As the T1 season approaches, learn about some important new tax measures and changes to Canada Revenue Agency (CRA) services that can help you better serve your customers. A personal tax accountant or a tax consultant from a renowned accounting firm can help.
What’s new for the final personal tax season 2022?
Changes for individuals
The following changes apply to Q1 2022 personal income tax returns for individuals, which are normally due on May 1 of this year (because April 30 is a Sunday).
- Prior Year’s Federal COVID-19 Deduction Request: CRA has created a new form – T1B Prior Year’s Federal COVID-19 Deduction Request – for individuals who want to:
- Deduct a payment made in 2022 on your 2020 or 2021 return (depending on when they received your benefits) instead of your 2022 return, or
- Divide the deduction between the 2022 annuity and the annuity for the year in which the benefit is used.
Once the form is filed, the CRA will automatically reevaluate the previous year’s return and apply the deduction, so the taxpayer does not have to apply for the changes separately. Please note that benefits paid after 31 December 2022 can only be deducted in the year in which they were paid.
- First-Time Buyer Tax Credit: The amount used to calculate the first-time buyer tax credit increased to $10,000 (from $5,000) for an eligible home purchased after 31 December 2021.
- Home Affordability Tax Credit: This non-refundable tax credit is available for eligible home renovation or improvement expenses that allow the eligible person to:
- obtain access to or be mobile or functional in a licensed dwelling, or
- Reduce the risk of harm to an eligible individual while in or entering a home.
- For 2022, the annual spending limit has increased to $20,000.
- Trader Relocation Deduction: Under this new deduction, eligible tradesmen and apprentice builders can deduct up to $4,000 in eligible temporary relocation expenses per year (see Form T777 for more information).
- Tax Credit for Medical Expenses for Surrogacy and Other Expenses: The list of eligible medical expenses has been expanded as of 2022 to include amounts paid to fertility clinics and donor banks in Canada to obtain donor sperm or eggs that will enable an individual to conceive a child, their spouse or partner, or the surrogate mother on their behalf. In a related change, some expenses incurred in Canada for a surrogate or donor are now treated as medical expenses of the individual.
Your personal tax accountant or a tax consultant can help you more. Reach out to an accounting firm that is reliable, so you can be in safe hands.
Changes for self-employed workers
Self-employed workers can take advantage of two new tax breaks:
- Air Quality Improvement Tax Credit: Self-employed individuals and members of a partnership can claim a refundable tax credit equal to 25% of their total spending to improve ventilation or air quality at their place of work. Spend must be incurred between September 1, 2021, and December 31, 2022, and is limited to $10,000 per location and $50,000 in total.
- Immediate Expenses for the Self-Employed: The federal government has introduced a temporary immediate allowance for certain eligible properties acquired by an eligible individual or partnership. For the self-employed, this deduction applies to assets acquired after December 31, 2021, up to a maximum of $1.5 million. The property must be available by 2025.
Key Reminder for 2022 Returns
While the following measures aren’t new for 2022, you should keep them in mind as you prepare your returns for 2022:
- COVID-19 Benefit Payments: Taxpayers who have received COVID-19 benefit payments from the federal, provincial, or territory government such as Canada Recovery Benefit, Canada Recovery Caregiving Benefit, Canada Recovery Sickness Benefit, and Canada Worker Lockdown Benefit will receive coupons T4A. These amounts must be reported as income. If an individual received and repaid COVID-19 federal benefits in 2022, their 2022 Q4A will show the net amount of COVID-19 federal benefits received.
- Climate Bonus Payment: Residents of Alberta, Saskatchewan, Manitoba, and Ontario must file a tax return to qualify for this payment, even if they did not earn that year. These payments will be received quarterly, but no longer as part of your personal tax return. To claim the Rural Allowance, taxpayers living outside a census metropolitan area should check the box under “Climate Change Incentive Payment” on page 2 of their T1 return (instead of Schedule 14 as in the previous years).
- Home office expenses: Employees who worked from home due to the COVID-19 pandemic in 2022 can continue to claim home office expenses under the same rules applied in 2021. In particular, if they occur conditions, you can continue to use the apartment rate method to deduct $2 for each day you worked from home due to COVID-19 in 2022, up to a maximum of $500.
- COVID-19 Business Benefits: All monies received in 2022 by self-employed persons under the Canada Recovery Hiring Program, Tourism, and Hospitality Recovery Program, Hardest-Effect Business Recovery Program, and Local Lock-In Program are taxable and should be included in the income for the year.
- Electronic Assessment Notices (NOAs): The government has proposed legislation that would allow the CRA to provide assessment notices electronically to individuals who filed their T1 returns electronically, which would mean NOAs would not be mailed to such individuals. As a reminder, this proposal has been shelved and we understand that the current process for issuing personal NOAs will not change until at least 2024.
In case you’re wondering who can take care of this for you, talk to a personal tax accountant or a tax consultant. Reach out to an accounting firm that is reliable, so you can be in safe hands.