Tax season can be a challenging time of year for many Canadians. Not only do you have to worry about preparing your taxes, but you also have to keep up with the ever-changing Canadian tax laws.
This year , the Canadian government introduced several changes to the tax exemptions available to Canadians. This article will provide an overview of the Tax Exemptions, Tax Brackets, and Tax Benefits to keep on your radar in 2023.
Tax Bracket Adjustments
For 2023, all five federal income tax brackets have been adjusted for inflation by 6.3%. The new federal tax brackets are as follows:
- 0 to $53,359 taxed at 15%
- $53,359 up to $106,717 taxed at 20.5%
- $106,717 up to $165,430 taxed at 26%
- $165,430 up to $235,675 taxed at 29%
- Over $235,675 taxed at 33%
Increased Basic Personal Amount
This year, Canadians can benefit from an increased basic personal amount. This means that the amount of income Canadians can earn before being required to pay taxes will increase from $13,808 in 2021 to $15,000 in 2023. This change will help to reduce the amount of taxes owed by lower income Canadians, allowing them to keep more of their earnings. The goal of this is to provide a much-needed boost to Canadians’ financial security. This change will also benefit those who are self-employed, as they will be able to deduct more of their business expenses from their taxable income.
Increased Employment Insurance Premiums
Beginning in 2023, employees and employers will both be subject to increased Employers Insurance premiums. Employees will now pay 1.63%, while employers are obligated to a rate of 2.28%.The rates have risen from 1.58% and 2.21% in 2022.
Tax-free Savings Account Limit Change
For the first time since 2019, the 2023 Tax-Free Savings Account (TFSA) contribution limit will rise to a maximum of $6,500 – allowing savers to accumulate a cumulative total of $88,000 if they have been a Canadian resident aged 18 or over since 2009 and have never previously contributed to a TFSA. Make sure you don’t miss out on this exciting opportunity to increase your savings!
Change in CPP Contributions
The Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) contribution rate for 2023 is 5.95% for CPP and 6.4% for QPP. The maximum contributions by employees and employers for CPP is set at $3,754.45 and $4,038.40 for QPP. Self-employed Canadians must contribute twice that amount.
Increased Age Credit Amount
Canadians will benefit from an increase in the age credit amount. This is a tax credit for seniors over the age of 65, and it will increase from $7,898 in 2022 to $8,369 in 2023. The aim is that seniors will be able to receive more money in their tax returns when filing their taxes. Additionally, the increase in the age credit amount will hopefully help to offset the costs associated with living as a senior, such as medical and living expenses.This is an excellent benefit that can help make life more affordable for those on a fixed income who may not have enough money to cover all of their costs.
Increase Disability Credit Amount
This year, Canadians will also benefit from an increased amount to the disability tax credit, as well. In 2023, this will increase from $8,870 in 2022 to $9,428. This increased amount is intended to help those with disabilities to pay for the costs of their disability, such as medical expenses and other costs associated with living with a disability. Additionally, the credit can be used to help offset the cost of disability-related items, such as special equipment or transportation. This credit can be claimed when filing taxes, and can reduce the amount of income tax owed.
Increased Canadian Child Benefit
In 2023, the Canadian Child Benefit (CCB) will provide a higher maximum benefit amount than in 2022. Specifically, the maximum benefit will increase from $6,997 per child under six and up to $5,903 per child aged six through 17 in 2022 to $7,437 per child under six and up to $6,275 per child aged six through 17 in 2023.This means that parents can expect to receive a higher amount of financial assistance from the Canadian Child Benefit in 2023 than in 2022. This could make it easier for families to cover their expenses related to raising children, such as childcare and other necessities.
LedgersOnline Can Help
The Canada Revenue Agency (CRA) has implemented changes to provide financial relief to lower income Canadians, by increasing tax exemption amounts. This will help to reduce the amount of taxes owed, and improve their overall financial security. LedgersOnline is here to help you understand the tax filing process, and take advantage of these changes to get the most out of your tax return. Schedule a call with us and see how we can help.