Tax Changes Affecting Santa Claus, That Might Apply to You

Well, although Denmark, Finland, Iceland, Norway, Russia, Sweden, and the United States would like to imply that Santa is a resident of their countries, we all know that he and Mrs. Santa are Canadian citizens and residents. (Santa Claus, North Pole, H0H 0H0, Canada) So, like all Canadian residents, Santa has to file his taxes in Canada. What changes in 2022 might affect his taxes? Let me share a few things.

Trust reporting rules. A few years ago, Santa completed a property freeze. Freezing refers to taking certain assets that you own and “freezing” their value today so that any future growth will go to someone else (most commonly a family trust). This will reduce your estate taxes on death – while you don’t have to give up control or use of the assets – among other benefits. Santa set up a trust with his elves as beneficiaries when he went through the freeze, and 2022 is the first year he must file a tax return for the trust. In the past, trusts did not have to file returns if there was no tax due and the trust did not distribute any capital (assets). Beginning with the 2022 tax year, every trust must file an annual return. Trust returns are due 90 days after the end of the trust year, which for living trusts (living trusts (trusts created during your lifetime – as is the case with Santa)) is December 31st, which means Santa 2022 The trust returns are due on Mar. 31, 2023.

The first family savings account. Well, this change won’t affect Santa personally, but his elves have lived in his home for years and are looking to buy a home of their own. The 2022 federal budget introduced a new First Home Savings Account (FHSA), which can be set up in 2023 and offers tax-deductible contributions of $8,000 a year, up to $40,000 over a lifetime, to help save for a home. (Check out my August 26th article for details on these programs). The FHSA also applies to first-time home buyers building a home.

Multigenerational home renovation. Santa and Santa Claus aren’t getting any younger. While Santa is still relatively feisty for the 1,751-year-old, they’ve been thinking it would be helpful if their nephew could come and live with them and help clean the house a bit. So Santa plans to expand their home to accommodate their nephew. Santa can take advantage of a new multigenerational home improvement tax credit starting in 2023. He will be able to claim up to $7,500 (15% of the maximum $50,000 cost) to support the construction of a secondary suite, which includes a private entrance, kitchen, bedroom and bathroom.

Family Accessibility Tax Credit. Santa is a senior citizen, so he can claim a tax credit of up to $20,000 (up from $10,000 in 2021) to spend on renovating his home, which will allow him and Mrs. Claus to play a bigger role around the house effect. They’ll be making these remodels while building a suite for their nephew.

luxury car tax. On September 1, 2022, a new luxury tax comes into effect in Canada, where certain vehicles and aircraft priced over $100,000 or boats over $250,000 will face a 10% or 20% tax on the value of the item. Values ​​above these dollar thresholds if this amount is less. Santa recently spent $300,000 on a new sleigh, a BMW Cloud Rider. Thankfully, he bought it before the rules went into effect, otherwise it would have been an extra $30,000. Next time, if he can find a used sled, he intends to buy a used one, which usually allows him to avoid the luxury tax, even if the used sled costs more than $100,000.

Tim Cestnick, FCPA, FCA, CPA(IL), CFP, TEP, author, co-founder and CEO of Our Family Office Inc. contact details: tim@ourfamilyoffice.ca.