What's New for the 2024 Tax Season in Canada

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The 2024 tax season is upon us, and Canadians need to stay informed about the latest changes that will affect their filings. In this comprehensive guide, we’ll explore the key updates and adjustments to the tax code that individuals, businesses, and trusts should be aware of. From new federal tax brackets to changes in pension plans and contribution limits, we’ll cover it all.

Important Dates and Deadlines

Before diving into the specific changes, let’s start with some important dates to keep in mind for the 2024 tax year:

February 19, 2024: The CRA’s NETFILE service for 2023 tax returns becomes available.
February 29, 2024: Last day to make an RRSP contribution for the 2023 tax year.
April 30, 2024: Deadline to file a 2023 income tax return without a late-filing penalty.
June 17, 2024: Last day to file a 2023 income tax return without a late-filing penalty if you or your spouse or common-law partner have 2023 self-employment income.

Changes for Individuals

New Federal Tax Brackets

The Canada Revenue Agency (CRA) has introduced new federal tax brackets for the 2024 tax year. These brackets have been adjusted to account for inflation and changes in the cost of living. Here are the updated tax brackets:

Income up to $55,868 will be taxed at a rate of 15%.
Income between $55,868 and $111,733 will be taxed at a rate of 20.5%.
Income between $111,734 and $173,205 will be taxed at a rate of 26%.
Income between $173,206 and $246,752 will be taxed at a rate of 29.3%.
Income over $246,752 will be taxed at a rate of 33%.

It’s important to note that these tax brackets apply to federal taxes, and each province may have its own tax brackets as well.

Changes to Canada Pension Plan (CPP)

The CPP has undergone some changes for 2024. The maximum pensionable earnings have increased, which affects the contributions and benefits under the plan. Additionally, a new tier called CPP2 has been introduced for higher incomes.

The maximum pensionable earnings for the CPP have increased to $73,200 in 2024. This means that the amount of income subject to CPP contributions has increased. The introduction of CPP2 aims to provide greater retirement security for individuals with incomes over $68,500. The CPP2 tier will extend up to $79,400 in 2025.

Employment Insurance (EI) Premium Rate Hike

Starting January 2, 2024, the employment insurance (EI) premium rates will increase. Workers will now contribute $1.66 per $100 of earnings, up from $1.63 in the previous year. Employers will contribute $2.32 per $100 of pay, up from $2.28.

The increase in EI premium rates is in response to the growing demand for EI coverage and aims to provide better support for those working in uncertain job markets. While this means a slight increase in deductions from employees’ pay, it also means more support in case of unemployment.

Changes to Deductions and Credits

Several deductions and credits have been adjusted for the 2024 tax year. Here are some notable changes:

The deduction for tradesperson’s tools expenses has increased to $1,000, up from $500.
The First Home Savings Account (FHSA) has been introduced as a registered account to help individuals save for their first home. Contributions to an FHSA are now deductible, and the income earned in an FHSA is not taxable. Qualifying withdrawals to purchase a first home are also not taxable.
The Multigenerational Home Renovation Tax Credit offers a refundable tax credit of up to $7,500 for qualifying renovations to an eligible dwelling. This credit is designed to support multi-generational living arrangements.
The temporary flat-rate method for claiming home office expenses, which was introduced during the COVID-19 pandemic, is no longer available for the 2024 tax year. Individuals will need to use the detailed method to claim home office expenses.

These are just a few of the changes that individuals should be aware of when filing their taxes for the 2024 tax year.

Changes for Businesses

Immediate Expensing of Capital

For eligible property available for use before January 1, 2024, businesses can take advantage of immediate expensing of capital. This incentive allows businesses to deduct the full cost of eligible property in the year it is acquired, rather than depreciating it over time. Please consult the CRA’s guidelines for specific eligibility criteria.

Accelerated Investment Incentive

The accelerated investment incentive is designed to encourage businesses to invest in eligible property. Eligible property acquired after November 20, 2018, and available for use before January 1, 2028, may qualify for accelerated capital cost allowance deductions. There is a phase-out period for eligible property that becomes available for use after 2023, reducing the overall capital cost allowance over the years 2024 to 2027.

Changes to Zero-Emission Vehicles and Automotive Equipment

The federal government has proposed a temporary enhanced Capital Cost Allowance (CCA) rate of 100% for eligible zero-emission vehicles and automotive equipment. However, there is a phase-out period for eligible vehicles or equipment that becomes available for use after 2023, reducing the overall CCA rate from 100%.

Substantive Canadian Controlled Private Corporations (CCPC)

Substantive CCPCs are private corporations resident in Canada that are ultimately controlled by Canadian-resident individuals. The government has announced plans to prevent tax planning strategies that aim to avoid CCPC status and its refundable tax regime. Legislation has been introduced to address this issue, and it will apply to tax years starting on or after April 7, 2022.

Clean Economy Investment Tax Credits (ITC)

The government continues to prioritize clean economy investments and has introduced various tax credits to encourage such investments. Effective dates for eligibility for different clean economy ITCs have been announced, including Carbon Capture, Utilization, and Storage; Clean Technology; Clean Hydrogen; Clean Technology Manufacturing; Clean Electricity; Expanded Eligibility for Clean Technology and Clean Electricity ITCs for Waste Biomass; and Labour Requirements. These incentives aim to promote the transition to a cleaner and more sustainable economy.

Changes for Trusts

Beneficial Ownership Reporting

Starting with tax years ending after December 30, 2023, all trusts, including bare trusts, must annually file a T3 Income Tax and Information Return, which includes additional beneficial ownership information. This reporting requirement aims to enhance transparency and combat tax evasion.

Other Key Developments

In addition to the changes mentioned above, there are other key developments to be aware of for the 2024 tax season. These include changes to provincial tax rates, property taxes, and carbon taxes. Each province may have its own specific changes, so it’s important to consult the relevant provincial tax authority for detailed information.

Conclusion

The 2024 tax season in Canada brings a range of changes that individuals, businesses, and trusts need to be aware of. From new federal tax brackets to adjustments in pension plans, it’s crucial to stay informed to ensure accurate and timely filings. Remember to consult the CRA’s guidelines and seek professional advice if needed. Stay proactive and well-informed to navigate the tax landscape and maximize your benefits in the coming year.