Tax changes, tuition caps and buses for private schools: How Budget 2023 will affect Albertans' wallets

If you're wondering how Budget 2023 will affect your wallet, you might already know.

Many items in the budget released Tuesday have already been announced and are simply being extended or re-affirmed in the new financial plan.

But in case you haven't been following every single government announcement for the past year or so, here's a summary of five things in the budget that affect Albertans' day-to-day finances.

Income tax indexation of 6%

Alberta's income tax thresholds and rebates used to be indexed for inflation, then they weren't for a while, now they are again.

"Indexed" means the thresholds and rebates were effectively pegged to the rate of inflation, meaning the amount you pay in real-dollar terms doesn't change.

But previous UCP Premier Jason Kenney de-indexed the thresholds and rebates in 2019, effectively increasing income taxes by about $150 in real-dollar terms for an average family over the following year.

The effect was subtle, because inflation was relatively low. But once inflation shot up so significantly, the effect became a lot bigger.

Last August, Kenney announced he would rescind the 2019 policy he introduced, and re-index Alberta's income taxes to inflation. The amount was set at 2.3 per cent for the 2022 tax year.

A study released last year by the University of Calgary's School of Public Policy estimated the period of de-indexation meant Albertans paid almost $647 million more in income taxes than they would have if taxes had remained indexed to inflation.

Budget 2023 affirms the re-indexation and sets the amount at six per cent for the 2023 tax year.

That means the basic personal amount (effectively the amount of income you can earn before paying any provincial tax) will increase from $19,814 to $21,003.

The income-tax brackets will also increase as follows.

Effect of 6% indexation for 2023 on tax brackets

Gas tax will again depend on oil prices

Alberta's on-again, off-again tax on gasoline and other fuels is set to return this summer — maybe.

Last April, the Alberta government hit pause on its fuel tax, bringing the levy on gasoline from 13 cents per litre down to zero. The move was meant to offer some relief at the pumps during a period of especially high fuel prices.

The tax holiday was to apply for as long as the average price of West Texas Intermediate (WTI) — considered the global benchmark price for oil — remained above $90 US per barrel.

When oil prices dipped later in the year, the province brought the fuel tax back – in part – for a few months, setting the rate at 4.5 cents per litre from October through December.

Then, as of Jan. 1, the fuel tax was gone again — back down to zero.

As of July 1, it will depend on oil prices again.

Budget 2023 sets out a formula for the fuel tax, tying the amount Albertans pay at the pumps to the average price for West Texas Intermediate oil.

If you're eager to know how much you'll be paying, you'll need to keep a close eye on the markets. The fuel tax will be adjusted quarterly based on the average WTI price over "the 20 trading days immediately preceding the 16th day of the last month prior to the start of the quarter."

Alberta fuel tax formula, effective July 1, 2023

Tuition cap and student loan breaks

If you're currently a student or thinking of enrolling in post-secondary education, Budget 2023 affirms some measures aimed at making it more affordable.

These measures, which include a tuition cap and breaks on student loans, were first announced a couple of weeks ago.

Starting July 1, the interest rate on student loans will be reduced by one percentage point, from prime-plus-one down to prime.

The grace period for repayments upon graduation will also be extended, from six months up to a year.

The threshold for repayment assistance plans will also increase, growing from $25,000 to $40,000. The move will extend the full benefit of the program to more Albertans who are struggling to make their loan payments.

Starting in the 2024-25 year, tuition increases will also be capped at two per cent annually.

School bus funding for private schools

Budget 2023 expands funding for school buses and extends that funding, for the first time, to private schools.

Private schools do not currently receive transportation funding from the provincial government for Grades 1 through 12.

The province plans to increase funding for school bus transportation by $414 million over the next three years "to make systemic improvements and offset rising costs while supporting parental choice."

"The changes in funding will mean about 80,000 additional students will be eligible for provincial funding support, and the parents of 47,000 students who are currently paying a fee to use bus services will save more than $20 million in transportation costs," the budget document states.

Education property tax freeze (for one year)

And, speaking of schools, Budget 2023 also includes a one-year freeze on the province's share of property taxes.

These taxes are collected by municipalities and include a municipal component, which is used to fund municipal services. But the province requisitions a certain amount of money to be collected each year from property owners to help fund education.

In the 2022-23 fiscal year, the province requisitioned $2.5 billion in property taxes.

It plans to keep that amount identical for the 2023-24 fiscal year.

The provincial requisition is then set to increase to $2.6 billion the next year, and $2.7 billion the year after that.

The actual amount you pay on your own property tax bill in a given year will depend on how the value of your property changes. But, all else being equal, the provincial component of that bill won't change.