The obligation to complete and file a tax return – and to pay any balance of taxes owed – recurs each spring with what probably seems to many taxpayers to be annoying regularity. That said, however, the T1 General tax return form which must be completed and filed each year by individual Canadian taxpayers is never exactly the same from one year to the next.
Some of the changes found in each year’s T1 are the result of the indexing of many aspects of our tax system, as income brackets and tax credit amounts are increased to reflect the rate of inflation during the previous year. Other changes, however, arise from the introduction by the federal government of new deductions or credits, changes to the existing rules which govern the availability and amount of such deductions or credits, and, inevitably, the end of some tax credit programs.
This year, most of the changes to be found on the return for 2022 are of a targeted nature, affecting taxpayers who claim specific types of deductions or credits based on their personal or family circumstances. What follows is a summary of those changes which taxpayers will find on the return for 2022, as outlined by the Canada Revenue Agency (CRA) in its Guide to the 2022 return form.
First Time Home Buyer’s Tax Credit
The purchase of one’s first home is a milestone in anyone’s life, but also likely (especially in recent years) one of the most difficult milestones to accomplish. Assistance in that process is provided through the federal government’s First Time Home Buyers’ Tax Credit (FTHBTC).
As the name implies, the FTHBTC is a tax credit available to first-time home buyers in Canada. The “first-time home buyer” criterion is, however, somewhat misleading, in that the credit can be claimed by anyone who did not own a home in Canada during the current year or any of the previous four years. For 2022, then, anyone who was not a homeowner during 2018, 2019, 2020, 2021, or 2022, but then purchased a home in 2022, may qualify as a first-time home buyer for purposes of the credit.
Those who qualify and who purchase a qualifying home (which includes most kinds of housing in Canada, including detached, semi-detached, and condominium properties) could, for 2021 and previous tax years, claim a non-refundable tax credit of $750. For 2022 and subsequent years, the amount of that tax credit is doubled, to $1,500.
The non-refundable nature of the credit means that it can only be used to reduce federal tax otherwise payable, and cannot create or increase a tax refund. However, where a home has been purchased by two spouses, the total credit claim can be split, in any proportion, between the two of them.
Detailed information on the First Time Home Buyers’ Tax Credit for 2022 is available on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-31270-home-buyers-amount.html.
Home Accessibility Tax Credit
Most Canadians want to “age in place” – that is, to remain in the family home for as long as possible. In many cases, as homeowners age, changes to the layout or facilities in their homes must be made for the home to continue to be both safe and convenient. That often means renovations, which can range in cost from hundreds to tens of thousands of dollars. Some of that cost can be offset by claiming the federal Home Accessibility Tax Credit (HATC), and the amount of expenditure eligible for that credit has doubled for 2022.
The criteria which determine the eligibility of a particular expense are extremely broad, as any “home renovation or alteration expenses of an enduring nature that allow a qualifying individual to gain access to, or to be mobile or functional within the eligible dwelling or reduce the risk of harm to the qualifying individual within the dwelling or in gaining access to the dwelling” can qualify for the credit. And, for purposes of the credit, a qualifying individual is anyone who is over the age of 65 or who is eligible to claim the disability tax credit.
The range of expenses which qualify for the HATC can be anything from grab bars installed in a shower or bath, to a staircase chairlift or a full-scale renovation done to permit an individual to live on one floor of a dwelling. The HATC is particularly flexible in that it may be claimed by other family members who live in the same dwelling as the senior or disabled individual, where qualifying expenses are incurred for changes to that dwelling.
The actual amount of the HATC which can be claimed is 15% of qualifying expenses incurred. Prior to 2022, the maximum amount of expenses which could be claimed for purposes of the HATC in a particular calendar year was $10,000. For 2022 and subsequent years, that amount is doubled, to $20,000, meaning that the maximum credit which can be obtained is $3,000.
The HATC is a non-refundable credit (meaning that it can only reduce federal tax otherwise payable, and cannot create or increase a refund), but claims for the HATC in a year can be split among individuals who are eligible to claim the credit, in any proportions.
More information on the HATC for 2022 can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-31285-home-accessibility-expenses.html
Claims for the Disability Tax Credit
Canadians whose lives are significantly restricted by disability or ill health may be able to claim the Disability Tax Credit (DTC). The rules governing eligibility for the credit are detailed and sometimes complex and an individual must, in order to claim the credit, obtain certification from the CRA with respect to their eligibility. The credit is a significant one, in that a claim for the DTC will, for 2022, reduce federal tax payable by $1330.50.
One of the criteria which applies to determine whether an individual will be eligible for the DTC is the need to undergo what is termed “life-sustaining” therapy for a specified amount of time each week. A change to the tax rules provides that an individual who is diagnosed with type 1 diabetes is automatically considered to be someone who has met the requirement for “life-sustaining” therapy; such individuals could, therefore qualify for the DTC.
Taxpayers who may be affected by this change should note that obtaining authorization from the CRA to claim the DTC is lengthy process and that, without such authorization in place, any claim for the DTC on the annual return will be disallowed. It will not, therefore, be possible for a person with type 1 diabetes to claim the DTC on the return for 2022 unless they have already received authorization from the CRA as a person who qualifies for that credit. Such individuals would, however, be well advised to begin the process of receiving such authorization, so as to enable a claim for the DTC on the return for 2023 to be filed next spring. Detailed information on how to do so can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/segments/tax-credits-deductions-persons-disabilities/disability-tax-credit.html.
Medical Expense Tax Credit
While our publicly-funded health care system covers many types of medical expenses incurred by Canadians, there is nonetheless a long (and growing) list of expenses which must be paid on an out-of-pocket basis. Where that’s the case, a medical expense tax credit (METC) can be claimed on the annual return to help offset the impact of medical expenses incurred, where such expenses are deemed to be eligible for that credit.
One of the most costly medical procedures which is not always covered by government health care plans is treatment for infertility and/or surrogacy arrangements. Beginning with the 2022 tax year, such expenses are considered to be qualified expenses for purpose of the medical expense tax credit. Or, as described by the CRA:
… the list of eligible medical expenses has been expanded to include amounts paid to fertility clinics and donor banks in Canada to obtain donor sperm or ova to enable the conception of a child by the individual, the individual’s spouse or common-law partner, or a surrogate mother on behalf of the individual. In addition, certain expenses incurred in Canada for a surrogate or donor are considered medical expenses of the individual.
Individuals who have incurred such expenses and intend to make a claim for the METC should remember that there is a limit on the amount of expenses which can be claimed. As is the case for all medical expenses claimed for purpose of the METC, any claim is limited to the amount of eligible expenses incurred which, for 2022, exceeds either 3% of the taxpayer’s net income for the year or $2,479, whichever is less.
Information on the types of expenses related to infertility treatment and surrogacy which may now be claimed as medical expenses can be found on the CRA website in an extensive listing of eligible medical expense, at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/lines-33099-33199-eligible-medical-expenses-you-claim-on-your-tax-return/details-medical-expenses.html#frtlty.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.