Federal tax brackets 2021 over 6511/25/2023 A higher threshold is a positive for clients looking to avoid the clawback, he said. “That can be a significant tax clawback if you hit that ,” Waters said. Once taxable income rises above the threshold amount, a “recovery tax” is charged at a rate of 15% of the difference between an individual’s income and the threshold amount, up to a limit of the amount of OAS the individual has received. The threshold for old age security (OAS) repayment rises to $86,912 in 2023, up from $81,761 in 2022, a difference of $5,151. “The value of that credit becomes less and less as inflation increases,” Waters said. One example is the pension income tax credit amount, which is fixed at $2,000. While most tax credits and benefits are indexed to inflation, a few are not, said John Waters, director of tax consulting services with BMO Private Wealth in Toronto. Make sure clients are taking full advantage of any credits for which they are eligible, Bezaire suggested: “You want to pay attention to more than you ever have before.” Other clients may want to consider realizing capital gains in 2023 - for example, selling a cottage for which the principal residence exemption is not available - to take advantage of the higher tax bracket thresholds, she added.Īmounts related to non-refundable tax credits, such as the age amount for individuals 65 or older or the Canada caregiver amount for children under 18, are rising by 6.3% next year, too. “It’s an opportunity for to really pay attention and maximize the credits they could take, but also look at their sources of income and maybe take advantage of that higher tax tier,” said Carol Bezaire, vice-president of tax, estate and strategic philanthropy with Mackenzie Investments in Toronto.įor example, retirees might consider making a larger RRIF withdrawal next year if they need extra money to cover the higher cost of living, while not necessarily paying a higher marginal tax rate, Bezaire explained. At the other end of the scale, Canadians can earn up to $53,359 in 2023, up from $50,197 in 2022, before being subject to the 20.5% tax rate, a difference of $3,162. That means the top federal tax rate of 33% will kick in at $235,676 of taxable income in 2023, up from $221,709 in 2022, a difference of $13,967.
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