TAX CHANGES FOR 2022 - Rates and Limits
- As expected, several tax rates and limits are changing in 2021. Federal and provincial income tax brackets are increasing to keep up with inflation.
- Employment Insurance (EI) Premiums are staying steady at 1.58% in 2022. However, maximum insurable earnings will increase from $56,300 to $60,300.
- Maximum pensionable earnings, the amount used by the government to calculate Canada’s Pension Plan contributions for the year, is increasing to $64,900, up from $61,600 in 2021. Similarly, the employee and employer contribution rates for 2022 will be increasing to 5.70%, up from 5.45% in 2021.
- In 2022, the annual contribution limit on the Tax-Free Savings Account (TFSA) remains at $6,000, where it’s been since it was upped for the first time in 2019. If you’ve never contributed to the TFSA and you’ve been eligible to contribute since 2009, you now have $81,500 in total contribution room. As the name implies, your money grows tax-free in the TFSA. What sets it apart from the Registered Retirement Savings Plan (RRSP) is that you don’t have to pay income tax when you cash out your money.
TAX BREAKS FOR PARENTS
- For the 2021-2022 benefit year beginning July 2021, the maximum annual benefit under the Canada Child Benefit is $6,833 for each child under 6 and $5,765 for children aged 6 to 17. For parents of disabled children under the age of 18, the Child Disability Benefit has increased to $2,915 for the July 2021 to July 2022 benefit period.
HOME BUYERS' PLAN
- The Home Buyers’ Plan (HBP) assists first-time homebuyers in attaining a down payment sooner. It allows those buying a home for the first time to withdraw money from their RRSP without paying any tax. Any money borrowed under the HBP must be paid back over 15 years, beginning in the second year after your initial withdrawal was made. Only funds that have been in your RRSP for at least 90 days can be withdrawn as part of the HBP. After being frozen for several years, the federal government increased the withdrawal limit back in 2019. Now, those eligible to participate in the program can withdraw up to $35,000 from their RRSP, up from $25,000 in previous years. This means that a couple buying a home together could withdraw a combined $70,000 from their RRSPs to buy their first property.
COVID-19 - Credits & Benefits
- While CERB (the Canada Emergency Response Benefit) no longer exists, a few other pandemic-related benefits have been extended. For the 2021 and 2022 tax years, employees forced to work from home due to COVID-19 can claim a flat rate tax credit of up to $500. You’re eligible for this credit if you’ve worked from home more than 50% of the time for a period of at least four consecutive weeks. Eligible expenses include utilities, home internet, rent, and maintenance and repair costs. Commission employees can also claim home insurance, property taxes, and the lease of electronics such as cellphone, laptop, tablet, etc. The Canada Recovery Sickness Benefit provides up to $500 ($450 after taxes) for workers unable to work because they are sick, need to self-isolate or have an underlying health condition that puts them at greater risk. Similarly, under the Canada Recovery Caregiving Benefit, anyone who is unable to work because they need to care for a child or family member due to COVID-19 can receive $500 ($450 after taxes) per week, for up to 44 weeks Keep in mind that while both CRSB and CRCB deduct a 10% tax at source (so the amount you’ll receive is $450), you may still need to pay additional tax come income tax time, depending on your situation. Both programs have been extended to May 7, 2022.