Tax season 2023 has already started, and as an investor, you should get yourself ready in advance. Even though millions of Canadians file their taxes each year, the task is a bit challenging. Despite being an expert in planning your new investments and finances, you may still need more tax preparation knowledge.
To ensure that you are filing your taxes correctly, you can discuss it with a professional or study it independently. Whatever decision you make, knowing the basics of Canadian taxes and preparing for them is important.
In this article, we will reveal some valuable tips to help you prepare for tax season 2023. So, let’s get started!
8 Tips to Prepare for Tax Season 2023
As a Canadian resident, you are required to file taxes with the CRA (Canada Revenue Agency) each year. There may be exceptions to this rule, but you must pay Canadian taxes if you are making money in Canada.
Make sure to familiarize yourself with Tax 2023 Canada before paying any employment taxes, social security taxes 2023, organizational taxes, or property rental taxes. Here are some of the things you need to know for that.
1. Register for a CRA Account (Canada Revenue Agency)
A CRA account makes tax filing simple, as it gives you access to this year’s tax data and your previous tax files. As the verification process takes some time, this is an excellent moment to begin receiving full access to your CRA information.
2. Mark the Important Dates
Tax filing dates are among the most significant things for you to remember. The Canada Revenue Agency (CRA) sets strict deadlines for returns and payments. The last date for most Canadians to file their income tax and benefit returns is April 30, 2023.
3. Identify Your Tax Category
The way you earn your money significantly impacts how you file your taxes and what tax bracket you fall into. For instance, taxes for self-employed individuals vary greatly from those with normal jobs. Similarly, a non-resident of Canada will file taxes differently than a Canadian resident. Therefore, you need to identify your tax category.
4. Know the Tax Brackets 2023 in Canada
You might be wondering what the tax brackets in Canada 2023 are. For that, you need to understand how much Canadian taxes are important, along with the tax brackets.
Furthermore, it is worth noting that Canada has a marginal tax structure. This means that the amount of taxes you pay depends on your taxable income. Generally speaking, the more money you make, the more your income is taxed.
Here is a breakdown of tax brackets 2023 and other tax rates in Canada 2023:
- The CRA estimates that in 2023, 15% will be Canada’s lowest federal tax rate. Your yearly taxable income must be $53,359 or less to qualify for it.
- People with taxable earnings between $53,359 and $106,717 will pay a 20.5% tax.
- If you make between $106,717 and $165,430 per year, your tax rate will be 26%. However, if your earnings are between $165,430 and $235,675, your tax should range around 29%.
- People making more than $235,675 per year have the highest federal tax rate on taxable income, i.e., 33%.
- Canadians who earn less than the basic personal level are exempted from tax. Therefore, you may expect to pay no taxes if your yearly income is less than $15,000.
You can read more details on income tax in the Federal Income Tax and Benefit Guide.
5. Stay Updated with Income Tax Changes
Since tax laws keep changing with time, it is essential to know about the latest trends as they affect how you will file taxes. The important tax changes in 2023 include:
- The maximum contribution for the Registered Retirement Savings Plan (RRSP) is now $30,780.
- The Tax-Free Saving Account (TSFA) contribution limit is $6,500.
- The contribution limit for First Home Savings Account (FHSA) is $8000.
6. Check Carry-Forward Amounts
Keeping track of your carry-forward amounts for capital losses, education, and RRSP contributions is essential. You can check the Notice of Assessment to see your RRSP contribution limit for 2023. This will help you to plan and maximize your RRSP contributions and prevent over-contribution fines. Moreover, you can also review these balances on your CRA account.
7. Keep Your Receipts
Always retain the original records and receipts if you want to claim something. This is necessary as the CRA will need to see them to evaluate your claim. Even though most of our tax information is mentioned on the information slips, you may still have income from a side business, rental properties, stock and bond transactions, commodities, or cryptocurrencies. Therefore, it is best to organize your paperwork before the tax season.
8. Calculate Your Taxes
If you want to better understand your tax situation, the CRA (Canada Revenue Agency) has an online tax 2023 Canada calculator. You can check out their website for guidelines on calculating your taxes based on your income.
What Do You Need to File the Taxes?
Things you need to file taxes in 2023 in Canada are all dependent on at what capacity you are filing the taxes. For example, personal taxes, savings, investments, retirement taxes, etc., each need a distinct type of form filled out with different information. However, the one thing common in every process is:
To start, you will need the following things to finish a tax return:
- Social Insurance Numbers for you, your spouse, and any children (if applicable)
- Date of births of family members
- Net income figures for your spouse and any kids for whom you are claiming credits (For example, the Canada Caregiver Amount, one of several to which you may be eligible)
- Total payments made to CRA in installments.
- Notice of Assessments from the return from last year.
- Your NETFILE access key
Before the tax season 2023, make sure to save the following slips (as applicable to you).
- T4 slips
Payments For Expenses
You can deduct or claim tax credits for the entire year’s expenses. Many of them are only available for purchases made throughout the year. Therefore, make sure to pay for them before the year ends. This can guarantee that you are eligible for a credit or deduction on your 2022 tax return.
Other Necessary Documents
Keeping your tax records from earlier years is also crucial. When filing for the current year, you might need to provide some of the following documents:
- Carry forward amounts for tuition, donations, business use-of-home, etc.
- CRA’s notice of assessment of the previous year
- Loss carry forward amounts
- Other CRA correspondence
How to Maximize Your Tax Return in Canada?
To optimize your tax return, you should first calculate your taxable income. Next, use as many tax credits and deductions as possible, so you can increase it. While a deduction reduces your taxable income, a credit lowers the amount of taxes you owe.
Increase Your Investment the Right Way
To sum it up, tax preparation should always be your priority. With higher credit, you can achieve your financial goals and have more investment options. Once you start developing credit, you will be more able to get what you desire in life, like a mortgage fund.
If you have good credits this tax season 2023 and are looking for mortgage fund investment, then RealAlt® Investment is a good option to boost your savings/investments.
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Frequently Asked Questions
There are three options for preparing your taxes:
- Hire a tax professional
- Use tax preparation software
- Do it on your own
How long do you have to keep your income tax records?
It is important to keep your supporting documents for 6 years after doing the taxes. The main reason to retain these documents is to provide CRA with the required information in case you are selected for a review.