December 31 , 2024 marks not just the end of the calendar year, but the end of the 2024 tax year for every individual Canadian taxpayer. And while the thoughts of most Canadians during the holiday season are focused on anything but their 2024 income taxes, the reality is that December 31 can be a critical date when it comes to determining how much income tax one will pay for 2024.
In some cases, steps need to be taken by December 31 in order to obtain administrative relief from interest or penalty charges which have been imposed by the Canada Revenue Agency. In other cases, not taking certain actions prior to the end of the calendar year will mean losing out on deductions and credits which might otherwise have been claimed on the 2024 return, and which would have reduced tax payable for the year. And, in all cases, a failure to meet that December 31 deadline cannot be remedied: only actions taken prior to the end of the calendar year (with the exception of RRSP contributions) can reduce the tax bill for 2024.
While the remaining time frame in which most tax planning and tax saving strategies for 2024 can be implemented is only a few weeks, the good news is that the most readily available of those strategies don’t involve a lot of planning or complicated financial structures – in many cases, it’s just a question of considering the timing of steps which would have been taken in any event. What follows is a listing of some of the steps which should be considered by most Canadian taxpayers as the calendar and tax year-end approaches.
Taxpayer requests for penalty or interest relief
Taxpayers are entitled to request relief from the Canada Revenue Agency for interest or penalty charges which the Agency has levied, and those who want to do so must send their request within ten years from the end of the calendar year or fiscal period concerned.
The 2024 deadline applies to taxpayer relief requests for:
- the 2014 tax year;
- any reporting period that ended during the 2014 calendar year; and
- any interest and penalties that accrued during the 2014 calendar year for any tax year or reporting period.
All such requests for relief must be submitted on or before December 31, 2024. More information on the circumstances in which relief may be provided, and how to make a request for such relief, can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/complaints-disputes/cancel-waive-penalties-interest/who-can-apply.html.
Making a final RRSP contribution
Most Canadians are aware that an RRSP contribution can be made anytime up to 60 days after the end of the calendar/tax year, and claimed as a deduction on the return for that calendar/tax year. There is, however, an important exception to that rule, of which most Canadians are likely unaware.
Every Canadian who has an RRSP must collapse that plan by the end of the year in which they turn 71 years of age – usually by converting the RRSP into a registered retirement income fund (RRIF) or by purchasing an annuity. An individual who turns 71 during the year is still entitled to make a final RRSP contribution for that year, assuming that they have sufficient contribution room. However, in such cases, the 60-day window for making a contribution after December 31 is not available. Any RRSP contribution to be made by a person who turns 71 during 2024 must be made by December 31, 2024. Once that deadline has passed, no further RRSP contributions are possible.
Reviewing tax instalments for 2024
Millions of Canadian taxpayers (particularly self-employed and retired Canadians) pay income taxes by quarterly instalments, with the amount of those instalments representing an estimate of the taxpayer’s total liability for the year.
The final quarterly instalment for this year will be due on December 15, 2024 (as that date falls on a Sunday this year, the actual due date for the instalment payment is Monday December 16). By mid-December, almost everyone will have a reasonably accurate idea of what their income and deductions will be for 2024 and so will be in a position to estimate what the final tax bill for the year will be, taking into account any tax planning strategies already put in place, as well as any RRSP contributions which will be made on or before March 1, 2025. While the tax return forms to be used for the 2024 year haven’t yet been released by the Canada Revenue Agency, it’s possible to arrive at an estimate by using the 2023 form. Increases in tax credit amounts and tax brackets from 2023 to 2024 will mean that using the 2023 form will likely result in a slight over-estimate of tax liability for 2024.
Once one’s tax bill for 2024 has been calculated, that figure should be compared to the total of tax instalments already made during 2024 (that figure can be obtained by checking one’s online tax account on the Canada Revenue Agency website, or by calling the CRA’s Individual Income Tax Enquiries line at 1-800-959-8281). Depending on the result, it may then be possible to reduce the amount of the tax instalment to be paid on December 15 – and thereby free up some additional funds for the inevitable holiday spending!
Medical expenses
The federal and all provincial and territorial governments provide a non-refundable tax credit for eligible medical expenses incurred. Most Canadians will incur such expenses: while we benefit from a publicly-funded health care system, there is nonetheless a long list of medical and para-medical expenses which must be paid for out-of-pocket.
Individual taxpayers are entitled to claim the medical expense tax credit for all qualifying medical expenses incurred during any 12-month period which ends during the taxation year. In other words, the taxpayer can choose the 12-month period for which medical expenses incurred create the highest tax credit amount. However, as with other such credits, any expense, in order to be claimed on the 2024 tax return, must be incurred before the end of 2024.
There is an additional criterion for claims for the medical expense tax credit: only medical expenses which exceed the lesser of $2,759 or 3% of the taxpayer’s net income for 2024 can be claimed. Put in more practical terms, the rule for 2024 is that any taxpayer whose net income for the year is $91,967 or less will be entitled to claim eligible medical expenses that are greater than 3% of his or her net income for the year. Those having income of more than $91,967 will be limited to claiming qualifying expenses which exceed the $2,759 threshold.
Finally, it’s possible to combine medical expenses incurred by both spouses and by their minor children, and to make that combined claim on a single return. In most cases, the best tax result can be obtained where that claim is made on the return of the lower-income spouse, as long as that spouse has tax payable of at least as much as the medical expense tax credit to be claimed.
It is unfortunate that, given the number of Canadians who are in a position to claim the medical expense tax credit, the computation of that credit can be confusing. More information on how to calculate and claim the medical expense tax credit for 2024 can be found on the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4065.html. While the most current version of the publication currently available on the CRA site is for the 2023 tax year, the same rules will apply for 2024, with the exception of the applicable net income threshold, as outlined above.
Make sure to file your 2023 tax return by year-end
While making sure that one’s tax returns are filed on time is always a good idea (and delaying filing is, in all cases, a bad one), there are additional reasons this year to ensure that one’s tax returns for all years up to and including 2023 are filed by December 31, 2024.
On November 21, the federal government announced a “Working Canadians Rebate” – a tax-free rebate of $250 which will be sent to eligible Canadians in the spring of 2025. The basic requirements for eligibility for the rebate are that the individual have net income of $150,000 or less in 2023 and have earned income from employment or self-employment that year. In addition, an individual must have filed an income tax return for the 2023 tax year by the end of 2024. Canadians who are otherwise eligible but who do not file their income tax return for 2023 on or before December 31, 2024 will not receive the rebate.
The need to file a 2023 return by the end of this year is particularly important for residents of Ontario. In October of this year, the Ontario government announced that eligible residents of the province would receive a tax-free rebate of $200 early in 2025. In order to receive the Ontario rebate, an individual must have been 18 years of age or older and a resident of the province at the end of 2023, and must have filed an income tax return for the 2023 tax year on or before December 31, 2024.
