What’s New for 2022 in Income Tax Credits and Deductions
We recently sat down with Brent Sousa, Senior Manager of SB Partners, to discuss what is new for 2022 tax credits and deductions on our podcast. In the wake of the pandemic and reconfigured working environments, there are quite a few changes. Business owners, first-time home buyers, seniors, people affected by diabetes, and those who chose a staycation in 2022 may find some nice surprises.
Business owners, employees, and tradespeople
From an employment and business perspective, there are several new items outlined for 2022 as well as some continued programs to support working from home.
Temporary Flat Rate Method for Employee Home Office Expenses
If you are an employee who works from home, the simplified “flat rate method” is still available for people who found themselves working from home in 2020, 2021, and 2022 due to the COVID-19 pandemic. To qualify, you must have worked more than 50% of the time from home for a period of at least 4 consecutive weeks. There are two methods for claiming home office expenses, the simplified temporary flat rate method is still available, or the more detailed reporting method. A full comparison between the two methods is available online.
The simplified flat rate method was introduced as a temporary measure and is still available in 2022. If you qualify, you can claim $2 a day up to a maximum of $500. This simplified method does not require your employer to complete the T2200 nor do you have to document expenses. Note that this is for employees, if you are self-employed, you will want to refer to the CRA’s Business Use of Home Expenses information.
Labour Mobility Tax Deduction for Tradespeople
New for 2022, and subsequent tax years, is the Labour Mobility Tax Deduction for Tradespeople. This is designed to help tradespeople and apprentices alleviate some of the expenses of having to travel more than 150km away from their ordinary residence to temporary work locations and is designed to offset the cost of temporary lodging, transportation, and meals.
This applies to tradespeople in the construction industry who are performing construction duties that include “include the erection, excavation, installation, alteration, modification, repair, improvement, demolition, destruction, dismantling or removal of all or any part of a building, structure, surface or sub-surface construction or any similar property.”1
Immediate Expensing of Capital Assets
For business owners, expensing of capital assets such as equipment, furniture, vehicles, etc. is not new, however, new for 2022 is the ability to write off 100% of the acquisition in the year it was acquired. This is a great way to help reduce taxable income to alleviate and offset the rising costs and interest rates. This was passed into law in June 2020 and can be applied to capital expenses up to $1.5 million.
Ontario Seniors Care at Home Tax Credit
The Ontario Seniors Care at Home Tax Credit is a new refundable tax credit introduced in 2022 to help low to medium-income seniors who turned 70 or have a spouse or common-law partner who turned 70, with eligible medical expenses that provides them with support to continue living at home. The credit is 25% of up to $6,000 of eligible medical expenses to a maximum of $1,500. The percentage is reduced at certain income levels.
Eligible expenses can include:
- attendant care (certification required)
- care of a provincially authorized medical practitioner (e.g., nurse, occupational therapist)
- dental, vision, and hearing care (for example, glasses, dentures, and hearing aids)
- walking aids (for example, walkers, canes)
- wheelchairs and electric scooters
- bathroom aids (for example, grab bars, grips, rails)
- diapers and disposable briefs
- hospital beds
- oxygen and assisted breathing devices
- renovation or construction that improves a person’s mobility, access, or functioning within the home because of severe and prolonged impairment.
More details on eligible expenses can be found here.
Home Accessibility Tax Credit (HATC)
The federal, non-refundable Home Accessibility Tax Credit has doubled increasing the annual expense limit on home renovations for the installation of accessibility features such as wheelchair ramps, stair lifts and grab bars from $10,000 to $20,000. To claim this credit you must be eligible for the Disability Tax Credit or 65 years or older at the end of 2022. This can provide a non-refundable credit of up to $3,000.
In Ontario, there is also the Seniors’ Home Safety Tax Credit, a temporary, refundable tax credit for 2021 and 2022 of up to 25% of eligible expenses up to $10,000 for a maximum credit of $2,500.
Rising needs and costs for medical expenses are a continuing challenge for everyone. In 2022, there were several new tax credits introduced to help families.
Disability Tax Credit
The Disability Tax Credit welcomed individuals with type 1 diabetes as now meeting the requirements to claim Life-Sustaining Therapies. It is a non-refundable tax credit that can be claimed retroactively for up to 10 years and can be transferred to other family members or care providers who meet the eligibility requirements.
Eligible therapies must be taken at least twice a week in 2021 and 2022 and include:
- insulin therapy
- oxygen therapy
- chest physiotherapy
- other therapies
A full list of what is eligible is available on the Diabetes Canada website, and more information on eligibility and claiming the tax credit can be found at Canada.ca.
Medical Expense Tax Credit
The Medical Expense Tax Credit is a non-refundable tax credit that helps reduce the amount of tax you have to pay. This is not a new tax credit, but in 2022 the Medical Expense Tax Credit (METC) for Surrogacy and Other Expenses received royal assent. For 2022 and subsequent tax years costs related to fertility treatments including:
- payments to a medical practitioner or a public or private hospital for a medical service (e.g., generally certain medical procedures within the in-vitro fertilization (IVF) process);
- prescription drugs (e.g., prescribed fertility drugs); and
- payments for certain lab or diagnostic procedures (e.g., ultrasounds)
Are now eligible for the Medical Expense Tax Credit.
Other additions, changes, and updates
Other credits of note in 2022 include the Ontario Staycation Tax Credit and the First-time Home Buyers’ Tax Credit.
Ontario Staycation Tax Credit
We posted an article on the details related to the Ontario Staycation Tax Credit in 2022. For anyone who braved Pearson Airport and the struggles they faced with line-ups, baggage, and air travel in general opting for an Ontario Staycation was probably top of the list for their next trip. This new temporary refundable tax credit allows Ontarians to claim 20% of up to $1000 in eligible accommodation expenses for an individual or $2000 per family. The trip must be for leisure and not business purposes and can be applied to short-term accommodations of less than a month for camping, hotels, motels, resorts, lodges, bed and breakfast establishments, cottages, or vacation rental properties. Only one person per family can claim the credit, and the vendor must be registered for a GST/HST number which shows on the receipt.
First-Time Home Buyers’ Tax Credit
The First-time Home Buyers’ Tax Credit again is not new but it has doubled for 2022. The non-refundable credit used to be $750 and has been increased to $1,500. It can be applied to qualifying home purchases that include:
- single-family houses
- semi-detached houses
- mobile homes
- condominium units
- apartments in duplexes, triplexes, fourplexes, or apartment buildings
For more information, please visit the CRA website.
Tax time can be daunting and cause a lot of anxiety, working with tax professionals such as SB Partners, is a good way to ensure you are taking advantage of all the credits and deductions available to you federally and provincially. For self-employed individuals, there are additional benefits to consulting a tax professional to ensure your maximizing reductions to your business and personal taxable income. Don’t wait until the last minute, get started by referring to our comprehensive tax preparation checklist and start now.
Listen to our latest Accounting for our Community Podcast on Maximizing Your Tax Savings: A Guide to 2022 Deductions and Credits