NEW 2024 Canadian Tax Changes That Will Impact YOU
The Canadian tax system is constantly evolving to reflect economic and social realities. This makes it important for Canadian tax payers to stay informed on the latest tax changes and how they affect your household income.
2024 Tax Season has already kicked in and If you file your taxes on paper you might have received your income tax package already. The below changes will have an impact on your tax returns as well as your overall take-home pay.
Key takeaways from this article;
Tax penalties have been increased to 10%, the highest since 2001.
Tax brackets have shifted and many contributions have changed to account for inflation costs.
Covid-19 credits like Work-From-Home have expired.
Important Tax Deadlines
February 19, 2024
This is the first day you can start filing your 2023 tax return online. If you file on paper, you should receive your income tax package in the mail by this date.
April 30, 2024
Two key events for this date:
This is the deadline for most employed Canadians to file a tax return.
If you owe money to the CRA regardless of if employed or self-employed, this is also the payment deadline.
June 15, 2024
If you or your spouse or common-law partner are self-employed, this is the deadline to file your tax returns.
As this date falls on a Saturday in 2024, you should consider filing your tax returns on or before June 17, 2024. If you owe money to the CRA, you'll still need to pay by April 30, 2024, to avoid paying interest on overdue payments.
You’ll avoid late-filing penalties and interest by filing and paying on time.
What’s new for 2024?
Below are the 8 most important changes you should know about when filing your 2023 tax returns and doing overall tax planning:
Interest and Penalties
Got a tax bill over $10,000? The CRA requires you to file your 2024 taxes electronically via My CRA Account or pay a penalty of $100 per payment.
2. Interest on Late Taxes
The current rate will be increased from 9% to 10% starting January 1, 2024, and will be 10% in the second quarter of 2024 onwards, the highest charged in 20 years.
The last time the CRA charged interest at 10% was in 2001.
3. Home office expenses for employees
Remember the flat deduction method of $400 claim introduced during Covid? That’s GONE.
According to the CRA, this was only temporary as many Canadians were forced to work from home during the pandemic. With most employers easing into the ‘new normal’, and workers returning to the office most of the week, the CRA has decided that needs to go.
Going forward, employees will need to follow the detailed method to make any Work From Home (WFH) claims.
4. First Home Saving Account (FHSA)
The FHSA is a new registered plan to help qualified individuals to save to buy or build a qualifying home. Starting April 1, 2023, contributions to an FHSA are generally deductible, and qualifying withdrawals made from an FHSA to buy or build a qualifying home are tax-free. Your notice of assessment from the CRA will also include a table similar to the RRSP table for the FHSA balances where applicable.
Your contributions to FHSA are tax deductible while withdrawals as long as you use them towards a down payment for purchasing your first home are tax-free.
5. Residential Property Flipping Rule
Howdy, Property Flippers!
The Residential Property Flipping Rule came into effect on January 1, 2023. Basically any profits from flipping a residential unit including a rental property located in Canada are now taxable. This rule also deems profits from a sell of residential property located in Canada that was owned for less than 365 consecutive days to be business income and not a capital gain, unless the property was already considered inventory of the taxpayer or the disposition occurred due to, or in anticipation of, certain life events.
6. Multigenerational Home Renovation Tax Credit
The CRA will give up to $7,500 (15 percent of $50,000) of costs of any qualifying renovations to an eligible home completed with the objective of allowing a qualifying individual to live with a qualifying relative.
7. Tax Brackets have shifted to account for inflation
In order to maintain buying power for Canadians as prices of basic goods and services continue to skyrocket, the CRA has adjusted tax brackets as follows:
$0 to $53,359 of income (15%)
More than $53,359 to $106,717 (20.5%)
More than $106,717 to $165,430(26%)
More than $165,430 to $235,675 (29%)
$235,675 and higher (33%)
If you were initially on the upper end of a tax bracket before this upward adjustment by the CRA, you might find that you’ve now shifted to a lower bracket and will be paying less taxes as a result.
8. Canadian Pension Plan (CPP) maximum contributions have been increased
Canadian Pension Plan has been enhanced to include a second earnings ceilings:
Tier 1: Those earning up to $68,500, no changes.
Tier 2: Those earning more than $68,500 but up to $73,200 will pay an additional 4 percent (%). Self-employed folks - who are the employer and the employee at the same time - will contribute 8%.
These changes affect employers as well as employees