The 2022 tax season is upon us. As tax accountants prepare for the busy tax season by anticipating increased workloads and longer working hours, they also have to focus on the new tax changes for the 2022 tax season. Several T1 filing developments have occurred since the previous tax season concluded, and you’ll want to ensure you’re aware of the latest ones to file tax returns properly and serve your clients better.

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The Canadian Taxpayers Federation recently released its annual New Year’s Tax Changes report that might prove beneficial for those looking to see the tax changes that will occur in 2022. In addition, you’ll also want to consult CRA’s website to find out more about the personal income tax changes for the upcoming tax season. We’ve highlighted the key changes occurring to give you an overview of what to expect. 

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Personal Income Tax Changes for the 2022 Tax Season

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Here are some personal income tax changes you need to be mindful of for the 2022 tax season. They include:

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Inflation Adjustment Factor

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Canada Revenue Agency (CRA) indexes most income tax and benefit amount to inflation annually. In November 2021, CRA announced it was indexing the 2022 tax brackets and amounts by 2.4 percent, keeping in line with the current inflation figures in Canada. CRA obtained this inflation figure by calculating the percentage change in the average consumer price index data reported by Statistics Canada over twelve months from September 2021 to September 2022.

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As a result, CRA announced increased tax bracket thresholds would occur from January 1, 2022. Likewise, it also announced increases for non-refundable benefits. However, other benefits like GST and HST credit will remain unaffected until July 1, 2022, meaning you don’t have to worry about their increasing amounts for this tax season. 

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Tax Brackets for 2022

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CRA announced changes in the five federal tax brackets after indexing them for inflation. As a result, here are the new federal brackets for 2022:

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· Bracket 1: $0 to $50,197 (15 percent income tax)

· Bracket 2: $50,197 to $100,392 (20.5 percent income tax)

· Bracket 3: $100,392 to $155,625 (26 percent income tax)

· Bracket 4: $155,625 to $221,708 (29 percent income tax)

· Bracket 5: Income exceeding $221,708 (33 percent income tax)

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Basic Personal Amount

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The basic personal amount refers to the minimum income a person can earn without having to pay federal income taxes. CRA has set the increased BPA to $14,398 by legislation. That means if an individual earned this amount or less, they don’t have to pay any federal income tax. Likewise, if a person earned more than the basic personal amount, they’ll only have to pay federal income tax on the income after this amount. 

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Employer-Provided Benefits

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CRA also recently updated its guidance on employer-provided benefits. CRA changed the rules for some employer-provided benefits because of COVID-19. It recently announced that it was extending its 2020 administrative rules until 2022. 

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As a result, CRA announced it wouldn’t consider taxable benefits to arise if an employer provides reimbursement or allowance for travel expenses to individuals if their employment place is open during the pandemic. Likewise, it also stated that if an employee continues to work from home, it will not consider taxable benefits to arise if their employer provides them with a reasonable allowance to cover their work from home expenses, like purchasing work equipment or supplies.

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CRA also has a similar ruling for employer reimbursement for purchasing computer and home office equipment. It doesn’t consider anything under $500 as a taxable benefit. However, if an individual exceeds the $500 threshold, they’ll have to include it as employment income on their T4. It’s also important to note the qualifying period for this scheme lasts from March 15, 2020, to December 31, 2022. Therefore, let’s assume an individual purchased a computer monitor for $400 in December 2020. Then, they bought an office chair for $200 in October 2021. The individual will have exceeded CRA’s $500 limit since their total purchases amounted to $600. Therefore, the individual will have to list $100 as employment income for 2021.

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Breeze Through the 2022 Tax Season with Taxbotic

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Taxbotic is a T1 workflow management software that can be your companion this tax season. You can use Taxbotic to alleviate your workload, as it enables you to request T1 information from clients with a single click. We use a secure, convenient cloud-based accounting system, meaning you don’t have to worry about security breaches. We strive to automate the tax return preparation checklist and in process reduce the back and forth with clients.

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Visit our website for more information.