New year, new taxes: how tax reform in 2023 may effect you

New year, new taxes: how tax reform in 2023 may effect you

New policies include tax incentives for new homeowners and non-resident property owners.

The federal government has made many taxations and tax benefit modifications for this year and experts say to monitor the home tax changes.

New initiatives include a First Home Savings Account (FHSA), a tax on home-flipping, and a levy on abandoned or misused dwellings.

rental housing

First Home Savings Account

The FHSA lets qualified homebuyers save up to $40,000 over five years, with a maximum $8,000 yearly contribution. FHSA contributions are tax-deductible and home-purchase withdrawals are tax-free.

The government will presume anybody who sells a house after less than a year is flipping it. Sale profits are company revenue, not capital gains.

In addition, the government is implementing an Underused Housing Tax (UHT).

According to an email sent out by the Canadian Ministry of Finance, “The UHT is a national, annual one percent tax on the value of vacant and underused residential property in Canada owned directly or indirectly by a non-resident, non-Canadians.”

Non-Canadians who own an underused or unoccupied home in Canada by December 31, 2022, must submit a UHT report by April 30, 2023.

The UHT has a number of exceptions. There are exemptions for seasonal homes and inaccessible sites.

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According to Woolley, the range of exemptions to the UHT is notable.

He also said, “I think that one of the dangers in these rules is the more exemptions you provide, the more the tax planners and the clever, crafty people are going to say, ‘Well, this is the way you get around these rules,'”

As per Rogozynski, it’s likely the tax will increase in the next few years.

“I can’t see why over time that rate wouldn’t go up from 1 percent to 2 percent, to 3 percent, because they’re nameless, faceless foreigners. They don’t vote,” he added.


Other changes

The federal government adjusts numerous tax advantages, including the personal income tax rates, for inflation. The Canada Revenue Agency forecasts a 6.3% rise this year.

It is a far higher jump than usual, according to Rogozynski.

He said, “This is triple what you would normally see across the last 40 years.”

“So pretty well everybody who is in Canada working now probably has never seen such an indexation factor going on.”

The amount of income that is free from taxation known as the Basic Personal Amount has increased from $14,398 in 2022 to $15,000 this year.

As per Rogozynski, overall, tax changes this year are modest.

He added “There may be a recession [in 2023]. That’s not the time to introduce a bunch of big new increases.”

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