Recent Tax Changes Canadians Need to Know About
Being compliant is the biggest challenge most Canadians face with taxation. The tax changes alter the method you file returns as they make you eligible and ineligible for credits and deductions. Below is a list of the most recent tax changes you should know about while filing your return in 2022.
Most Recent Tax Changes in Canada
1. The Latest Tax Bracket
You will need to pay income tax based on the latest tax slab issued by the Canada Revenue Agency (CRA). For this, you will first need to calculate your total taxable income, which is total income minus all the allowable deductions and exemptions.
The federal income tax bracket you need to follow to file your return in the year 2022 is:
| Income Tax Bracket | Income Tax Rates |
| $49,020 or less | 15% |
| Between $49,020 and $98,040 | 20.5% |
| Between $98,040 and $151,978 | 26% |
| Between $151,978 and $216,511 | 29% |
| Over $216,511 | 33% |
The government adjusts and changes its tax bracket based on the inflation prevailing in the economy. It aims to maintain the purchasing power of Canadians.
2. The TFSA (Tax-Free Savings Account) Contribution Limit – Unchanged
- The contribution limit for the TFSA is unchanged and remains at $6,000. This program started in 2009, and all individuals 18 years or more can get enrolled in this scheme.
- The advantage offered by TFSA is that it lets you earn returns tax-free. Whatever you get from your TFSA is not taxable, and you are not required to include it in your taxable income.
- However, note that the contributions made to the TFSA are not tax deductible. You cannot reduce the amount contributed from your taxable income.
3. Conditional Repayment of Covid-19 Benefits
- If you received the different covid-19 benefits in 2021 from the CRA, you fill out a T4A or T4E slip while filing your income tax return.
These benefits are:
- Canada Recovery Benefit (CRB)
- Canada Sickness Recovery Benefit (CSRB)
- Canada Recovery Caregiving Benefit (CRCB)
If your net income after considering all the adjustments is more than $38,000, then you will be required to repay (full or partial) the Covid-19 benefits received by you in 2021. In Box 201 of the T4A or T4E slip, you will disclose how much you repaid. These repayments are eligible for tax deductions. You get an option to claim the deduction either in the:
- Year in which you received the Covid-19 benefits
- or
- Year in which you repaid the Covid-19 benefits
4. Work from Home Tax Credit
Indeed, the pandemic was terrible. The employees and business owners posed unprecedented challenges, and Covid restricted us at home.
Thus, the government of Canada again allows you to claim work from expenses as a tax credit. The government has increased the limit for the tax year 2021 from $400 to $500.
You can claim this tax credit in two separate ways. These are:
- You have tracked your work-from-home expenses and calculated a total amount, claiming whatever you have incurred.
- You do not track your work-from-home expenses and can opt for the flat rate method. The CRA allows you to calculate your tax credit based on $2 per day working from home during the pandemic.
- For example, if you worked for 200 days from home during the pandemic, then you can claim $400 ($200 x $2 per day)
- Get it as a tax credit.
5. The Limit of Basic Personal Amount (BPA) Increased
- The government increased the BPA for the tax year 2021 to $13,808. The Government of Canada has announced that it will keep raising the BPA until it reaches $15,000 by 2023.
- BPA refers to a tax credit you can claim as an individual taxpayer. If your taxable income is below the BPA, you will get a 100% reduction from the federal income tax.
- It is also worth noting that the government has already declared the BPA limits for the tax years 2022 and 2023. These are $14,398 and $15,000, respectively.
6. Changes in Tax Credits
Every year, the government alters the tax structure based on its observation of the economy. Below is a list of the changes in tax credits applicable to the taxation year 2021:
- The disability tax credit has become more flexible. It has happened because:
- Tax authorities have updated the list of mental functions.
- They have increased the activities that determine the time spent on life-sustaining therapy.
- If you own a small business and have incurred any expense to improve air quality, you will get a refundable tax credit of up to 25%.
- For the RRSP (Registered Retirement Savings Plan) accounts, the tax department will consider the post-doctoral fellowship income as earned income.
