Updates on Personal Income Tax for 2023 – Insights for Canada and the US
As we edge closer to the personal tax filing deadline, it’s crucial to stay informed about the recent updates affecting personal income tax filings in Canada and the United States for the year 2023. Here’s a comprehensive overview to guide you through the changes.
Updates on Canada Personal Income Tax
Enhanced Canada Workers Benefit (ACWB)
For those who received Canada Workers Benefit payments in past years, the process has been streamlined. Starting from the 2023 tax year, these payments will be advanced without the need to apply via Form RC201. Instead, report any amounts from the RC210 slip on Schedule 6, which will be used to calculate the figure for line 41500 on your tax return.
Climate Action Incentive Payment (CAIP) Boost
The rural supplement for the CAIP has seen a significant increase, doubling to 20% starting in April 2024. This supplement aims to incentivize environmentally responsible actions.
Increased Deductions for Tools
Tradespersons and apprentice mechanics will now benefit from an increased maximum employment deduction for eligible tools, rising from $500 to $1,000, which will support those in the trade industries.
COVID-19 Benefit Repayments
For Covid-19 benefit repayments made after December 31, 2022, taxpayers can now claim these as a deduction on line 23200 of their 2023 tax return, offering some relief for repayments made.
First Home Savings Account (FHSA)
Aiming to aid individuals in saving for their first home, contributions to an FHSA are generally deductible, and any qualifying withdrawals made for purchasing a qualifying home are tax-free.
Multigenerational Home Renovation Tax Credit (MHRTC)
Under MHRTC, taxpayers can claim up to $50,000 in qualifying renovation expenses for creating a secondary unit in their dwelling for a qualifying relative, with a maximum credit of $7,500 per claim.
Property Flipping Rule Changes
Now, gains from selling a housing unit within Canada that was held for less than 365 days are considered business income, not capital gains, unless exceptions apply, targeting speculative property flipping.
Updates on US Personal Income Tax
Annual Inflation Adjustments
Federal income tax brackets and the standard deduction amount have increased by approximately 7%, with the standard deduction rising to $27,700 for married couples filing jointly and $13,850 for single filers.
Child Tax Credit Adjustments
The refundable portion of the child tax credit now goes up to $1,600 per child, with further increases planned until 2025. These changes require the completion of Schedule 8812 to calculate the correct credit amount.
Qualified Commercial Clean Vehicle Credits
This credit supports businesses purchasing "qualified commercial clean vehicles," offering a credit of up to 30% of the vehicle's cost, capped at $40,000 for larger vehicles, to encourage eco-friendly business operations.
Home Energy Credits
The energy-efficient home improvement credit has increased to $1,200. It covers 30% of expenses for certain energy-efficient installations and is valid through 2033.
Disaster Tax Relief
Extended deadlines for tax filings and payments have been announced for victims of various natural disasters across the US, providing some respite during recovery.
For further details on how these updates might affect your 2023 tax filings or to explore more changes, consider discussing with a tax advisor. Staying informed and seeking professional guidance can help navigate the complexities of tax season effectively.
