Tax season is officially upon us and Canadians can now file their 2023 personal tax returns online. Here’s what’s new for the 2023 return, and some things to keep in mind as you get ready to file.
The filing deadline
This year’s general tax filing deadline is April 30, 2024. If you or your spouse or partner have self-employment income, your filing deadline, which is normally June 15, is extended by two extra days in 2024 to June 17, since June 15 falls on a Saturday this year.
In either case, if you owe tax for 2023, any balance due must be paid by April 30. After that date, the Canada Revenue Agency charges non-deductible arrears interest at a rate of 10 per cent, compounded daily. This is the highest rate in more than 20 years.
Paper returns getting thinner
More than 90 per cent of Canadians file their returns electronically, but if you’re one of the two million Canadians who still file a paper return, you should have already received your 2023 tax package in the mail.
You may have noticed, however, that this year’s package is thinner than usual. According to the CRA, that’s because the agency is no longer printing line-by-line instructions for the paper package. By making this change, the CRA has reduced each package by approximately 30 pages, or about 20 per cent. The line-by-line instructions are still available online.
Notice of Assessment (NOA)
Your NOA is a summary of your tax return that the CRA sends out each year once your tax return has been assessed. The NOA shows the date your return was processed (important in case you want to formally object to your assessment by the deadline), and the details of how much tax you owe or the amount of refund you may be receiving. Last year, more than half of Canadians received a refund, with the average amount being $2,262.
This year, if you’re expecting a refund but you’re not signed up for direct deposit, you’ll receive a paper T1 NOA and cheque separately. The CRA has also made changes to the T1 NOAs “to provide more complete information that is easier to understand.” For example, the CRA recently updated the registered retirement savings plan table included as part of your NOA.
Working from home
If you worked from home in 2023, you may be entitled to write off your home-office expenses. For the 2023 tax year, the CRA has stated you will be qualified to write off your home-office expenses if your home workspace is where you “principally” — meaning more than 50 per cent of the time — performed your duties of employment for a period of at least four consecutive weeks during 2023.
Unfortunately, the CRA has scrapped the simplified method for home-office expenses which allowed employees working from home to claim $2 per day, up to $500. For 2023, you’ll need to calculate your actual home-office expenses and pro-rate them according to work use.
You’ll also need to get a signed copy of CRA form T2200 Declaration of Conditions of Employment from your employer. The T2200 is not submitted with your return, but you’re required to keep it in case the CRA asks to see it later.
First Home Savings Accounts (FHSA)
If you contributed to or withdrew money from the new FHSA in 2023, you should have received a T4FHSA (First Home Savings Account Statement) showing the amount you contributed or withdrew in 2023. The maximum contribution amount was $8,000, and you can choose to deduct the entire contribution on your 2023 return, or you may wish to defer claiming the deduction to a future year when you’re in a higher tax bracket and the deduction may be worth more.
To report FHSA activities on your 2023 return, there’s a new form, Schedule 15, FHSA Contributions, Transfers and Activities. This schedule is used to tell the CRA that you opened up an FHSA in 2023 (step 1), that you made a contribution last year (step 2), that you’re claiming a deduction in 2023, or saving some of that deduction for a future year (step 3) and whether you made a qualifying withdrawal in 2023 to buy your first home (step 4).
Multigenerational home renovation tax credit
Among the 2023 tax changes that took effect for this year is the new Multigenerational Home Renovation Tax Credit. This refundable credit was introduced to assist Canadians with the cost of renovating a home to create a secondary unit so that a family member who is more than 65 years of age (or 18 if they qualify for the disability tax credit) can live with you. The credit is available for renovation expenses incurred in 2023 and beyond.
A “qualifying renovation” is a renovation, alteration or addition made to your home that’s of an enduring nature and integral to the home. The renovation must be undertaken to establish a secondary unit within your home in which your relative may live. A secondary unit is a self-contained housing unit with a private entrance, kitchen, bathroom facilities and sleeping area. It can be either newly constructed or created from an existing living space that didn’t already meet the local requirements to be considered a secondary dwelling unit.
If eligible, you can claim up to $50,000 in qualifying expenditures for each qualifying renovation completed, up to a maximum credit of $7,500 for each claim you’re eligible to make. The claim is made on new Schedule 12, Multigenerational Home Renovation Tax Credit.
Anti-flipping rule
Starting Jan. 1, 2023, any gain from the disposition of a housing unit (including a rental property) located in Canada that you owned or held for less than a year before sale is deemed to be business income, not a capital gain. It’s also not eligible for the principal residence exemption. There are, however, certain exceptions to this rule, such as in the case of death, disability, separation and work relocation.
Repayment of COVID benefits
If your COVID-19 benefits were denied and you were required to repay them in 2023, they can be claimed as a deduction on line 23200 of your 2023 return.