The past year has been a challenging year for Canada, both in terms of the macro economy, the small business environment and the financial arrangements for families. In 2024, these challenges remain, and there will still be a lot of uncertainty in the new year. Below is a brief summary of the tax changes in 2024, so that individuals and businesses can make corresponding financial plans.
1. Increase in the basic personal amount. In 2024, the federal personal tax exemption will increase to $15,705, which equates to a $105.75 reduction in federal taxes.
2. The contribution rate of CPP Canada Pension continues to increase. Under the new enhanced CPP reform plan, the contribution rate for individuals and companies under the CPP will remain unchanged at 5.95% in 2024. The maximum annual contribution amount for individuals is $3,867.50 for ordinary employees and $7,735 for self-employed individuals, corresponding to a maximum pensionable earning of $68,500.
3. From 1 January 2024, CPP will introduce a second contribution rate and income ceiling, known as the "second CPP contribution rate and earnings ceiling". This will only affect workers who earn more than the first income cap. For 2024, the second income cap is set at 7% higher than the first, while in 2025 it will be 14% higher than the first. The portion of income between $68,500 and $73,200 in 2024 will be subject to the "second CPP contribution" at a rate of 4% for employees and employers, with a maximum contribution of $188 each. The second CPP contribution rate for self-employed persons is 8%, with a maximum contribution of $376.
4. The EI unemployment insurance premium rate will increase from 1.63% in 2023 to 1.66% in 2024. The maximum annual unemployment insurance contribution is $1,049.12, which corresponds to a maximum annual insurable earnings of $63,200.
5. Increase the contribution room to a TFSA by $500 in 2024 to $7,000. The maximum accrual amount is $95,000. The maximum amount you can contribute to an individual RRSP in 2024 is $31,560.
6. The federal government of Canada announced that it will eliminate the tax deduction for certain short-term rental property expenses from January 1, 2024. Some provinces or municipalities have imposed bans or restrictions on short-term rentals. The federal government has now removed this tax benefit and is no longer allowed to deduct short-term rentals for short-term rentals operating in provinces or municipalities where short-term rentals are prohibited. Short-term rental operators who do not comply with local regulations will also be denied any deductions.
7. In the Autumn Economic Report, the Canadian federal government announced that it would eliminate the GST/HST sales tax on professional services provided by psychotherapists and counseling therapists. The aim is to increase the affordability of counselling and treatment, encourage people to do socially beneficial things through the tax system, and help improve the mental and spiritual health of Canadians.
8. In 2024, Canadians will have to report any involvement of "bare trusts" when filing their taxes. Unlike explicitly established trusts, naked trusts are usually formed inadvertently when parents jointly sign a mortgage for their children or where the children are part owners of the property. In these cases, the naked trust does not generate any reportable income for a particular tax year. But starting in 2024, for the first time, the CRA will require Canadians to complete a T3 tax return reporting the trustees, beneficiaries and settlors of each trust for the previous year. Failure to report a naked trust membership may result in a penalty of $2,500 or 5% of the value of the trust property, whichever is higher. Although naked trusts have no income and are not subject to income tax, the new reporting requirements increase the reporting burden on taxpayers.
9. In response to Canada's growing housing crisis, the federal and Ontario governments have successively launched HST rebate programs for developers who build long-term rental properties. Eligible developers can get a 100% HST rebate. For more information on the enhanced HST refund, please refer to the earlier article "Ontario Enhanced HST Rebate: A Gospel for Multi-Unit Rental Property Developers"
10. Small businesses that applied for CEBA loans during the epidemic need to pay off $40,000 by January 18, 2024 to enjoy the $20,000 waiver.