hey guys it's Adrian here the Canadian in the t-shirt and today I'll be breaking down the
important tax changes in Canada for 2023 that you need to know this year has been difficult with
record high inflation and Rising interest rates and so the federal government has responded with
some significant changes for the new year and most of it is actually good news which should reduce
taxes for everyday Canadians and put more money in your pocket these updates were just announced
and I'll be going over all these essential tax numbers so you can plan ahead and make the most
of your 2023 Financial New Year I'll be covering the new contribution limits for the tfsa and the
rrsp new limits for the CPP Canadian pension plan updated tax brackets and tax credits which affects
everyone and the brand new tax sheltered account called the first home savings account or FHSA
which will be a big help when trying to buy your first home as always I include timestamps for each
chapter so feel free to skip ahead make sure you watch the rest of my Canadian tax guide my
videos with the silver thumbnails to learn the basics of how taxes work in Canada what are tax
brackets the tax sheltered accounts like the tfsa rrsp and RESP and definitely watch my
video on year-end tax saving tips the strategies in that video are useful every year in December
to lower your tax bill and make the most of your money for the New Year in this video I'm focusing
on the new changes just for 2023 so let's jump in starting with some good news the tfsa contribution
limit for 2023 has increased to six thousand five hundred dollars this is the first time the tfsa
limit has increased since 2019 which is fantastic and that's an extra 500 that you can contribute
to your tfsa and watch those Investments grow totally tax-free year after year the tfsa is one
of the most powerful tools we have as Canadians to build long-term wealth but it breaks my heart
that most Canadians are not using it correctly the tfsa is not a savings account use it as an
investing account make sure you watch my tfsa explained videos to learn the rules and how
to make the most of this tax sheltered growth I can't stress enough how important a tfsa is
to build your future and the earlier you start the better time is your greatest Ally when it
comes to investing so on January 1st 2023 everyone will gain an additional six thousand five hundred
dollars worth of tfsa room if you don't have the money to make this contribution this year don't
worry you don't lose it that contribution room is carried Forward Forever so whenever you're ready
put that money in and start investing tax-free if you don't have cash available to contribute
to your tfsa but you have stocks or ETFs in a non-registered account like a margin account you
can transfer those investments into your tfsa which I cover in this video here this can be
a great strategy but you might have to pay some capital gains taxes on that transfer even so a
one-time tax is well worth a lifetime of tax-free growth make sure you watch that video for details
everyone in Canada gets the same tfsa contribution room it's only based on your age not your income
let's look at this table to find out the maximum tfsa contribution room that you have based on
your age in the year 2023. if you're born in the year 1991 or earlier meaning you will be 32 or
older this year you have a total of eighty eight thousand dollars of available tfsa contribution
room that means if you have never added money to your tfsa you can put this full amount 88
000 into your tfsa in the year 2023. looking at the bottom if you were born in 2005 meaning you
are turning 18 in 2023 you will have six thousand five hundred dollars of tfsa contribution room and
for new Canadians this is important you do not need to be a Canadian citizen or even a
permanent resident to open a tfsa as long as you live in Canada and have a valid social insurance
number you can open a tfsa account even with a student visa or a work visa however you only
start building tfsa room once you actually live in Canada and are at least 18 years old so let's
look at this table to see your tfsa room based on when you moved to Canada so if you're 40 years old
but you only move to Canada in 2022 you don't get the full 88 000 of tvsa room you would only have
twelve thousand five hundred dollars of tfsa room the same as a 19 year old you earned six thousand
dollars of room in 2022 when you moved here and another sixty five hundred dollars for 2023.
for the rrsp we also have increased contribution limits for 2023. the rrsp is a powerful investing
tool to build your retirement fund and reduce your tax bill but your contribution limit does depend
on your income each year your rrsp room will grow by 18 of your earned income for the previous year
earned income includes your regular or employment income from your job plus your net business income
and Rental income if you're a landlord but it does not include investment income like dividends and
capital gains so if you have a salary of eighty thousand dollars at your job you'll earn 18 of
that or fourteen thousand four hundred dollars worth of rrsp room but this 18 of new room is
capped at an annual limit of 29 210 for 2022. so if you had a massive salary of two hundred
thousand dollars you wouldn't get the full 18 of that in rrsp room you would be capped at that
limit twenty nine thousand two hundred and ten dollars but good news for high earners in 2023
that annual limit has been increased to thirty thousand seven hundred and eighty dollars so if
you make over 160k you get to enjoy that extra rrsp room and reduce your taxes make sure you
watch my rrsp explained videos to learn how it all works there's a lot of rules when it comes to the
rrsp but don't let that stop you the rrsp can be an absolute Game Changer if you know how to use it
right let's move on to the changes in federal tax credits and the CPP the Canadian pension plan the
CPP is a federal pension plan that all Canadians pay into you'll notice from your paycheck there
will be a CPP contribution amount deducted from your paycheck and unfortunately for 2023 this
amount is increasing but don't worry you're not losing this money you do get to claim the CPP
money back once you retire but while you're working it does feel like an extra tax the
CPP contribution rates for 2023 have increased to 5.95 percent so 5.95 of each paycheck will
be deducted for CPP until you reach the annual maximum of three thousand seven hundred and fifty
four dollars and 45 cents for 2023. once you've paid that maximum amount the CPP deductions stop
so for the rest of the year your paycheck will be a little bit higher you'll only reach the
CPP maximum if you have a salary above 66 600 in 2023 this number is called the maximum pensionable
