The Tax Blog for Smart Canadians

Tax-free first home savings account (FHSA)

Starting in 2023 (no impact on the 2022 return), the tax-free First Home Savings Account (FHSA) is a new tax-sheltered registered account, similar to an RRSP and a TFSA, to help you save for the purchase of your first home.

We wrote extensively about this plan in a previous blog article.

Labour mobility deduction ( LMD ) for tradespeople

Tradespeople who work in construction can deduct their travel expenses if they are required to travel to a work site.

Eligible expenses include:

• Temporary lodging at the temporary work location
• Transportation for one round trip to the temporary lodging location
• Meals consumed by the eligible tradesperson during the round trip

To claim the deduction, eligible tradespeople must travel at least 150 km to the temporary lodging place, which is located in Canada, and stay for a minimum of 36 hours.

The annual deduction limit is set at $4,000, and expenses incurred for each work site are limited to 50% of the employment income earned at the temporary work site.

Home buyers’ amount

You can claim this non-refundable tax credit if you purchased your first home during the year. For 2022, the eligible amount has doubled from $5,000 to $10,000. The actual tax credit is 15% of this amount, up to $1,500.

Home accessibility tax credit

If you renovated your home to make it more accessible for a relative who is either a disabled adult or is age 65 or over, you can claim this tax credit. For 2022, the limit has doubled from $10,000 to $20,000 in eligible expenses.

Canada’s Affordability Plan

In the latter half of 2022, the federal government announced new measures to help Canadians cope with soaring inflation as part of its Affordability Plan: the doubling of the GST credit, the Canada Dental Benefit and the Canada Housing Benefit.

We wrote extensively about these three programs in a recent blog article.

Immediate expensing of depreciable properties

Business owners who purchased depreciable properties that they put to use can now fully expense the purchase cost of these properties against their business income. Ordinarily, only a specified percentage of the value of the purchase cost would be allowed as an expense. The overall limit is set at $1.5 million spread across all eligible properties and must be shared with associated businesses, if any.

Most depreciable properties purchased to be used in a business are eligible, except for buildings (CCA classes 1 to 6), intangible properties (such as patents, copyrights, client lists, etc.) and natural gas assets.

This measure is also applicable in Quebec.

To learn more, please consult this professional blog article.

Canada workers benefit (CWB)

The Canada Workers Benefit is a refundable tax credit intended to supplement the earnings of low-income workers.

Starting in July 2023, half of this credit will be delivered through an advanced payment directly to eligible individuals from the previous year. These advanced payments will take place in July and October 2023 and January 2024.

COVID-19 benefits repayment in a prior year

If you repaid in 2022 COVID-19 benefits received in 2020-2021, you have the option to deduct the repayment against your 2020 or 2021 income. To do so, complete form T1B to have the CRA adjust your prior year’s tax return.

Air quality improvement tax credit

Business owners and rental property owners can claim a refundable tax credit for expenses incurred for air quality improvements in qualifying locations.

Qualifying locations include properties used during ordinary commercial activities in Canada (including rental activities). This does NOT include the personal home of the business/rental property owner (ex. when a business is run from the owner’s home).

Eligible expenses include the purchase, installation, upgrade or conversion of mechanical heating, ventilation and air conditioning (HVAC) systems, as well as the purchase of devices designed to filter air using high-efficiency particulate air (HEPA) filters. The expenses must have been incurred between September 1, 2021, and December 31, 2022.

The credit rate is 25%. Eligible expenses are limited to $10,000 per qualifying location, and $50,000 across all qualifying locations.

You can claim this credit through a new form, the T2039.

Quebec

Senior assistance tax credit enhancement

The Senior Assistance Tax Credit is a refundable credit for low-income seniors age 70 or over whose income is below a certain threshold.

The maximum credit has been increased to $2,000 for single individuals whose income is under $24,195 and $4,000 for couples whose combined income is under $39,350. The credit is progressively reduced as the earned income increases.

Ontario

Staycation tax credit

Ontario residents who spent their vacation within the province and stayed at short-term accommodations (hotel, motel, resort, lodge, vacation rental, etc.) can claim the expenses incurred for such lodging as a refundable tax credit.

The maximum amount you can claim is $1,000 for single individuals and $2,000 for families.

The credit rate is set at 20% of the eligible expenses.

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