What’s New for the 2024 Tax-Filing Season?
Capital Gains Taxation Update
Inclusion Rate Adjustment: Starting January 1, 2026, the capital gains inclusion rate will increase from 50% to 66.67% for individuals with annual capital gains exceeding $250,000, as well as for corporations and most trusts. Lifetime Capital Gains Exemption (LCGE): Beginning June 25, 2024, the LCGE limit will rise to $1.25 million for eligible capital gains. Indexation of the exemption will resume in 2026.
Canada Carbon Rebate (CCR) Enhancements:
Expanded Eligibility: Beginning in April 2025, the Canada Carbon Rebate (CCR) rural supplement will extend to individuals living in rural areas or small population centers with fewer than 30,000 residents, even if they are within census metropolitan areas, as defined by Statistics Canada. Geographical Basis: Eligibility will be assessed using the most recent census data available before the applicable tax year.
The TFSA limit has been increased
The annual TFSA contribution limit has increased to $7,000 in 2024 and remains $7,000 in 2025 (up from $6,500 in 2023). Higher Cumulative Contribution Room As of 2025, individuals who have never contributed and were eligible since 2009 now have a total TFSA contribution room of $102,000. Inflation-Adjusted Limit The increase is due to inflation adjustments, as TFSA limits are indexed to inflation and rounded to the nearest $500. Withdrawal Rules Remain the Same
The Canada Pension Plan (CPP) and Québec Pension Plan (QPP)
Canada Pension Plan (CPP) Updates – Effective January 1, 2025 New Benefit for Part-Time Students: Dependent children (ages 18-24) of disabled or deceased CPP contributors enrolled part-time in recognized educational institutions can now receive a monthly benefit of $150.89, subject to meeting school attendance requirements. (Source: Canada.ca) Enhanced Death Benefit: If a CPP contributor passes away before receiving retirement or disability benefits and has no surviving spouse or common-law partner, their estate will receive an additional $2,500, increasing the total death benefit to $5,000. (Source: Canada.ca) Extended Eligibility for Disabled Contributor’s Child’s Benefit (DCCB): Children of disabled CPP contributors will continue receiving DCCB benefits even after their parent transitions to a retirement pension at age 65. (Source: Canada.ca) Changes to Survivor’s Pension Eligibility: Individuals who undergo a CPP credit split following separation will no longer be eligible for a survivor’s pension from their former partner. However, eligibility is restored if the couple reconciles and cohabits at the time of death. (Source: Canada.ca).
RRSP AND FHSA CHANGED
Registered Retirement Savings Plan (RRSP): Increased Contribution Limit: The RRSP contribution limit for 2024 has risen to $31,560 (up from $30,780 in 2023), calculated as 18% of earned income from the previous year, subject to the annual cap. (Source: Canada.ca) First Home Savings Account (FHSA): Annual Contribution & Lifetime Limit: First-time homebuyers can contribute up to $8,000 per year, with a lifetime contribution cap of $40,000. Contributions are tax-deductible, and withdrawals for home purchases are tax-free. (Source: Canada.ca) Carry-Forward of Unused Contribution Room: Unused contribution room (up to $8,000) can be carried forward to the following year. For example, if you opened an FHSA in 2023 but did not contribute, you would have $16,000 available in 2024. (Source: Canada.ca) Importance of Opening an FHSA Early: Contribution room starts accumulating only after opening the account. Opening an FHSA by December 31, 2024, ensures $8,000 of contribution room for 2024, plus an additional $8,000 for 2025, totaling $16,000. (Source: MoneySense.ca) These updates aim to help Canadians maximize retirement savings and support first-time homebuyers.
New Tax brackets to account for inflation for 2024
Federal Income Tax Brackets for 2024: 15% on the first $55,867 of taxable income. 20.5% on taxable income over $55,867 up to $111,733. 26% on taxable income over $111,733 up to $173,205. 29% on taxable income over $173,205 up to $246,752. 33% on taxable income over $246,752 Ontario Provincial Income Tax Brackets for 2024: 5.05% on the first $51,446 of taxable income. 9.15% on taxable income over $51,446 up to $102,894. 11.16% on taxable income over $102,894 up to $150,000. 12.16% on taxable income over $150,000 up to $220,000. 13.16% on taxable income over $220,000.