While the tax return form that Canadians prepare and file each spring might look identical to the form that was used the previous year, the reality is that our tax system is constantly changing, and that change is reflected in amendments made to each year’s tax return form, which in turn affect the tax situation of every Canadian taxpayer.
Some of the changes to the annual return happen “automatically”, as Canadian federal income tax brackets and tax credits are, by law, indexed to inflation. Consequently, each year, credit amounts and tax brackets increase to reflect changes in the Consumer Price Index. For 2024, those amounts have increased (by comparison to 2023) by 4.7%.
Other changes to the return arise for a variety of reasons. New tax credit or benefit programs are introduced, existing programs are tweaked or amended in some way, or temporary credit or benefit programs expire. As well, technical amendments are made every year to the Income Tax Act, which can affect how taxable income is determined or how tax payable is calculated.
Unusually, probably the most significant tax change for 2024 is a tax change which will not appear on the 2024 return. In its 2024-25 budget, the federal government announced that, effective as of June 25, 2024, the inclusion rate for capital gains (meaning the percentage of capital gains included in income) would be increased from one-half to two-thirds on all capital gains realized by corporations, and on capital gains over $250,000 realized by an individual in a single year. However, on January 31, 2025, Finance Canada announced that the implementation date for that change would be deferred to take effect, not on June 25, 2024, but on January 1, 2026.
Given that the change in the capital gains inclusion rate applies only to individuals who realize more than $250,000 in capital gains in a year, the deferral will impact a very small number of Canadian taxpayers. Nonetheless, for those individuals, the deferral of the increase in the capital gains inclusion rate will have a significant impact on their taxable income amount – and therefore their tax payable amount for 2024.
Another change, which does take effect for 2024 (and subsequent years), is likely to affect a far greater number of taxpayers – specifically, those who engage in e-commerce activities on any of the available digital platforms. Under Canadian tax law, the worldwide income of a Canadian resident, from any source, is income which must be reported on the annual tax return, and on which tax must be paid. However, until 2024, Canadian tax authorities seeking to ensure compliance with Canadian tax reporting and tax payment rules had very few means by which income earned through the digital economy could be tracked.
Beginning with the 2024 tax year, however, operators of e-commerce platforms are required to report to the CRA amounts earned by Canadian residents on those platforms, where the Canadian resident is a “reportable seller”. For these purposes, a reportable seller is someone who engages in 30 or more transactions during the year and receives more than $2,800 from those transactions. A copy of the information provided to the CRA (which can include the seller’s name, address, and social insurance number and their bank account numbers) was sent to each Canadian-resident reportable seller by the end of January 2025, and that information must be reported on the return for 2024. More information on how to do so can be found on the CRA website at https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/platform-economy.html.
Other changes in effect for the 2024 tax year will be welcome news to affected taxpayers. Those who are saving for the purchase of a first home through the Home Buyer’s Plan (HBP) will benefit in two ways. The HBP allows first-time homebuyers to withdraw funds (to a specified maximum) from their registered retirement savings plan (RRSP) on a tax-free basis, where those funds are used to make a down payment on a first home. All such funds withdrawn must then be repaid to the RRSP over a 15-year period, with the repayment period beginning two years after the withdrawal is made.
The budget provisions made two changes to the existing rules. First, the HBP withdrawal limit was increased from $35,000 to $60,000 for withdrawals made after April 16, 2024. In addition, temporary repayment relief will be provided, as the start of the required repayment period is deferred by an additional three years for participants making a first withdrawal between January 1, 2022 and December 31, 2025. Accordingly, the 15-year repayment period will start in the fifth year following the year that the first withdrawal was made.
Individuals who make contributions to the Canada Pension Plan or the Québec Pension Plan and who had income of more than $68,500 in 2024 will notice a change in their required contribution amounts for that year. Such individuals will be required to make “second tier” CPP/QPP contributions on that additional income, to a specified maximum contribution amount. Employees who are subject to the second tier contribution requirement will have had such additional contributions (to a maximum of $188) deducted from their wages or salary throughout the year. However, self-employed individuals, who pay their CPP/QPP contributions for the year when filing the annual tax return, and who pay both the employer and employee contributions, will notice an increase of up to $366 in such contribution amounts which must be paid for 2024.
Finally, Canadians who donate their time as volunteer firefighters or volunteer search and rescue personnel will see the amount of tax credit they can claim to offset expenses related to those activities doubled. Specifically, the Volunteers Firefighters Amount and the Search and Rescue Volunteers Amount have been increased from $3,000 to $6,000 for eligible individuals who performed at least 200 hours of combined eligible volunteer service during the year.
To alert Canadians to the changes which may affect their tax return preparation for the year, the Canada Revenue Agency provides a listing and explanation of such changes. That information is included in the Income Tax Guide for 2024 returns and can also be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/whats-new.html.
The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.
