Updated on January 12, 2024
Stay with us and delve into the details of the 2024 Canadian Tax Changes: Explore all the modifications and understand who will be impacted by these updates.
Canada Tax Changes to Be Aware of in 2024
With the commencement of the new year, the tax season kicks in, requiring taxpayers to file their returns based on the latest adjustments. Notably, substantial changes are set to impact Canada’s tax system in 2024.
The regulations governing your income tax obligations, along with potential eligibility for tax credits and deductions, undergo periodic updates. Several changes implemented this year have the potential to influence taxes and payroll in Canada for the year 2024.
This article will comprehensively compile and discuss all the significant Canada Tax Changes to be mindful of in 2024.
Canada Tax Important Deadlines
It is imperative for Canadians to take note of these vital deadlines.
- Employers must file T4, T4A, and T5 slips by February 29 to avoid fines. If there are more than five slips, they must be provided online.
- The deadline for submitting Schedule 15 beneficial ownership information and T3 trust reports is April 2.
- Self-employed individuals have until June 17 to file their personal income tax forms; however, the deadline is April 30.
- The deadline to contribute to an RRSP for the 2023 tax year is February 29.
- If filing more than six returns, one can opt for an electronic tax return to reduce the penalty.
Comprehensive Overview of Canadian Tax Changes: Impact and Affected Individuals
Explore the following section where we’ve outlined various tax changes introduced by the Canadian government and their potential impacts. Take a look:
New federal tax brackets
Once again, the federal government has adjusted the tax brackets for the 2024 tax year in response to the persistent high rate of inflation over the past year. The federal indexation factor for 2023 was set at 6.3%, marking a substantial increase from 2.4% in 2022. It is anticipated that this factor will slightly decrease to 4.7% for the 2024 tax year.
The Canada Revenue Agency (CRA) determines the tax Canadians pay on different income levels for the upcoming year based on the inflation index from the previous year. Each bracket has experienced an increase from the 2022 levels, resulting in taxpayers paying a lower percentage of their annual income overall.
Modifications to your costs and potential savings
While not an annual adjustment, Old Age Security is recalibrated for inflation every three months. In the first quarter of 2024, OAS benefit payouts are set to increase by 0.8% compared to the previous three-month period.
As of January 2, Employment Insurance premiums have seen an increase. Employers are now required to contribute $2.32 per $100 of salary, marking a four-cent rise from the previous year. Similarly, employees are expected to contribute $1.66 per $100 of earnings, reflecting an increase of three cents.
Updated alternative minimum tax rate
The alternative minimum tax was established to guarantee that affluent individuals contribute a minimum amount of tax, even when they avail themselves of credits, deductions, or preferential treatment, or when their income originates from sources exempt from taxes.
The Alternative Minimum Tax (AMT) is currently imposed at a rate of 15%, with a $40,000 exception. If the proposed increase in the AMT rate is approved, it will be applicable to subsequent tax years, taking effect from January 1, 2024.
Increase in the EI premium rate
Effective January 2, 2024, the rate of employment insurance premiums is set to increase. Annually determined by the Canada Employment Insurance Commission, the EI premium rate is based on a predicted break-even rate derived from a seven-year projection. In 2024, the rate for employers’ EI premiums has risen from $2.28 to $2.32 per $100 of earnings, while the rate for workers has increased from $1.63 to $1.66 per $100 of earnings.
Raising the TFSA Contribution limit
In 2024, the contribution cap for Tax-Free Savings Accounts (TFSA) is set to increase to $7,000 from $6,500 in 2023. Individuals can commence contributing to a TFSA once they turn eighteen and are allowed to carry over any unused contribution room from previous years. For instance, if you begin contributing to a TFSA this year, you have the potential to utilize up to $88,000 in contribution room.
Payment adjustments for the Canada Pension Plan
In 2024, middle-class workers will experience a higher percentage of their paychecks directed towards contributions to the Canada Pension Plan (CPP). Starting this year, the CPP will introduce a second wage cap, resulting in additional payroll deductions for individuals earning beyond a specified amount.
In the initial tier, mirroring the previous structure, employees contribute a set percentage of their earnings to the Canada Pension Plan (CPP), with a government-established maximum of $68,500 in 2024. A second contribution level applies to earnings beyond $68,500, reaching a maximum of $73,200. Individuals falling into this category contribute an additional 4% on their second-tier earnings, which represents the difference between $68,500 and $73,200.
Concluding Words
The objective behind these changes in the tax code is to augment the take-home pay of Canadians. The ongoing implementation of the revised CPP rules, extending into the next year, aims to provide Canadians with a substantially increased retirement income, transitioning from 25% to 33% of their eligible income.
Thank you for exploring the information on Canada Tax Changes to be mindful of in 2024 on our website.