Every year the Canadian government introduces new tax laws and changes to the existing tax code. These changes can significantly affect the amount of tax you pay and the benefits you are eligible for. As we enter the 2022 tax year, it’s important to be aware of the 10 most significant personal tax changes in Canada. In this article, we’ll discuss these changes in detail and explain why they are relevant to you.
- Tax Brackets and Rates
The federal government has adjusted the tax brackets and rates for the 2022 tax year. These changes are designed to provide tax relief for middle-class Canadians and increase taxes for the highest income earners.
Tax Bracket 2022 Tax Rate
$0 to $48,535 15% $48,535 to $97,069 20.5% $97,069 to $150,473 26% $150,473 to $214,368 29% Over $214,368 33%
Example: If you earn $75,000 in 2022, you will pay 20.5% tax on the first $48,535 of your income, 26% tax on the next $48,534, and 29% tax on the remaining $22,931.
- COVID-19 Benefits Extension
The government has extended various COVID-19 benefits, such as the Canada Emergency Response Benefit (CERB) and the Canada Recovery Benefit (CRB), into 2022. These benefits provide financial support to Canadians who have been affected by the pandemic.
- Climate Action Incentive
The Climate Action Incentive is a non-refundable tax credit designed to encourage Canadians to reduce their carbon footprint. The credit is available to residents of the four provinces without a carbon pricing system (Ontario, Manitoba, Saskatchewan, and New Brunswick).
Example: If you live in Ontario, you can claim a credit of $154 for yourself and $154 for your spouse or common-law partner. If you have children, you can also claim an additional $77 per child under 18.
- Home Buyer’s Plan (HBP)
The Home Buyer’s Plan (HBP) allows first-time homebuyers to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) to purchase or build a home. The government has increased the HBP limit from $25,000 to $35,000 for the 2022 tax year.
- Registered Education Savings Plan (RESP)
The Registered Education Savings Plan (RESP) allows Canadians to save for their children’s post-secondary education. The government has increased the annual contribution limit for RESPs from $2,500 to $5,000 for the 2022 tax year.
- Age Credit
The Age Credit is a non-refundable tax credit designed to provide tax relief for seniors. The credit amount has increased from $7,125 to $7,275 for the 2022 tax year.
- TFSA Contribution Limit
The Tax-Free Savings Account (TFSA) contribution limit has increased from $6,000 to $6,500 for the 2022 tax year. TFSAs allow Canadians to save money tax-free and use the funds for any purpose, such as saving for a down payment on a home or covering unexpected expenses.
- Child Care Expense Deduction
The Child Care Expense Deduction allows parents to claim a portion of their child care expenses on their income tax return. The maximum claimable amount has increased from $10,000 to $10,000 per child for the 2022 tax year.
- Canada Pension Plan (CPP) Contributions
The Canada Pension Plan (CPP) contributions have increased for both employees and employers in the 2022 tax year. This increase is part of a larger plan to improve the long-term sustainability of the CPP and enhance the retirement benefits it provides.
Example: If you earn $50,000 in 2022, your CPP contributions will increase from $2,163.76 to $2,217.60.
- Enhanced Canada Child Benefit (CCB)
The Enhanced Canada Child Benefit (CCB) provides financial support to families with children. The government has increased the maximum annual benefit amount for the CCB in the 2022 tax year, which will provide more support to families with children.
These are the 10 most important personal tax changes for the Canadian tax year 2022. By understanding these changes and how they may impact you, you can make informed decisions about your finances and ensure you receive all the benefits and credits you’re eligible for. It’s important to speak with a financial advisor or tax professional to ensure you have a clear understanding of these changes and how they affect your unique financial situation.