Tax season is here once again. If you haven’t filed your taxes for 2024 yet, don’t worry–you’re not alone and there’s still time.
The deadline for most Canadians to file their 2024 tax returns and pay any amounts owing is April 30, 2025, or June 15, 2025 for those who are self-employed.
Here’s a primer on the major tax rule and rebate changes to know about for 2024 filings and how to use your tax credits or refund to achieve your financial goals.
1. Capital Gains Tax Changes
Changes to the capital gains inclusion rate initially slated for June 25, 2024, have been deferred until January 1, 2026. When they come into effect, they’ll
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Increase taxes on capital gains above $250,000 for individuals
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Increase the inclusion rate the Canada Revenue Agency (CRA) uses to determine taxable capital gains and allowable capital losses from one-half to two-thirds.
At that time, the government intends to maintain or enhance existing programs to support middle-class Canadians, including:
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Maintaining principal residence exemption.
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Introducing the $250,000 threshold for individuals.
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Increasing Lifetime Capital Gains Exemption to $1.25 million.
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Creating a new investment incentive for Canadian Entrepreneurs.
2. Carbon Tax and Rebate Changes
The Canada Carbon Rebate (formerly known as the Climate Action Incentive Payment [CAIP]) is a tax-free payment to help eligible Canadians in rural communities offset the cost of federal pollution pricing.
As of June 22, 2024, the Government of Canada has increased the Canada Carbon Rebate rural supplement from 10% to 20% of the base amount. Eligibility is also reverting back to using the 2016 Census data instead of the 2021 Census, which is good news for those deemed ineligible under the 2021 Census data. Retroactive payments from April and July will be issued together in October’s payment.
You’re eligible if you are:
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Either 19 years old the month before the CRA makes the payment or under 19 and living with a partner or your child.
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A resident of Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, or Saskatchewan.
3. Home Buyers’ Plan (HBP) Withdrawals
The Home Buyers’ Plan (HBP) allows Canadian residents to make withdrawals from Registered Retirement Savings Plans (RRSP) to build or buy their first home.
The HBP withdrawal limit has increased from $35,000 to $60,000 for withdrawals made after April 16, 2024.
Temporary repayment relief was introduced to defer the start of the 15-year repayment period by an additional three years for participants making a first withdrawal between January 1, 2022, and December 31, 2025.
This means you can withdraw more, and the 15-year repayment period will start in the fifth year following the year that the first withdrawal was made.
4. Alternative Minimum Tax (AMT) Calculations
Starting in 2024, Alternative Minimum Tax (AMT) calculation rules have changed to include:
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An increase of the minimum tax rate from 15% to 20.5%.
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An increase of the basic exemption threshold to $173,205.
There are also changes to the calculation of adjusted taxable income, the special foreign tax credit, and the minimum tax carryover, many of which limit the value of most non-refundable tax credits.
5. Short-Term Rentals
Starting January 1, 2024, if you owned, at any time, a short-term rental that wasn’t in compliance with your local legislation, you can no longer deduct the non-compliant amount when you file your taxes.
6. TFSA and RRSP Contributions Limits
The Tax-Free Savings Account (TFSA) contribution limit is remaining at $7,000 for 2024. With this year’s limit, your total contribution room is now up to $102,000 if you’ve qualified for the TFSA every year since its inception in 2009.
The Registered Retirement Savings Plan (RRSP) annual dollar limit for the 2024 tax year is $31,560, up from $30,780 in 2023. However, the individual contribution limit is still capped at 18% of your earned income in the previous year.
7. New OAS Limit Amounts
Old Age Security (OAS) provides retired Canadians with a source of retirement income. However, retirees with income over certain limit amounts might find their OA amount reduced or even cancelled.
The OAS thresholds for the 2024 tax year are as follows:
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Minimum income recovery threshold: $90,997
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Maximum recovery threshold for ages 65 to 74: $148,451
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Maximum recovery threshold for ages 75 and older: $154,196.
8. Increased Canadian Pension Plan Maximum Contributions
The Canada Pension Plan (CPP) and Québec Pension Plan (QPP) have increased by 6.5% as part of the government’s continued implementation of the CPP enhancement. Earnings and contributions consider the average growth rate of salaries and weekly wages earned throughout Canada.
- Maximum pensionable earnings are now $68,500, with a basic exemption of $3,500 for 2024.
