Small Business Tax Changes in 2023

Tax season is here again, and with it are some changes that Canadian small business owners need to know. With any new update, we recommend reviewing what has been implemented in previous years to ensure you know what exactly is changing and what that means for your small business. Below are some changes and additions that could apply when filing your taxes this year.

WAGE AND RENT SUBSIDIES FOR BUSINESSES

Between March 15, 2020 to May 7, 2022, the Canada Revenue Agency (CRA) provided wage and rent subsidies to support wage and rent-related expenses during the COVID-19 pandemic for various businesses, charities, etc. It is important to note that as of November 4, 2022, you can no longer apply for the subsidies if you did so during tax time.

AIR QUALITY IMPROVEMENT TAX CREDIT

This temporary tax credit is available for small businesses to claim on their taxes if eligible. Because of the pandemic, many small businesses required greater ventilation and air filtration systems. To assist in these expenses, the air quality improvement tax credit is available for small business owners to claim 25% of their expenses, as long as the expenses did not exceed a maximum of $10,000 per location ($50,000 across all locations) and were made between September 1, 2021 to December 31, 2022.

Since this tax credit was available in the latter half of 2021, many small business owners who purchased ventilation and air filtration systems in 2022 can now take this opportunity to report their expenses on their taxes, so be sure to take note of this addition.

AUTOMOBILE DEDUCTION LIMITS AND EXPENSE BENEFIT RATES FOR BUSINESSES

If you purchased a vehicle for your small business, there are some changes that apply as of January 1, 2023, as outlined by the Government of Canada:

• There is an increase in the ceiling for capital cost allowances for Class 10.1 passenger vehicles from $34,000 to $36,000 that were obtained on or after January 1, 2023.
• For Class 54 zero-emission passenger vehicles, the ceiling for capital cost allowances increased from $59,000 to $61,000 for vehicles obtained on or after January 1, 2023.
• For employers who pay their employees to use their own personal vehicle for business purposes, the deduction limit of tax-exempt allowances has increased to 68 cents/km for the first 5,000 km driven (a seven-cent increase), and any additional kilometres after that becomes 62 cents. This applies to businesses within the provinces.

EFILE AND REFILE CHANGES

If you file your taxes electronically with the CRA, you will need to renew your participation to access their electronic services. This is a result of the CRA’s suitability screening that they do each year to ensure those electronically submitting taxes on behalf of a client are permitted to do so. Instructions and more details are available on the Government of Canada’s updates page.

CONTRIBUTION LIMIT TO TAX-FREE SAVINGS ACCOUNT

Do you have a tax-free savings account (TFSA) for your small business? If so, the 2023 annual contribution limit has increased to $6,500, which is the first time it has been raised since 2019.

ONTARIO ELECTRICITY REBATE

If you live in Ontario, the Ontario Energy Board (OEB) outlined a reduction in electricity prices for households and small businesses that would take place November 1, 2022. It is also noted by the OEB that the Ontario Electricity Rebate changed to 11.7%, effective on the same date. This change in the pre-tax credit is important to take note of moving forward when filing taxes and calculating expenses.

SMALL BUSINESS SOLUTIONS FROM THE UPS STORE

Need help getting organized during tax season? The UPS Store has a variety of small business solutions. From printing services (at our locations and online) to shredding and more, we’ve got you covered.

Please note: The UPS Store does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only. If you think one or more of these changes could have an impact on your taxes, it’s important to seek the advice of a tax professional before filing your return. This precaution will prevent you from jeopardizing the financial health and general well-being of your small business by filing an erroneous return or by violating CRA rules.