Navigating the Tax Landscape in 2024: What Canadians Should Anticipate

As we step into the new year, Canadians should brace themselves for several tax measures and adjustments that will reshape the fiscal landscape in 2024. While many of these changes are expected to have a minimal impact on the average citizen, high-income earners may find themselves facing more significant alterations to their tax obligations.

Tax Landscape in 2024

1. GST/HST Exemptions: The federal government is set to implement changes to the Goods and Services Tax (GST) and the Harmonized Sales Tax (HST) by removing the tax burden on “professional services rendered by psychotherapists and counselling therapists.” This move, aimed at making mental health services more affordable, is projected to cost $64 million in lost revenue over the next five years. Additionally, the GST exemption on the construction of new rental apartments will be extended to include new co-op rental housing, encouraging developments in the housing sector.

2. Short-Term Rental Deductions: In response to the increasing number of homes used for short-term rentals in major cities like Montréal, Toronto, and Vancouver, the federal government is eliminating income tax deductions for expenses related to short-term rentals. This measure is designed to incentivize property owners to return units to the long-term rental market, especially in areas where short-term rentals have been banned or restricted by municipalities.

Read More: A Financial Roadmap: Planning Your Money at the Beginning of the Year

3. CPP Pension Enhancement: Starting in 2024, the federal government will collect a second level of Canada Pension Plan (CPP) contributions to fulfill its commitment to boosting CPP payments to retirees. This, combined with the annual increase in CPP contributions, will lead to an annual CPP payment increase of $302 for employees, reaching a maximum of $4,045.50.

4. Alternative Minimum Tax (AMT): The alternative minimum tax rate is undergoing significant changes, with the AMT taxable income amount rising to $173,000 and the tax rate on income above that amount increasing to 20.5%. Originally designed to prevent high-income individuals from disproportionately reducing their tax bills through deductions, the revised AMT could potentially affect ordinary Canadians experiencing temporary spikes in income.

5. Carbon Tax Increase: Effective April 1, 2024, the carbon tax in provinces under the federal backstop will rise from $65 to $80 per tonne. This increase will impact fuel charges, with gasoline fuel charges rising to 17 cents a litre and propane fuel charges increasing to 12 cents a litre. The majority of government revenues from the carbon tax will be returned to households through a rebate program.

6. Income Tax Adjustments and Other Changes: Federal income tax bracket thresholds will rise by 4.7%, and basic personal exemption amounts will be adjusted for inflation. The annual Tax-Free Savings Account (TFSA) contribution limit will increase to $7,000 in 2024. Additionally, the maximum insurable earnings ceiling for employment insurance will rise to $63,200, affecting the maximum annual EI premium.

7. Reporting Bare Trusts: In a notable change, Canadians will be required to report any involvement in “bare trusts” during the tax season in 2024. Failing to disclose membership in a bare trust could result in fines of $2,500 or five percent of the trust’s property value.

Read More: Year-End Reflection and New Year Preparedness

As we embark on this new tax year, Canadians are encouraged to stay informed about these changes and consult with tax professionals to navigate the evolving tax landscape effectively. While some adjustments may impact specific groups more significantly, the overall aim of these measures is to create a fair and sustainable tax system for all citizens.

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