What’s New for the 2022 Tax Season

The maximum Registered Retirement Savings Plan (RRSP) contribution limit for 2022 is $29,210 and $30,780 for 2023. Your RRSP deduction for 2022 is generally calculated as 18 per cent of your 2021 earned income, less 2022 pension adjustments to a maximum of $29,210, plus any unused RRSP deduction room carried forward from prior years. 

The Tax-Free Savings Account (TFSA) annual contribution limit for the 2022 tax year remains at $6,000. For 2023, the annual TFSA contribution limit increases to $6,500. The cumulative contribution limit has increased to $81,500 for 2022 and increased to $88,000 for 2023. Investment income earned in your TFSA is not taxable but the contributions you make to your TFSA are not deductible. 

The Home Buyer’s Plan limit for the 2022 and 2023 tax year remains at $35,000. Amounts withdrawn under the Home Buyer’s Plan must be repaid to an RRSP over a period not exceeding 15 years, starting in the second year following the year in which the withdrawal was made to prevent any income inclusion. The Home Buyer’s Plan applies to first-time home buyers.

For the 2022 tax year, the first-time home buyers’ amount is increased from $5,000 to $10,000, in respect of which you may qualify for a federal non-refundable tax credit of $1,500, if you purchased a home in the year and both of the following conditions apply: 

1. You or your spouse or common-law partner acquired a home; and 
2. You did not live in another home owned by you/or your spouse or common- law partner in the year of acquisition or in any of the preceding four years.

The Toronto Vacant Home Tax (VHT) is an annual tax on vacant homes in Toronto, payable starting in 2023. The VHT now requires residential property owners to submit a declaration of their property’s status, starting with 2022. Homeowners who choose to keep their properties vacant will be subject to this tax, which is one percent of the Current Value Assessment (CVA) of the property. The VHT will be imposed on all Toronto residences that are declared, deemed or determined to be vacant for more than six months during the previous year.  

Although all property owners are required to submit a declaration, the tax does not apply to the following properties: 

1. properties that are the principal residence of the owner;  
2. properties that are the principal residence of a permitted occupant or tenant; or
3. properties that qualify for an exemption. 

The deadline to declare a property’s 2022 occupancy status is February 2, 2023. Speak to your Crowe Soberman advisor regarding the VHT filing requirement. 

The Underused Housing Tax (UHT) is an annual 1 per cent tax on the ownership of vacant or underused housing in Canada that took effect on January 1, 2022. The UHT generally applies to individuals who are not Canadian citizens or permanent residents of Canada. In some situations, however, the tax can also apply to Canadian owners who are not considered an “excluded owner,” as discussed further below.  

For affected owners, however, the tax will not apply if certain exemptions are met. For example, if the property is occupied by you or rented to an individual at fair value, in periods of at least one month that total 180 days or more in the calendar year, the property would not be considered “underused,” and no tax would apply. There are other exceptions that could apply as well.  

The UHT tax return for a calendar year must be filed by April 30 of the following calendar year (i.e., if a UHT tax return is required to be filed for 2022, it must be filed by April 30, 2023). Only persons who meet the definition of an “excluded owner” are not subject to the UHT and have no obligations to file. All other types of owners must file a return, regardless of whether an exemption applies.  

An “excluded owner” includes, but is not limited to: 

1. an individual who is a Canadian citizen or permanent resident 
2. any person – including an individual who is a Canadian citizen or permanent resident – that owns a residential property as a trustee of a mutual fund trust, real estate investment trust, or specified investment flow-through trust (SIFT) for Canadian income tax purposes
3. a Canadian corporation whose shares are listed on a Canadian stock exchange designated for Canadian income tax purposes
4. a registered charity for Canadian income tax purposes
5. a cooperative housing corporation for Canadian GST/HST purposes
6. an Indigenous governing body or a corporation wholly owned by an Indigenous governing body 

As such, Canadian private corporations, Canadian partnerships and Canadian trusts who own residential property in Canada may have a requirement to file a return, even if an exemption applies and no tax is owing.

There are significant penalties if you fail to file a UHT tax return when it is due. Affected owners who are individuals are subject to a minimum penalty of $5,000. Affected owners that are corporations are subject to a minimum penalty of $10,000. These penalties can apply even where no UHT is owing. Speak to your Crowe Soberman advisor regarding the UHT filing requirement and whether it applies in your circumstance. 

For 2017 and subsequent taxation years, the Infirm Dependent tax credit, the Caregiver tax credit, and the Family Caregiver tax credit have been replaced by a new 15 per cent non-refundable Canada Caregiver Credit (CCC). If you have a dependent under the age of 18 who’s physically or mentally impaired, you may be able to claim up to an additional $2,350 in 2022 and $2,499 in 2023 in calculating certain non-refundable tax credits. For infirm dependents 18 or older, the amount of the CCC for 2022 is $7,525 and the 2023 amount is $7,999. 

In 2019, the province of Ontario introduced the Ontario Childcare Access and Relief from Expenses (CARE) tax credit for low- and moderate-income families who pay childcare expenses. CARE is a refundable tax credit that is only available to families with household income under $150,000. 

