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2024 Tax Updates
Personal tax rates:
Personal top marginal tax rate: in Ontario remained at 53.5% in 2024. Click to see our tax rate chart:
* The tax rates are for capital gains under the $250,000 threshold.
Capital gains inclusion rate: increased from ½ to ⅔, for capital gains realized after June 24, 2024; for individuals and graduated rate estates, the effective capital gains inclusion rate will be ½ on the first $250,000 of capital gains earned in the year and then ⅔ on any amount above the $250,000 threshold.
New real estate policies:
Tax-free first home savings account (FHSA): If you are a Canadian resident age 18 or older, contribute to a FHSA to help save towards a qualifying first home purchase. Contributions are deductible (like an RRSP) up to $8,000 annually ($40,000 lifetime limit, undeducted contributions can be carried forward and deducted in a later year), earnings on the savings are tax-free and qualifying withdrawals are non-taxable (like a TFSA).
Home buyers’ plan: Withdrawal limit from a home buyer’s RRSP increased to $60,000 after April 16, 2024.
First-time Home Buyer’s tax credit: An amount of $10,000 for a qualifying home purchase and neither individual or spouse owned & lived in another home in year of purchase or any 4 preceding years.
Multigenerational Home Renovation tax credit: a refundable tax credit on eligible expenses for a qualifying renovation update to $50,000.
Home Accessibility tax credit: An amount of $20,000 for eligible home renovation that will allow seniors and persons with disabilities to live more independently at home.
Anti House Flipping: Profits arising from certain dispositions of residential properties owned for less than 12 months are deemed to be business income and the principal residence exemption cannot be used. Certain exemptions may apply.
Non-compliant short-term rentals: Expenses incurred in 2024 to earn short-term rental income are not deductible if the rental does not comply with applicable provincial and municipal laws and other requirements.
GST/HST on Assignment Sales: All assignment sales of newly constructed residential housing are taxable supplies. To eliminate an element of double taxation, the amount attributable to a deposit to be excluded from the consideration of the assignment sales subject to GST/HST.
GST/HST new housing rebate: Consider whether you are eligible to claim.
An annual 1% underused housing tax (see our link UHT): applies on the value of non-Canadian owned Canadian residential property considered to be vacant or underused. Certain residential property owners (other than an “excluded owner”) in Canada are required to file an annual declaration for each Canadian residential property they own, even if they can claim an exemption from the tax. For 2024 tax year, the deadline to file the UHT return and pay tax owing is April 30, 2025 (same deadline for Toronto’s VHT).
2 Years ban on foreign buyers of residential restate: Starting in 2023, except for a permanent resident, work permit holder or student visa holder (extended to January 1, 2027). Details see CMHC website.
Ontario NRST: increased to 25% and on certain residential properties provincewide.
Individuals
Year-end tips:
Employee stock options: If you have private corporation (CCPC) options, consider exercise your CCPC stock options at least 24 months before you sell the shares to potentially claim the $1.25 million lifetime capital gain exemption. You can also potentially claim a 50% income deduction (note the restrictions to $200,000 for public companies only, not impacting CCPC). Note the stock option deduction decreases to 1/3 from June 24, 2024. Individuals can still benefit from a deduction of 1/2 of the taxable benefit up to a combined $250,000 for both employee stock options and capital gains.
Covid-19 benefits repayment: If you repaid any Covid-19 benefits to CRA in 2024, deduct the repayment amount from your income in your 2024 tax return.
Must report sale of principal residence: in personal tax returns (including change of use or deemed dispositions) and designate principal residence for dispositions (T2091). Discuss with us for any sale or any change of use of real estate properties.
Make charitable donations and political contributions before year end. Take advantage of higher tax credits and first-time donor’s super credit (25% on up to $1,000 donations)
Employee gifts and awards – Ask your employer to provide you with non-cash gifts/awards. These will not be taxable to you if you receive non-cash with a total value to you of $500 or less annually.
Job-related courses – Ask your employer to pay for job-related courses directly, rather than paying you additional remuneration.
Canada training credit – Starting 2020, eligible individuals aged 25 to 65 who are enrolled at eligible educational institutions can claim this new federal refundable tax credit on tuition and fees for training (annual allowance of $250 per year; $5,000 maximum lifetime tax credit).
Home office expenses – If you work from home for more than 50% of time, ask your employer to issue a Form T2200 and track home office expenses and retain relevant utilities and maintenance receipts.