earnings so the good news is that if you have a salary above 66 600 then towards the end of
the year you'll notice a bump in your paycheck by about 5.95 percent because you're no longer
paying that CPP tax and this is important you pay into CPP every paycheck but your employer
does as well so if you are self-employed you have to pay double in CPP you pay for your portion and
your employer's portion so if you're running a business as a sole proprietorship or you own
a corporation and pay yourself a salary your business will have to pay twice the CPP amount
so for regular employees in 2023 the max CPP amount you pay is 3754 dollars but if you're
self-employed it's doubled at seven thousand five hundred and eight dollars I cover this in my video
here the downsides of running a business in Canada so back to the good news for 2023 the federal tax
brackets have been adjusted so that everyone will pay less in federal taxes as I covered in this
video on how taxes work in Canada we have tax brackets that start in the bottom and build on
top of each other so your first fifty thousand dollars of income is taxed at the lowest tax
bracket of 15 percent then your next 50k is taxed at the second bracket of 20.5 percent then the
next bracket is 26 and so on this is designed so that lower income Canadians Pay Less in taxes as a
percentage than higher income earners for 2023 the tax rates are the same but the brackets themselves
have increased so now more of your income will fall in the lower tax brackets and so you'll
be paying that lower tax rate and this will help all Canadians specifically the lowest tax bracket
of 15 percent event has been increased by three thousand dollars so now your first 53 359 will be
taxed at this lowest rate the second tax bracket of twenty point five percent has been increased by
six thousand dollars so now any income above the first 53k and Below 106k will be taxed at 20.5
percent and the third tax bracket has increased by almost ten thousand dollars so across the board
all Canadians will see more money in the lower tax brackets and so you can expect a lower tax
bill overall but note this is only for federal taxes each province also has their own provincial
tax brackets so keep that in mind for 2023 a lot of the tax credits have also seen an increase to
further reduce your tax bill the most important being the basic personal tax amount which helps
all Canadians for 2023 the basic personal tax amount has grown to a nice even fifteen thousand
dollars this is designed so that if you earn less than 15 thousand dollars a year you won't pay a
single Dollar in federal taxes this is especially helpful for students and part-time workers but for
everyone else you receive a tax credit so you don't get taxed for fifteen thousand dollars
in that first tax bracket again the first tax bracket has a tax rate of 15 so you'll save 15
percent of fifteen thousand dollars that saves you 2 250 in federal taxes and all Canadians
benefit from this however if you earn more than a hundred and sixty five thousand four hundred
thirty dollars your tax credit gets clawed back as your income grows even for super high income
earners don't worry this tax credit doesn't go down to zero the minimum tax credit you'll
earn is thirteen thousand five hundred twenty one dollars and that's if you're making more than two
hundred and thirty five thousand dollars per year but for the vast majority of Canadians who make
less than 165k this tax credit saves you 2 250 in tax another significant increase we see for
2023 is the lifetime capital gains exemption which gets a big jump to 971 190 this tax benefit isn't
for most people it only helps Canadians who own a small business Corporation and are selling their
business for example I own a corporation Canadian in a t-shirt Inc and if I sold this company for a
million dollars I would be taxed on one million dollars of capital gains that would cost me over
two hundred and sixty thousand dollars in taxes but with this exemption I get to reduce my capital
gains by nine hundred and seventy thousand dollars instead of getting taxed on one million dollars
I only get taxed on the remaining thirty thousand dollars of capital gains so instead of paying 260
000 in taxes I'd only be paying around 5 000 in taxes this is one of the best benefits of
starting a business in Canada you can eventually sell that business and that sale is extremely tax
efficient one of the most exciting tax changes for 2023 is the introduction of a brand new tax
sheltered account called the first home savings account or fhsa this is designed to help Canadians
save up for a down payment on their first home and it combines the best benefits of both the
tfsa and the rrsp all the money you put into the fhsa can be invested grown and eventually
withdrawn totally tax-free just like the tfsa and even better whatever money you contribute
will deduct from your taxable income lowering your tax bill just like the rrsp this is a game
changer and I'm very excited for it however this legislation hasn't been passed just yet so some
details may change but here's what we know so far the fhsa will have a lifetime contribution
limit of forty thousand dollars and an annual contribution limit of eight thousand dollars so
if you put in the maximum eight thousand dollars a year it will take you five years to max out the
fhsa again this isn't confirmed just yet but but we have a tentative starting date of April 1st
2023 so I would suggest that you plan ahead and try your best to save up eight thousand dollars
for 2023 and take advantage of this new investing account so far the eligibility rules are that you
must be 18 years old you must live in Canada and you must be a qualified first-time homebuyer that
doesn't necessarily mean that you've never bought a house but you can't have lived in a house that
you own for the past five years so if you do own a house as a rental property like myself and you've
never lived in it you should be eligible for this new account there are also some special rules
involving divorce and separations I'll be making a whole video on the first Home Savings Account
once the bill gets officially passed and we know the details for sure so there you have it guys
those are the most important tax changes for 2023 that you need to know I know taxes aren't the most
exciting thing but it's so important to learn the rules so that you can make the most of your money
I always say it's not about how much you make it it's about how much you keep and I'll do my best
to teach you how to keep your money in your pocket and make sure you watch my Canadian tax guide to
learn how thanks for watching guys and be sure to like comment and subscribe if you found this
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everyone and I'll see you guys on the next episode of the Canadian in a t-shirt bye guys