The CARE credit is in addition to the existing Child Care Expense Deduction. Families could receive up to $6,000 per child under the age of seven, up to $3,750 per child between the ages of 7 and 16, and up to $8,250 per child with a severe disability. The CARE credit would be claimed by the lower income earner in the household. The province of Ontario has not yet announced whether these amounts will be increased for 2022. In prior years, the province of Ontario has also provided additional top-up payments. No details of 2022 top-up payments have been announced to date.  

The Canada Workers Benefit (CWB) is a federal refundable tax credit, available for 2019 and subsequent years, for low-income individuals or families with working income over $3,000. For 2022, the amount of the CWB will be computed as 27 per cent of earned income over $3,000, to a maximum credit of $1,428 for single individuals without children and $2,461 for families (couples and single parents). 

The maximum credit is reduced by 15 per cent of adjusted net income over $23,495 for single individuals without children and $26,805 for families. 

For 2022, individuals who are eligible for the CWB and disability tax credit can receive a CWB supplement of up to $737. This credit is reduced by 15 per cent of adjusted net income over $33,018 for single individuals without dependents and $43,210 for families. However, the credit is only reduced by 7.5 per cent if both individuals in a couple are eligible for the supplement.  
 
In addition, in 2019, the government introduced an amendment to clarify that kinship care providers would be considered the parents of a child in their care for the purposes of the CWB. As a result, kinship care providers would be eligible for the higher CWB amount available for families, provided all other eligibility requirements are met. This applies retroactively to 2009 and subsequent years.  
 
Beginning in 2023, the payment of CWB amounts is proposed to be automatic instead of through application provided your 2022 tax return is received and assessed by the CRA prior to November 1, 2023. The advance payments would allow individuals to receive up to half of their anticipated CWB for a taxation year in the current taxation year. Advanced payments are proposed to be issued automatically starting in July 2023 for the 2023 tax year.

The disability tax credit (DTC) is a non-refundable tax credit that helps people with impairments, or their supporting family member, reduce the amount of income tax they may have to pay. The Federal disability tax credit amounts for 2022 are $8,870 for an eligible individual aged 18 or older, and $14,044 for an eligible individual aged 17 and younger. 

The eligibility requirements for the DTC for mental functions necessary for everyday life and life-sustaining therapy were expanded in June 2022. Speak to your Crowe Soberman advisor if you think these changes may apply to you and/or any members of your family. 

For 2016 and subsequent tax years, the Government implemented a non-refundable Home Accessibility Tax Credit.  
 
The tax credit is available for eligible expenses incurred in making a home more accessible to individuals aged 65 or older or to individuals who are disabled or infirm.  
 
Either the individual who incurred the expenses or the individual for whom the expenses are made can claim the tax credit. The individual who incurred the expenses can only claim the tax credit in respect of expenses incurred for his or her spouse or common-law partner, or for disabled or infirm dependents.  
 
For 2022 and subsequent tax years, you can claim up to $20,000 in eligible expenses under the Home Accessibility Tax Credit, resulting in a non-refundable tax credit worth up to $3,000. Expenses eligible for the claim must be permanent and non-routine renovations to the home. The alterations must allow the individual for whom the expenses were incurred to be mobile within the home and/or reduce the risk of harm to the individual within the home.

You can claim a tax credit for eligible medical expenses paid for your dependent children if they were under 18 years of age at the end of the tax year, however, the total medical expenses for the family must exceed the lesser of $2,479 or 3 per cent of the parent’s net income for 2022. 
 
For 2022 and subsequent years, the 2022 federal budget has proposed to expand the list of eligible medical expenses for the purposes of the medical expense tax credit to include surrogacy and other related expenses. Further, the 2022 Federal Budget proposed to expand who expenses may be claimed for, such that an individual or their spouse may be able to claim the medical expense tax credit in respect of a surrogate or donor.

The lifetime capital gains exemption (LCGE) allows people to realize tax-free capital gains, if the property disposed of qualifies. For dispositions of qualified small business corporation shares, the lifetime capital gains exemption has increased to $913,630 in 2022and $971,190 in 2023. 

For dispositions of qualified farm or fishing property, the lifetime capital gains exemption is maintained at $1,000,000 for dispositions after April 20, 2015. 

The Ontario Staycation Tax Credit is a new credit for 2022. The purpose of the credit was to encourage Ontario families to explore the province, and to help certain sectors to recover from the pandemic. 

Ontario residents can claim 20 per cent of their eligible 2022 accommodation expenses, up to $1,000 as an individual, or $2,000 as a family. This will provide up to $200 for an individual or $400 for a family.  

The credit can be claimed for short-term leisure stays, such as hotels, resorts, lodges, cottages, campgrounds or vacation rental properties. The leisure stay must be in the province of Ontario to qualify. Further, the credit is only available for stays falling within the calendar year 2022, regardless of when payment was made for the stay.  

To be eligible for the tax credit, the accommodation expenses must have been paid by you, your spouse, or your eligible child.