- Employee and employer contribution rates for 2024 are remaining 5.9% with a maximum contribution of $3,867.50, up from $3,754.45.
- Self-employed contribution rates remain 11.9% with a maximum contribution of $7,735.00, up from $7,508.90.
Looking ahead to the 2025 filings, the first pensionable earnings ceiling will be $71,300 with the basic exemption remaining the same.
What Is The New Tax Increase For 2024 Canada?
In addition to the above changes, Canada’s tax brackets are being revised annually. To help Canadians keep up with the cost of inflation, the federal government has adjusted tax brackets for 2024, increasing them from 2023 thresholds. For some, the adjustments may result in paying a lower tax rate on more income.
The new brackets and tax rates for 2024 are:
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Up to $55,867 of income is taxed at 15%
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Income more than $55,867 to $111,733 is taxed at 20.5%
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Income more than $111,733 to $173,205 is taxed at 26%
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Income more than $173,205 to $246,752 is taxed at 29%
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Above $246,752, income is taxed at 33%.
What is the Basic Personal Amount for Taxes In Canada 2024?
The Basic Personal Amount (BPA) has increased to $15,705. The BPA is a non-refundable credit that can be claimed by anyone who files income taxes in Canada. The credit gives individuals making less than a certain amount a full deduction from income tax, while those who make more than the basic amount receive a partial reduction.
How Filing Your Taxes Impacts Debt
Filing a tax return may bring up feelings of dread –especially if you owe a balance on your return–but it’s still necessary, especially if you have debt.
Not filing a current tax return can have major financial implications, including penalties, interest charges, and/or the temporary loss of some government benefits until the taxes are filed and processed.
Avoid Costly Penalties
It’s important to file your return and pay any taxes owing by the deadline to avoid penalties that cost you more in the long run.
If you have a balance owing and you file late, you will be subject to interest and a late-filing penalty. The late-filing penalty is 5% of your 2024 balance owing, plus an additional 1% for every month it is late, to a maximum of 12 months.
Also, if the CRA charged you a late-filing penalty for any year between 2020 and 2023 and requested a formal demand for a return, your late-filing penalty for 2024 would be 10% of your balance owing. You’d also be charged an additional 2% for each full month that you file after the due date, to a maximum of 20 months.
That said, it’s not an all-or-nothing situation. If you can’t pay your balance in full, you can work with the CRA to pay it off through installments.
Impact on Government Benefits
If you’re receiving certain benefits from the federal government,, failing to file your return on time may result in your benefits being paused. This is because eligibility for certain government benefits is contingent on the numbers on your tax return. You also won’t be able to apply for any new benefits, such as the Canadian Dental Care Plan, without filing your 2024 tax return.
Important Income Records
Not filing a current tax return can result in more complications than just interest charges. The information on your tax return is used to determine:
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Loans, such as student loans, mortgages, and lines of credit.
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Student grants, as well as certain bursaries and scholarships.
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Low-income grants for programs including home repair and heating rebates.
It’s important to file on time, even if you can’t pay your balance by the deadline, to avoid being charged the late filing penalty and keep your federal income records updated.
Income Tax Planning
Keeping informed is key to making good financial decisions, especially when understanding how the latest tax rules will affect your finances. Some good rules of thumb include:
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Understanding which tax bracket you fall into to help you set achievable financial goals for the year ahead.
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Contributing to an RRSP each year to lower your taxable income for the year and save for retirement.
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Capitalizing on home buyer tax perks, like the First Home Saving Account (FHSA) and the First-Time Home Buyers’ Tax Credit (HBTC).
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Monitoring your eligibility for both federal and provincial benefits like child care and environmental rebates.
Planning for Financial Success in 2025
Receiving a refund on your 2024 taxes can help you tackle debt and reduce financial strain for the coming year. Consider using it to pay down any debt you may have, such as credit card debt, or put it in savings. You could set up an automation rule to move the money to a savings account as soon as you receive it or set it aside in a TFSA to save for a major purchase or goal.
With so much turbulence amid rising costs and tax changes, maintaining a budget and setting SMART financial goals for 2025 is crucial. Review your budget frequently and distinguish between needs and wants when things become challenging. By focusing on what you can control versus what you can’t, you’ll be able to build confidence and maintain positive momentum.
And when in doubt, ask for help from our certified Credit Counsellors. Call us at 1 (800) 267-2272 to get started.
