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From UFile's tax expert Gerry Vittoratos.

Tax Update 2023

Feb 7, 2024 by Gerry Vittoratos
Another tax season is just around the corner. Let’s have a look at some important changes coming to the tax return.

Tax-free First Home Savings Account (FHSA)

The Tax-Free First Home Savings Account 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 program in a previous 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 has been delivered through an advanced payment directly to eligible individuals from the previous year. Advanced payments have taken place in July and October 2023, and another is scheduled for January 2024.

Residential Property Flipping Rule

If you sell a residential real estate property within 12 months of buying it, the gains from the sale will be considered business income instead of capital gains unless you qualify for an exception (see below). This means that 100% of the gain/profit made from the sale of the property will be included in income, instead of 50% for a standard capital gain. Also, you will not be able to claim the principal residence exemption even if you lived in the property.

There are exceptions to this rule:

  • Death: a disposition due to the death of the taxpayer or a related person.
  • Household addition: a disposition due to a related person joining the taxpayer’s household or the taxpayer joining a related person’s household (e.g., birth of a child, adoption, care of an elderly parent).
  • Separation: a disposition due to the breakdown of a marriage or common-law partnership, where the taxpayer has been living separate and apart from their spouse or common-law partner because of a breakdown in the relationship for a period of at least 90 days.
  • Personal safety: a disposition due to a threat to the personal safety of the taxpayer or a related person, such as the threat of domestic violence.
  • Disability or illness: a disposition due to a taxpayer or a related person suffering from a serious disability or illness.
  • Employment change: a disposition for the taxpayer or their spouse or common-law partner to work at a new location, or due to an involuntary termination of employment. In the case of work at a new location, the taxpayer’s new home must be at least 40 kilometres closer to the new work location (eligible relocation).
  • Involuntary termination: a disposition due to an involuntary termination of the employment of the taxpayer or the taxpayer’s spouse or common-law partner.
  • Insolvency: a disposition due to insolvency of the taxpayer or to avoid insolvency (e.g., an accumulation of debts).
  • Involuntary disposition: a disposition against someone’s will (e.g., expropriation or the destruction or condemnation of the taxpayer’s residence due to a natural or man-made disaster).

Multigenerational Home Renovation Tax Credit (MHRTC)

This is a new refundable credit for renovation expenses paid to create a secondary dwelling in order to house an eligible relative (a senior or adult with disabilities).

The eligible relative (called the “qualifying individual”) is either:

  • a senior who is 65 years of age or older at the end of the renovation period taxation year; or
  • an adult with disabilities who is 18 years of age or older at the end of the renovation period taxation year, and who is eligible for the Disability Tax Credit at any time in that year.

The caregiver (called the “qualifying relation”) housing the eligible relative (or qualifying individual) is a person who:

  • is at least 18 years of age at the end of the renovation period taxation year; and
  • is a parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece or nephew of the qualifying individual (or the qualifying individual’s cohabiting spouse or common-law partner) at any time in the renovation period taxation year.

The credit can be claimed by either the qualifying relation or the qualifying individual.

The credit is 15% of the qualifying renovation expenses up to a maximum of $50,000. It can only be claimed in the year the renovations are completed, and only once in a lifetime.

Tradesperson’s tools expense deduction

If you are a tradesperson, you can deduct a portion of the cost of eligible tools that you purchased in the year to earn employment income.

In prior years, the deduction maximum was set at $500. Starting in 2023, this deduction has been increased to $1,000.

Home office expenses – flat-rate method

Introduced in 2020 because of COVID-19, the flat-rate method allowed for the claim of a $2/workday deduction for every day you were required to work from home due to the pandemic. This method of claiming home office expenses has been eliminated as of 2023.

If you still work from home, you can claim home office expenses by using the detailed method.

Quebec

Reduction of tax rate for first two taxable income brackets

Starting in 2023, the Quebec government has lowered the tax rate for the first two brackets of taxable income by 1% as follows:

  • 15% to 14% for taxable income up to $49,275;
  • 20% to 19% for taxable income of more than $49,275 but not more than $98,540.

Consequently, the credit rate for most non-refundable tax credits has been reduced from 15% to 14%.

Residential Property Flipping Rule

The same rule applies as federally (see above).

 

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Presented by UFile's tax expert
Gerry Vittoratos
MTax

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