Employees working from home due to the COVID-19 pandemic may be able to claim up to a maximum of $500 for 2022 using the temporary flat rate method, to calculate their home office expense deduction. 

The Canada Revenue Agency (CRA) introduced a temporary flat rate method to simplify claiming the deduction for home office expenses in 2020. The maximum deduction available was originally $400. The CRA has increased the maximum deduction available under the temporary flat rate method to $500 for 2021 and 2022.  

Individuals can use the simplified method if they worked more than 50 per cent of the time from home, for a period of at least four consecutive weeks due to the COVID-19 pandemic. The claim is $2 per day, for each day that an individual worked from home, up to a maximum of $500 or 250 working days.  The claim is made on an individual, not a household basis. As a result, each person working from home in the same dwelling can claim up to $500. You do not need your employer to sign Form T2200 if the temporary flat rate method is used for the 2022 taxation year. If the temporary flat rate method is used, an individual cannot claim any other employment expenses. The government has not yet confirmed if this deduction will be available for the 2023 tax year. 

The Canada Emergency Business Account (CEBA) was launched on April 9, 2020.  It provided interest-free bank loans, guaranteed by the government, of up to $60,000 to small businesses and to not-for-profits that are operating businesses. There is also a loan forgiveness component to the CEBA. On January 12, 2022, the Department of Finance announced that the repayment deadline for CEBA loans to qualify for partial loan forgiveness was being extended from December 31, 2022, to December 31, 2023, for all eligible borrowers in good standing. If the balance of the CEBA loan is repaid on or before December 31, 2023, this will result in 25 per cent (up to $10,000) of the original $40,000 CEBA loan being forgiven, and 50 per cent (up to $10,000) of the additional $20,000 CEBA loan expansion being forgiven (total forgiven amount of up to $20,000).   

In 2022, the maximum CEBA loan amount remains at $60,000. Sole proprietors will have 33 per cent (up to a maximum of $20,000) of the CEBA loan forgiven, to the extent they repay the loan balance by December 31, 2023. For example, if a sole proprietor took a CEBA loan of $60,000 and repays $40,000 by December 31, 2023, the $20,000 unpaid balance will be forgiven. 

The forgivable portion of the loan is taxable to the sole proprietor in the year the loan is received, notwithstanding that the conditions of forgiveness (i.e., repayment by December 31, 2023) have not yet occurred. 

Therefore, if you received a CEBA loan of $60,000 in the 2022 tax year, the $20,000 forgivable portion is taxable to you in 2022. You may be eligible to elect under a specific provision of the Income Tax Act to reduce the amount of an outlay or expense that is made or incurred by you before the end of 2023, rather than directly including the amount in income. Speak to your Crowe Soberman advisor regarding this election and whether it can be used in your circumstances.

Effective January 1, 2023, the Government introduced the Multigenerational Home Renovation Tax Credit (MHRTC). The refundable tax credit is available to individuals who incur eligible renovation expenses to create a second dwelling unit for an eligible related senior or a related eligible adult with disabilities (who are 18 years of age or older who is eligible for the Disability Tax Credit). The credit is computed as 15 per cent of eligible expenses, to a maximum of $50,000, for a maximum credit of $7,500. The MHRTC applies to eligible expenses incurred on or after January 1, 2023. Therefore, the first return in which you can claim the credit will be on your 2023 personal tax return. 

A second dwelling unit is defined as a self-contained dwelling unit with a private entrance, kitchen, bathroom facilities, and sleeping area. There are various other rules that would need to be considered to ensure eligibility for the MHRTC. More than one individual can claim the MRHTC as long as no more than 15 per cent of the maximum $50,000 expenditure limit is claimed between them. Expenses would not be eligible for the MHRTC if they are claimed under the Medical Expense Tax Credit and/or the Home Accessibility Tax Credit. 

Under the new residential property flipping rule, profits from flipping residential real estate will be subject to full taxation (i.e., no capital gains tax treatment will be available). This rule will apply if the property was owned for less than 365 consecutive days. The government has also confirmed that this new rule will apply on assignment sales. Where this new deeming rule applies, the principal residence exemption will not be available to shelter any portion of the gain. The new deeming rule applies to residential property dispositions that occur on or after January 1, 2023.  

The new deeming rule will not apply if the disposition is connected to a certain life event (i.e., death, marital breakdown, family expansion, employment change, insolvency, disability, etc.). 

In the 2022 Budget, the Government of Canada proposed the Tax-Free First Home Savings Account (FHSA), a new registered plan aimed at helping Canadians purchase their first home. The registered plan would enable eligible first-time home buyers to save $40,000 on a tax-free basis. An FHSA combines the features of an RRSP and a TFSA; similar to an RRSP, contributions to the FHSA will be deductible for tax purposes, and similar to a TFSA, withdrawals would be non-taxable if used to purchase a first home. Since this is a tax-free account, you won’t pay any taxes on capital gains or interest earned within the account.  Annual contributions are limited to $8,000, and lifetime contributions are limited to $40,000. You may carry forward up to $8,000 of your unused annual contribution amount to use in a later year. The FHSA rules are expected to come into effect on April 1, 2023.