Canadian Tax Change Highlights for 2023
Making payments to CRA, Advanced Canada Workers Benefit, Climate Action Incentive Payment rural supplement increase, increased deduction for eligible tools, COVID-19 benefit repayments, First Home Savings Account, Multigenerational Home Renovation Tax Credit, new property flipping rule, return of fuel charge proceeds to farmers tax credit.
Making Payments to Canada Revenue Agency (CRA)
As of January 1, 2024, you must make payments electronically to the Receiver General of Canada if the amount is over $10,000. You may face a penalty for mailing a cheque, unless you can show it wasn't reasonably possible to make an electronic payment. This page gives an overview of different payment methods accepted by CRA.
Howland Tax Services often used to recommend CRA's My Payment service as an easy and convenient way to make payments. However, this service has become much less useful since RBC suspended its participation, and TD Canada Trust stopped allowing it for personal tax. Certain credit unions now seem to be the only remaining full participants. For our part, we find the easiest way to pay CRA these days is by setting up PAD agreements (pre-authorized debits) using My Account or My Business Account.
Change for Employees Working at Home
Employees who worked at home during 2020, 2021 and 2022 due to COVID-19 were allowed to claim a home office deduction using either a temporary flat rate method or a detailed method. Eligible employees who worked from home in 2023 are now required to use the detailed method to claim home office expenses. The temporary flat rate method does not apply to the 2023 tax year.
Advanced Canada Workers Benefit (ACWB)
If you were eligible to receive the Canada Workers Benefit (CWB) in a previous tax year, advance payments are now issued automatically under the ACWB program.
You will receive an RC210 slip showing the amount of ACWB received in 2023. This should be reported on Schedule 6 Canada Workers Benefit, where you will calculate an amount to enter on Line 41500 of your return (more information).
Climate Action Incentive Payment (CAIP)
The CAIP is a quarterly payment to help eligible individuals and families in certain provinces offset the cost of federal pollution pricing. It consists of a basic amount and a supplement for residents of small and rural communities. The Government of Canada has announced its intention to double the rural supplement from 10% to 20%, starting in April 2024 (more information).
Deduction for Eligible Tools
Employed tradespersons and apprentice mechanics can claim a deduction for the cost of eligible tools, if they meet the conditions in the Employment Expenses guide (T4044). The maximum deduction has increased from $500 to $1,000 for 2023, and the threshold for expenses eligible for the apprentice mechanics tools deduction has also changed (more information).
COVID-19 Benefit Repayments
Federal, provincial and territorial COVID-19 benefit repayments made after December 31, 2022 can be claimed as a deduction on Line 23200 of your 2023 return.
First Home Savings Account (FHSA)
The FHSA is a new registered plan to help individuals save for their first home. Starting April 1, 2023, contributions to an FHSA are generally deductible and qualifying withdrawals made from an FHSA to purchase a qualifying home are tax free. If you opened one or more FHSAs in 2023, complete and file Schedule 15, FHSA Contributions, Transfers and Activities with your tax return (more information).
Multigenerational Home Renovation Tax Credit (MHRTC)
The MHRTC is a new refundable tax credit that allows an eligible individual to claim certain renovation costs to create a secondary unit within an eligible dwelling, so a qualifying individual (a senior, or an adult who is eligible for the disability tax credit) can live with a qualifying relation. If eligible, you can claim up to $50,000 in qualifying expenditures for each qualifying renovation completed, up to a maximum credit of $7,500 for each claim you are eligible to make.
You need to file Schedule 12 Multigenerational Home Renovation Tax Credit with your return to make a claim. If you are confused by the terms "certain," "eligible," or "qualifying" above, you are not alone! It is advisable to read carefully the definitions in the instructions for Schedule 12 before making a claim.
Property Flipping
It has always been a "question of fact" whether profits from the disposition of a property are taxed as business income or capital gain. However, a new rule came into effect on January 1, 2023 that deems any gain from the disposition of a housing unit (including a rental property) located in Canada, or a right to acquire a housing unit located in Canada, that you owned or held for less than 365 consecutive days before its disposition to be business income and not capital gain, unless the property was already considered inventory (i.e. business property), or the disposition occurred due to, or in anticipation of certain life events (more information).
Return of Fuel Charge Proceeds to Farmers Tax Credit
The return of fuel charge proceeds to farmers tax credit is now available to self-employed farmers and individuals who are members of a partnership operating a farming business with one or more permanent establishments in Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island or Saskatchewan. If eligible, a portion of your fuel charge proceeds may be returned to you. For more information, see the instructions for Line 47556.