Top Tax Tips for Filing 2022 Returns

Evelyn Jacks

It is indeed that time of the year: tax season is upon us and there is lots of tax news for those just starting their 2022 T1.  With just under 5 million tax returns already filed by mid March, the average refund is just under $2,200 and the average balance  just under $4,500.  Here’s my top picks for tax tips you need to know to maximize your entitlements:

File on Time by May 1.  As April 30 falls on a Sunday this year, the tax filing deadline is midnight May 1.  About 6% of Canadians file their tax returns late and that means they are missing out on using their tax refunds, which are being eroded in value by high inflation or lucrative refundable tax credits like the Canada Child Benefits, the GST/HST Tax Credit, the Canada Worker’s Benefit, Climate Action Incentive,  the Eligible Educator School Supply Tax Credit, provincial tax credits or inflation supports.  The tax return will also be used to determine whether your family qualifies for the Canada Dental Benefit, available on your child’s dental costs back to October 1, 2022, if you fall below the income testing ceilings. 

Other Returns May Be Due May 1.  The T1 isn’t the only tax return to worry about:  If you have foreign assets abroad with a total cost of $100,000 or more, the T1135 form may be required. This year there’s yet one more new return – the new UHT-2900 Form which has cast a much wider net than first anticipated.  Ask your tax specialist about it if you own multiple residential properties. 

Beware Interest Costs on Balances Due.  If you are reporting income or losses from an unincorporated small business, the tax filing deadline is June 15, but you should still file by May 1 if you owe money to CRA.  Interest is charged at the prescribed rate, which changes quarter, plus 4% and this compounds daily.  The interest rate is expected to rise to 9% on April 1 (from 8% currently) so pay off that balance due this month if possible.   

Don’t report exempt income. Examples include those refundable tax credits and inflation support payments, US government assistance for COVID, income exempt by statute, such as the Indian Act,  gifts or inheritances, life insurance benefits received, just to name a few.  If you have over-reported income with these sources, you can ask the CRA to adjust your return.

COVID benefits ended. Most COVID supports ended in May of 2022. If you received the Canada Recovery Benefit, there may be a clawback or repayment required if your income was back to normal during the rest of the year.

Claim Deductions for CERB repayments. A deduction is claimable for the following COVID-19 relief benefits received in 2020/21 if repayments occurred in 2022:

• Canada Emergency Response Benefit (CERB)
• Canada Emergency Student Benefit (CESB)
• Canada Emergency Recovery Benefit (CRB)
• Canada Recovery Sickness Benefit (CRSB)
• Canada Recovery Caregiving Benefit (CRCB)

There is a new form, too, the T1B E. But, you do not use this form if claiming a deduction for the entire amount repaid in 2022.  In that case, simply make the claim on Line 23210 of the 2022 T1 return.  Use this new form only if amounts repaid in 2022 are to be applied on the 2020 or 2021 tax return.  It is also possible to split the deduction between the 2022 tax return and the year a COVID benefit was received, whichever provides the best after-tax result for you.  Using tax software can really help with these scenarios. 

Tradespeople Have a New Deduction.  Eligible construction tradespeople and apprentices who ordinarily reside in Canada and who temporarily relocate to  a location in Canada to obtain or maintain employment will be able to deduct up to $4,000 per year for eligible expenses.  These include costs for temporary lodging at a work site that is at least 150km from their ordinary place of residence for a minimum of 36 hours.  Costs of meals and transportation for one round trip from their ordinary place of residence to the temporary lodging are also claimable.  Receipts will be necessary and cannot also be claimed under the moving expense deduction.  That’s an important proviso as this new deduction comes with a cap of 50% of employment income.  In some cases,  the moving expense claim is better.

Claiming Home Office Expenses.  Home based workers can claim the simplified deduction for home workspace costs for the last time in 2022.  That’s possible if you worked from home more that 50% of the time for at least a month (for part-timers, that’s 50% of the time you worked).   The claim is $2 per day up to a maximum of $500.  No receipts are required; simply file form T777S.  There are special rules for shared workspaces. 

Claiming Auto Expenses.  There are some important changes here too.  Be sure to have an auto log for your business or employment driving in 2022.  Also, if you purchased a vehicle, there are several different ways to make an accelerated claim for your capital cost allowance. The maximum ceilings on fixed costs have also changed as follows for 2022 (interest cost ceilings remain at $300 per month):

• Maximum cost for CCA on Class 10.1 vehicle: $34,000 + taxes ($59,000 plus taxes if the vehicle is a zero-emission passenger vehicle)
• Maximum lease amount deductible: $900 per month + taxes

The 2023 deduction limits for passenger vehicles will rise again as follows:

• Maximum cost for CCA on Class 10.1 vehicle: $36,000 + taxes ($61,000 plus taxes if the vehicle is a zero-emission passenger vehicle)
• Maximum lease amount deductible: $950 per month + taxes

Claim Newly Enhanced Non-Refundable Credits.  There have been upgrades to the Disability Tax Credit, which is now available to those diagnosed with Type 1 Diabetes and others requiring life-sustaining therapies at least 14 hours a week or those suffering from mental illnesses.  In addition the Home Accessibility Tax Credit has been doubled to $20,000 and the First Time Home Buyer’s Tax Credit has been doubled to $10,000.  New qualifying medical expenses include costs paid for surrogacy or the donation of sperm, ova, or embryos.  

Claim your Capital Losses.  If you cashed out of your non-registered accounts with the market jitters you may have incurred a loss.  Use that to offset other capital gains you earned in the year; unused losses can be carried back and applied to previously reported capital gains in the prior three tax years.  That will generate tax refund.  Use form T1-A.   

More Tax Change Coming.  Check out news for new tax advantages coming soon:  on  April 1 for example, the new FHSA – First Home Savings Account – becomes available and students will permanently be forgiven interest costs on federal student and apprentice loans and that includes those currently being repaid.  There is also a new Multigenerational Home Renovation tax credit for 2023 and an Underused Housing Tax that will affect more residential property owners that first met the eye.

Of course, the March 28 Federal Budget is right around the corner.  Stay tuned for more tax change as you rush to complete your 2022 tax return, and be sure to subscribe to Knowledge Bureau Report for a Special Edition.

Bottom Line:  Filing a tax return is one of the most important financial transactions of the year.  Do it on time and leverage your refund into smart tax efficient investments like the RRSP, RESP or TFSA to build your wealth.  See your financial advisor for help with these investments.

Or give the gift that keeps giving back, taxwise: a charitable donation in your community.  Advisors with an MFA-P™ designation can help with your longer term, strategic philanthropic plans.

But if you owe money to CRA, clear it up quickly to avoid high interest rates (and penalties if you are a procrastinator who owes and files late).  That will further crimp your financial choices.

Evelyn Jacks is the best-selling author of 55 financial books on tax filing, tax planning and family wealth management.  She is President of national educational institute, Knowledge Bureau.  Follow her on twitter @evelynjacks.