While our tax laws require Canadian residents to complete and file a T1 tax return form each spring, that return form is never exactly the same from year to year. Some of the changes found in each year’s T1 are the result of the indexing of many aspects of our tax system, as income brackets and tax credit amounts are increased to reflect the rate of inflation during the previous year. Other changes, however, arise from the introduction by the federal government of new deductions or credits, changes to the existing rules which govern the availability, amount, or delivery of such deductions or credits, and, inevitably, the end of some tax credit programs.
This year, most of the changes to be found on the return for 2023 are of a targeted nature, affecting taxpayers who claim specific types of deductions or credits based on their personal or family circumstances. What follows is a summary of the changes which taxpayers will find on the return for 2023, as outlined by the Canada Revenue Agency in its Guide to the 2023 return form.
Multigenerational home renovation tax credit (MHRTC)
The MHRTC is a new refundable tax credit that allows an eligible individual to claim certain renovation costs incurred to create a secondary unit within their home so that an elderly or disabled relative can live with them. Taxpayers who carry out such an eligible renovation can claim up to $50,000 in qualifying expenditures. The credit amount is 15%, meaning that a maximum credit of $7,500 ($50,000 times 15%) can be obtained. Detailed information on eligibility requirements can be found on Schedule 12, Multigenerational Home Renovation Tax Credit, which is used to claim the credit for 2023.
First home savings account (FHSA)
The First Home Savings Account is a new registered plan to help individuals save for their first home on a tax-sheltered basis. Contributions (to a maximum of $8,00 per year and a lifetime maximum of $40,000) made to an FHSA after March 2023 are deductible from income and, where funds are withdrawn from the FHSA to purchase a first home, no tax is payable on the withdrawals. Taxpayers who opened an FHSA in 2023 should complete Schedule 15, FHSA Contributions, Transfers and Activities as part of their return for 2023. Detailed information on the FHSA program can be found on the federal government website at First Home Saving Account.
Property flipping
A Canadian taxpayer who sells the home in which he or she has lived is not required to pay tax on the proceeds of sale from that transaction as the result of the principal residence exemption. Beginning in 2023, however, taxpayers who sell a residential property which they have owned for less than a year will not be entitled to claim that principal residence exemption. In such circumstances, any gain or profit realized on the sale will be treated as business income and taxed in full. (Some exceptions apply where a property held for less than one year is sold owing to a change in life circumstances – i.e., a death, job loss, or illness.) Detailed information on the new “property flipping” rule and those exceptions can be found at Residential Property Flipping Rule.
Federal, provincial, and territorial COVID-19 benefit repayments
During the pandemic millions of Canadians received benefit payments under a number of different government programs. In some instances, benefit payments were made to individuals who were not eligible for a particular benefit, or in amounts which exceeded their benefit entitlement. Over the past couple of years, the federal government has obtained repayment of such benefit overpayments from those individuals. Where, during 2023, a taxpayer repaid COVID-19 benefits received, they can claim a deduction for such repayments on line 23200 of the 2023 tax return.
Deduction for tools (tradespersons and apprentice mechanics)
Tradespersons who earn employment income from their trade are entitled to claim a deduction from that employment income for the cost of eligible tools. As of 2023, the maximum such deduction which may be claimed each year has increased from $500 to $1,000. Detailed information about the tools deductions for tradespersons and apprentice mechanics can be found on the federal government website at Deduction for Tradesperson’s Tools Expense – Canada.ca.