Cardinal Point Wealth Management Alerts Canadians and Americans Living in Canada About Four Important Tax Changes in 2023

June 05 21:03 2023
Cross-border financial advisor provides timely information on recent tax reforms impacting individuals and businesses in Canada.

Cardinal Point Wealth Management, a leading cross-border wealth management firm that specializes in cross-border tax planning, is alerting Canadians and Americans living and working in Canada about four significant tax changes now in effect. They include anti-flipping property rules, new trust reporting requirements, raising the amount of taxable capital at which the small business deduction is phased out from CA$15 million to CA$50 million, and new Excessive Interest and Financing Expenses Limitation rules.

“These could have significant tax implications for Canadians and Americans living in Canada,” says Kris Rossignoli, Cross-border Tax and Private Wealth Manager at Cardinal Point Wealth Management. “We want to ensure that Canadians and U.S. citizens living in Canada are aware of these changes and are taking the necessary steps to minimize their tax liabilities.”

Anti-Flipping Property Rules 

Under new anti-flipping property rules, individuals who buy and sell properties within a short period of time may be subject to additional taxes on any profits they make. The rules are designed to reduce incentives for speculation and house flipping, and to ensure that profits from flipping residential real estate are subject to full taxation (same as employment or business income). 

For those unfamiliar with the term “flipping,” it refers to buying a property with the intention of reselling it quickly at a higher price. The anti-flipping tax affects properties sold on or after Jan. 1, 2023 and targets everyone from professional home flippers to do-it-yourselfers.

New Trust Reporting Requirements 

CRA has also implemented new trust reporting requirements. Under the new rules, trustees of certain trusts are required to provide significantly more information to the Canada Revenue Agency (CRA). The rules apply to trusts that have a Canadian resident trustee, a Canadian-resident contributor to the trust, or a Canadian resident beneficiary and a connected contributor to the trust. The rules apply to taxation years that begin on or after January 1, 2023.

Trustees must file an annual income tax (T3) return if the trust has tax payable or it distributes all or part of its income or capital gains. The new rules also require additional information on all trustees, beneficiaries, settlors, and anyone with the ability to exert control over the trust’s assets. Trustees need to be prepared to meet these new requirements or risk facing penalties from the CRA.

Raising the Amount of Taxable Capital for Small Business Deduction 

The CRA has raised the amount of taxable capital at which the small business deduction (SBD) is phased out. It was CA$15 million but is now CA$50 million. This means that more small businesses will be able to take advantage of the small business deduction and pay the lower rate of corporate tax on active business income. 

The SBD is a tax credit that applies to the first $500,000 of taxable capital and the credit reduces the amount of federal tax paid by CCPCs on their active business income. 

Under the new rule, this upper limit increases to $50 million, which allows more businesses to qualify for the SBD and receive up to a 18 percent tax reduction on their active business income up to $500,000 (differs depending on province/territory rates). The new rules apply to taxation years that begin on or after January 1, 2023.

New Excessive Interest and Financing Expenses Limitation Rules 

The Canadian government has also implemented new rules that limit the interest and financing expenses corporations can deduct for tax purposes. The rules are aimed at preventing corporations from using excessive debt to reduce their taxes. The rules apply to taxation years that begin on or after January 1, 2023.

“At Cardinal Point Wealth Management, we are committed to helping our clients navigate the complex world of cross-border taxation,” adds Rossignoli. “We encourage all Canadians and Americans living in Canada to speak with one of our advisors to discuss how these changes may impact their tax planning strategies.”

About Cardinal Point Wealth Management 

Cardinal Point Wealth Management is a cross-border wealth management firm that specializes in helping Americans living in Canada and Canadians living in the United States navigate the complexities of cross-border taxation, financial planning, and investment management. With offices in Toronto, Calgary, Palm Beach, Phoenix and Orange County, Cardinal Point Wealth Management provides comprehensive financial planning and investment management services to clients on both sides of the border.

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Company Name: Cardinal Point Wealth Management
Contact Person: Kris Rossignoli
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Address:2255 Glades Road, Suite 324A
City: Boca Raton
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Country: United States