laser eye surgery, ambulatory services and even shower safety bars. It’s important to note, however, that eligible expenses must not have been reimbursed through an insurance policy or third-party prior to or after the claim.
In some cases, snowbirds who incurred costs south of the border may be able to claim certain medical expenses.
Ultimately, Ewing says that Canadians should take particular care this year when it comes to their tax filing and overall financial plan. And that includes any eventual tax refund they may receive. With a potential recession on the horizon, Ewing says Canadians may want to consider using their refund to pay down any high-interest debt they may be carrying or to bolster a rainy-day fund. “As always, what you do will depend on your circumstances, but speaking to a financial advisor or planner who can do the math and run projections may help you make some of these important decisions,” she says.
- Why there may be reasons for optimism despite market challenges, MoneyTalk, TD, Oct. 15, 2022, accessed Feb. 10, 2023, www.moneytalkgo.com/video/why-there-may-be-reasons-for-optimism-despite-market-challenges/ ↩
- Canada Pension Plan amounts and the Consumer price index, Statistics Canada, Dec. 28, 2022, accessed Feb. 10, 2023, www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/cpp-price.html ↩
- How much you could receive, Statistics Canada, Jan. 16, 2023, accessed Feb. 10, 2023,