New Tax Breaks Are Coming in 2022: What Does That Mean for Your Income?

What tax changes can you expect in 2022?

edit CRA taxes

Image source: Getty Images

Every year, the Canada Revenue Agency (CRA) makes slight adjustments to the tax code in order to keep up with inflation (called “indexation”). This year, with the inflation rate hitting historic highs, the CRA has had to make some big changes, all of which could help reduce your tax bill in 2022. Let’s take a look at what 2022 indexation means for your income.

BPA got a bump

Recall that the basic personal amount (BPA) is a tax credit that reduces your taxable income by a certain amount. Every Canadian is entitled to claim the BPA on their tax return, and every year the CRA changes the BPA to keep up with inflation.

In 2022, the BPA will increase from $13,808 to $14,398. That means you can shave $14,398 from your taxable income. For instance, if you made $75,000 this year, then only $60,602 ($75,000 less $14,398) would be considered taxable.

The change in the BPA isn’t open to everyone, however. Only those who have a net income of $150,473 or less will get the full change in the BPA ($590). If your net income is greater than $150,473 but less than $214,368, your BPA bump will increase slightly, with the upper end of that range getting less and the lower end getting more. If you made more than $214,368, your BPA is a flat $12,298.

The minimum taxable amount also got a bump

In 2021, if you earned $49,020 or less, then you would have fallen in the 15% tax bracket. That’s much less than the second tax bracket, 20.5%, which applied to Canadians who earned more than $49,020, but less than $98,040.

To adjust for inflation, however, the CRA has bumped the minimum taxable amount up by $1,177. Now, if you earn $50,197 or less, you’ll fall in the 15% tax bracket.

All tax brackets increased slightly

In addition to the minimum taxable amount, all tax brackets raised slightly. Here’s what they look like for 2022 (in comparison to 2021)

Tax Bracket20222021
20.5%$50,197 to $100,392$49,020 to $98,040
26%$100,392 to $155,625$98,040 to $151,978
29%$155,625 to $221,708 $151,978 to $216,511
33%Over $221,708 Over $216,511
Tax bracket thresholds

Bottom line

As the Canadian government continues to fight back inflation, we may see other changes to the tax code in the near future. But for now, these are the changes you can expect in 2022.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

More on Personal Finance

Female hand holding piggy bank. Save money and financial investment
Personal Finance

Here’s Why a Big Emergency Fund Is a Terrible, Terrible Idea

Here's why saving more than six months' worth of expenses can be disadvantageous to your household.

Read more »

cup of cappuccino with a sad face
Personal Finance

5 Super-Simple Ways to Completely Ruin Your Credit Score

Building your credit score takes time, dedication, and smart decisions. Tearing your credit score apart — well, you could do…

Read more »

Young woman sat at laptop by a window
Personal Finance

5 High-Paying Side Hustles That Could Help You Save for Retirement in 2022

If you're struggling to save for retirement, here are five side gigs that could give your retirement fund a boost.

Read more »

Hour glass and calendar concept for time slipping away for important appointment date, schedule and deadline
Personal Finance

The Tax Deadline Is Almost Here! Here Are 5 Things You Need to Know if You Haven’t Filed Yet

The deadline to file your taxes is May 2. If you haven't started yet, here's what you should know.

Read more »

consider the options
Personal Finance

New to Investing? Be Sure You Avoid These 5 Newbie Mistakes

If you're new to investing, here are five big mistakes you should watch out for.

Read more »

Couple relaxing on a beach in front of a sunset
Personal Finance

Lazy Canadians: Here’s How You Can Make $200 Per Week in Passive Income

To earn $200 a week, invest money in high-quality stocks or ETFs.

Read more »

gas station, convenience store, gas pumps
Personal Finance

Costco vs. Canadian Tire: Which Rewards Card Will Save You More on Gas in 2022?

The CIBC Costco Mastercard earns 3% back at Costco Gas, and the Canadian Tire Mastercard earns 10 cents per litre.…

Read more »

young woman celebrating a victory while working with mobile phone in the office
Personal Finance

Finally! Apply for a CIBC Costco Mastercard Now to Get a Welcome Bonus!

From now until December 31, 2022, CIBC will give you a welcome bonus on the new CIBC Costco Mastercard.

Read more »