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TAX SEASON UPDATE

Below I have highlighted both business and personal tax updates as a follow-up to the 2021 and 2022 Federal Budgets.


There are opportunities to capitalize on:

  • The 100% write-off or immediate expensing of depreciable property (with some exceptions like buildings) available to a small business corporation owned by a Canadian resident (a Canadian Controlled Private Corporation or CCPC) announced in the 2021 budget.

  • This was further expanded during 2022 to include immediate expensing acquired by a Canadian resident individual who has an unincorporated business.

  • To qualify for immediate expensing, the depreciable property must be purchased by a CCPC before January 1, 2024, and by an unincorporated business before January 1, 2025.


Some good news here:

  • The Government of Canada has delivered targeted affordability measures for Canadians who need it most; the Canadian Dental Benefit and a one-time top-up of the Canada Housing Benefit.

  • The Canada Dental Benefit provides eligible parents or guardians with a direct tax-free payment of up to $650 per year for two years to help cover dental expenses for children under 12. The benefit is available to families without access to private dental insurance and with an adjusted family net income under $90,000. The CRA began receiving applications and processing payments for the benefit on December 1, 2022. This can be accessed online or by phone.

  • The one-time top-up to the Canada Housing Benefit will provide a tax-free payment of $500 to renters who are struggling with the cost of housing. The top-up is available to families with an adjusted net income below $35,000, or below $20,000 for single Canadians, who pay at least 30% of their adjusted net income towards rent. The CRA began receiving applications and processing payments for the benefit starting December 12, 2022. This can be accessed online or by phone.


Some not-so-good news:

  • A luxury tax came into effect on January 1, 2022, on the purchase of aircraft and personal cars that have a retail price of a threshold of $100,000 or more, and boats over $250,000. The tax is the lesser of 10% of the price and 20% of the price above the threshold.


There is a big focus on housing measures in the budgets:


Underused Housing Tax:

  • A 1% tax on the value of vacant and underused residential property came into effect on January 1, 2022.

  • This tax is on residential property owned directly or indirectly by non-resident non-Canadians, and on underused residential property owned by Canadian citizen/residents that is occupied for less than 180 days of the year.

  • In addition, there must be a written agreement or lease if the owner gives occupancy to the dwelling. If the occupants are relatives of the owner, the rent charged must be at least fair market rent.

  • There are a number of exemptions to the law, for example, if the residential property is uninhabitable as a result of disaster or renovations. Please consult with me on the exemptions.

  • All residential property owners have received in the mail a “yellow” important notice from the City of Toronto where the action is required by February 2, 2023, to declare the occupancy status of their residential property.

  • The reporting requirements apply on a calendar basis even if no tax is payable, and the fines are onerous if not reported.


Residential Property Flipping Rule:

  • If someone purchases and sells a residential property within 365 days, any profit on the sale would be treated as “business income” deemed from flipping residential property inventory as a business.

  • This takes effect on January 1, 2023.

  • The principal residence exemption from capital gains to that homeowner will NOT apply.

  • There are a number of exclusions where the property will be excluded from the flipped property rule. For example, if the disposition occurs due to one or more of involuntary events such as death or illness, a threat to personal safety, termination of employment, insolvency or expropriation of the property. Please consult with me on other exclusions.


First Home Savings Account (FHSA):

  • Contributions for first-time home buyers are tax deductible, like an RRSP contribution (Registered Retirement Savings Plan).

  • There is no tax on income/growth in the account, like a TFSA (Tax-free Savings Account).

  • Withdrawals of contributions and investment income to buy or build a first-time home are not taxable.

  • Maximum contributions are $40,000 in total.

  • The annual maximum contribution is $8,000.

  • This takes effect on January 1, 2023.


Multigenerational Home Renovation Tax Credit:

  • A 15% tax credit for up to $50,000 in construction or renovation costs (as much as a $7,500 reduction on your personal taxes owing) for constructing a secondary suite for a senior 65 years or older, or adult with a disability.

  • The secondary suite means a self-contained housing unit that has a private entrance, kitchen, bathroom and sleeping area.

  • The credit can be claimed by the senior or adult with a disability, and/or qualified relatives who own the home (parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece or nephew).


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