January 15, 2022 by David Christianson
So, it’s a new year, is it? Judging from the daily news, you had me fooled.
But the government certainly has some tax changes and initiatives in mind for 2022. I’ve been perusing the Prime Minister’s December 16 Mandate Letter to the Minister of Finance for clues.
There are some interesting and innovative ideas, like a 15% tax credit on the first $500 of repair costs on home appliances, with the goal of extending the lives of the appliances. (My wife says they should talk to the makers about their current strategy of planned obsolescence. I agree.)
There is also a Labour Mobility Tax Credit of up to $600 to cover relocation costs for construction workers who must move for work, and a Career Extension Tax Credit of up to $1650 for seniors who want to stay in the workforce. I will have to look into that one.
The PM has also asked the Minister to “convert the Canada Caregiver Credit into a refundable tax-free benefit, allowing caregivers to receive up to $1250 per year” and to increase APP Disability benefits by 25% over the next several years.
Keep in mind this is just a wish list, and none of it has been passed into law. However, expect a lot of these items to be in the 2022 fiscal year Budget, which we will hopefully see in March. Other items may include an increase to the Eligible Educator School Supply Tax Credit and an addition to the Safe Return to Class Fund.
Much of the Mandate Letter is devoted to making housing affordable in a variety of ways. Some are very reasonable while others have a low chance of being implemented, in my view.
There are several initiatives aimed at reducing climate change, mostly for industry. However, the proposed doubling of the Mineral Exploration Tax Credit for “minerals essential to the manufacturing of vital clean technologies” and an investment tax credit of up to 30% for investment in “a broad range of clean technologies” may stimulate a new industry of packaging and selling tax credits, so high income earners can reduce their personal taxes.
If I’m correct in that, it would run counter to other Mandate Letter initiatives, which include introducing a minimum 15% tax rule for top bracket earners, passing the previously proposed tax on expensive cars, boats and airplanes, and more money to CRA for additional auditors and investigators.
The fear of many tax professionals is what is not said in this Mandate Letter. Many expect an increase in the capital gains inclusion rate from the current 50% to some higher figure, and even some form of tax on the gain on sales of principal residences.
If you plan to sell investments this year anyway, consider doing it before the next Budget, as only half of the gain will be included in your taxable income.
The TFSA limit remains at $6,000 for 2022 and the RRSP limit is 18% of your 2021 earned income (minus any Pension Adjustment for contributions to a pension plan), maximum $29,210.
The federal tax brackets were indexed 2.4% for 2022. In round figures, the 15% first tax bracket is from about $13,000 to $50,000 of taxable income, the next (20.5%) bracket applies to taxable income between $50,000 and $100,000, the 26% bracket extends to $150,600 taxable income, with 29% applied until $221,708.
Anyone with income above that figure enjoys the 4% federal surtax, raising the federal tax to 33%. Remember that you also pay provincial income tax on top of the federal rate.
Manitoba has three brackets – 10.8% on the first $34,431 of taxable income, 12.75% on the next $40,000 of income, and 17.4% on taxable income above $74,416.
When you put them together, we have seven tax brackets in Manitoba, requiring a bit more diligence in planning.
Next column we will review some tips for preparing your 2021 tax filing and provide some strategies to reduce your taxes further in 2022.
Enjoy the milder weather!
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Dollars and Sense is meant as an introduction to this topic and should not in any way be construed as a replacement for personalized professional advice.
Please consult legal, tax, insurance and investment experts for advice on your unique situation.
David Christianson, BA, CFP, R.F.P., TEP, CIM is recipient of the FP Canada™ Fellow (FCFP) Distinction, and repeatedly named a Top 50 Financial Advisor in Canada. He is a Senior Wealth Advisor and Portfolio Manager with Christianson Wealth Advisors at National Bank Financial Wealth Management, and author of the book Managing the Bull, A No-Nonsense Guide to Personal Finance.