Key Tax Updates for Canadian Families and Family Owned Enterprises: Navigating the 2023 Tax Season

As we approach another tax filing season, it’s crucial to stay informed about the recent changes in tax legislation, especially for families and family-owned enterprises in Canada. Tax laws are constantly evolving, making it challenging for the average person to keep up. As a tax expert with extensive qualifications and experience, I’m here to guide you through these changes to ensure you’re well-prepared for your 2023 tax filings.

Embrace the First-Home Savings Account

Introduced in 2023, the First-Home Savings Account (FHSA) is a boon for first-time homebuyers. If you contributed to an FHSA in 2023, you have the option to deduct these contributions on your tax return for the year or defer the deduction to a future year. This flexibility can be particularly advantageous if you anticipate a significant increase in your income in the coming years.

Canada Workers Benefit Adjustments

The Canada Workers Benefit (CWB) has been updated to provide more accessible support to low-income workers. In a welcome change, qualifying for the CWB no longer requires a separate application on your tax return. Eligible individuals will automatically receive this refundable tax credit, simplifying the process and ensuring that those who need it most will benefit without additional paperwork.

Residential Property Flipping Rule

A significant update for 2023 is the taxation of profits from flipping residential properties. If you sold a property within 365 days of purchasing it, the profits would now be taxed as business income rather than a capital gain, with certain exceptions. This change aims to cool off speculative real estate transactions and ensure fair taxation of profits.

Multigenerational Home Renovation Credit

Recognizing the importance of family and caregiving, a new tax credit for multigenerational home renovations has been introduced. This credit applies to up to $50,000 of qualifying renovation expenses incurred to accommodate a senior family member living with you, offering up to $7,500 in tax savings. Be sure to claim this on Schedule 12 of your tax return.

Changes to Working from Home Deductions

The simplified flat-rate method for calculating home office deductions, introduced during the pandemic, is no longer available for 2023 and onwards. Those working from home must now return to the detailed method to claim these expenses, necessitating a more thorough documentation of costs associated with their home office space.

Trust Tax Reporting Requirements

An important update for trusts: starting from tax years ending after December 30, 2023, all trusts must file an annual T3 Income Tax and Information Return. This new requirement includes bare trusts and those holding assets jointly, marking a significant shift in reporting obligations. Penalties for non-compliance emphasize the importance of timely and accurate filing.

Mandatory Electronic Payments

For payments exceeding $10,000, the Canada Revenue Agency (CRA) now mandates electronic payments. While a grace period is expected before strict enforcement, this change reflects a move towards modernizing tax payments and ensuring efficient, secure transactions.

Underused Housing Tax Updates

The Underused Housing Tax (UHT), primarily targeting vacant or underutilized residential properties owned by non-residents and non-citizens, has seen revisions to exempt certain Canadian corporations, partnerships, and trusts. This adjustment, proposed in the Fall Economic Statement of 2023, necessitates careful review to determine filing obligations by the April 30, 2024, deadline.

Looking Ahead: Changes Beyond 2023

While focusing on the immediate tax season is crucial, it’s also important to note upcoming changes. These include adjustments to the alternative minimum tax (AMT), new mandatory disclosure rules aimed at enhancing the CRA’s response to tax risks and pending changes to the general anti-avoidance rule (GAAR). Additionally, regulations affecting short-term rental deductions are set to change in 2024, emphasizing compliance with provincial and municipal laws.

As tax landscapes become increasingly complex, my goal is to guide you through these changes, ensuring your family and family-owned enterprise remains compliant, optimized for tax benefits, and aligned with your ambitions. Remember, understanding these updates is not just about compliance; it’s about seizing opportunities to minimize tax liabilities and support your financial goals. Let’s navigate this tax season together, ensuring that your family and business are positioned for success.

This information is for discussion purposes only and should not be considered professional advice. There is no guarantee or warrant of information on this site and it should be noted that rules and laws change regularly. You should consult a professional before considering implementing or taking any action based on information on this site. Call our team for a consultation before taking any action. ©2024 Shajani CPA.

Shajani CPA is a CPA Calgary, Edmonton and Red Deer firm and provides Accountant, Bookkeeping, Tax Advice and Tax Planning service.