Pay childcare expenses for 2024 by December 31, 2024 and get qualifying receipts. If you reside in Ontario, claim the Ontario childcare access and relief from expenses (CARE) tax credit; a refundable credit of up to 75% of eligible childcare expenses for individuals with family income up to $150,000.
Caregiver tax credit – if you are a caregiver, claim available federal and provincial tax credit. It requires that you support a mentally or physically infirm dependant, but the dependant is not required to live in caregiver’s home but must be resident of Canada.
Contribute $7,000 TFSA (tax free savings account). If you are planning a withdrawal from your TFSA, consider doing so before the end of 2024 instead of early in 2025 – amount withdrawn are not added to your TFSA contribution room until the beginning of the year after the withdrawal. Be mindful of over-contribution penalty of 1% per month for both TFSA and RRSP.
Home buyers’ incentives – If you are a first-time home buyer, consider withdrawing tax-free up to $60,000 from your RRSP, under the Home Buyers’ Plan. Amounts withdrawn must be repaid to your RRSP over 15 years. And claim the $10,000 first-time home buyers’ tax credits.
Sell investments with accrued losses before year end to offset capital gains realized in the year. Matching the gain/loss year will be more crucial in 2024 under the new AMT regime (see below). Watch for superficial loss rules and consider your tax brackets.
Claim Allowable Business Investment Loss (ABIL) with an election under subsection 50(1). Discuss with us for the compliance rules.
Prescribed rate interest on intra-family loans outstanding in 2024 must be paid on or before January 30, 2025, to avoid attribution of income.
Alternative minimum tax (AMT) rule change in 2024: Under new AMT rules, capital gains are fully taxable, certain deductions and tax credits are reduced by 50%, and the new AMT rate is higher than the current rate. See our newsletter: https://www.impactcpas.ca/post/new-amt-regime-for-2024. Discuss with us about your situation and any mitigating strategies.
Luxury tax: Take into account the federal luxury tax applies on purchases, leases and imports, for personal use, of vehicles and aircraft over $100,000 and of vessels over $250,000.
Tax efficient investments:
Hold investments intended for capital growth outside your RRSP and hold interest-generating investments inside RRSP (or TFSA).
Contribute to RESP for your child or grandchild. Plan for the RESP to receive the maximum lifetime Canada education savings grant of $7,200. Discuss with us about RESP withdrawing rules.
Canada Child Benefit – If you receive this benefit, invest the funds in a separate account in trust for your children. Investment income on these funds will not be taxable to you.
For high earners, consider hold investments in a corporation. Discuss the merits with us before setting up an investment holding corporation. Potentially hold Canadian dividend paying investments in the corporation for RDTOH flow through.
Repay debt that has non-deducible interest before other debt that has interest qualifying for deduction (e.g. investment loan) or tax credit (student loan).
Capital gains deferral: If you sold capital property in 2024, you may be able to defer tax on part of the capital gain by establishing a vendor take back (VTB) loan. This may allow you to claim a capital gains reserve over a maximum of four years to manage your capital gains under the $250,000 threshold. Please consider the credit risk associate with this strategy.
Accrued capital gains: Consider delaying the sale of stocks with accrued gains until 2025 (pending your expected capital gains in 2024 and 2025) to manage your capital gains under the $250,000 threshold.
International information reporting:
Canadian tax residents must report their worldwide income in Canada to calculate their Canadian income taxes, but can offset a certain amount of foreign tax credit.
T1135: Review your foreign holdings to determine if you have a reporting obligation with a total cost of specified foreign property exceeding $100,000 at any time in the year – required to file form T1135.
T1134: for owning shares in a non-resident corporation that is a foreign affiliate at any time in the year, must file by October 31, 2025 (i.e. due 10 months after a taxpayer’s year end). Watch out for the foreign accrual property income (FAPI) complications. Discuss the implications with us.
T1142: for distributions received in the year from a non-resident trust that the taxpayer is a discretionary beneficiary including the relevant distribution information.
Trust reporting:
T3: Trust reporting rules amended to reduce the number of trusts, including “bare trusts,” that will be subject to these rules and to defer the start of the revised bare trust filing requirements until the 2025 taxation year. Details see our newsletter: Bare Trusts 2.0 – Proposed Changes To New Bare Trusts Reporting Rules
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©2024 IMPACT CPA LLP, an Ontario limited liability partnership. All rights reserved.
The content of this pamphlet is prepared by IMPACT CPA LLP for information only and are not intended to provide professional advice as individual situations will differ. We would be pleased to discuss your specific situation and tailor a tax plan to meet your requirements.
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