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With tax season upon us, it’s important to stay informed about changes to taxation laws and guidelines. Here are some of the most important updates to keep in mind.
A new Grocery Rebate will help ease the cost of groceries for low-income Canadians. In addition, a new rule will allow CRA to pre-fill tax returns.
Each year, the tax framework undergoes modifications to align with economic shifts, inflation rates, and the evolving needs of taxpayers. As Canadians gear up for the upcoming fiscal year, it becomes imperative to stay abreast of the alterations slated for key components of the tax system.
One of the focal points of these changes revolves around Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs), Canada Pension Plan (CPP), and Family Health Savings Accounts (FHSA). These pillars of the Canadian tax system are set to witness adjustments that will impact how individuals plan for their financial futures.

The Canadian Government Has Introduced Some Important Changes:

• Grocery Rebate

To help low and middle-income families dealing with higher grocery costs, they’ve come up with the Grocery Rebate. Just like the GST/HST credit, it’s based on your income and family situation. For example, the July 5, 2023, Grocery Rebate will be given to anyone who is entitled to receive the GST/HST credit in January 2023. To be eligible, for the above rebate make sure you’ve filed your 2021 tax return taxes.

• Interim Canadian Dental Benefit

Originally for uninsured kids under 12, the Interim Canadian Dental Benefit is being replaced by the Canadian Dental Plan which is expanding dental coverage to include all uninsured Canadians with family income less than $90,000. It should be fully implemented by 2025.

• Tradespeople Tool Deduction

Good news for tradespeople who bring their tools – the maximum deduction limit has gone up from $500 to a cool $1,000. So, if you’re in the trades and supply your own tools, this one’s for you!

Basic Personal Amount

The federal basic personal amount is the minimum amount of income that Canadians can earn before they start paying federal taxes. The basic personal amount is increasing for the 2024 taxation year to $15,705 for individuals with taxable income of $173,205 or less.

First-Time Home Buyers’ Tax Credit

If you buy your first home in 2024, you can now claim a $1,500 ($10,000 x 15%) credit on your tax return. The credit base was increased from $5,000 to $10,000 for the 2022 taxation year.
In addition, beginning on April 1, 2023, you could open a first home savings account (FHSA) which is a registered plan allowing you, as a prospective first-time home buyer, to save for your first home tax-free (up to certain limits).

Automatic Tax Filings

The government has outlined plans to introduce automatic tax filing, which would see the CRA pre-filling your return with the information it has on file.
It is expected to be piloted next year, and if successful, could eventually be expanded to include more individuals. This would reduce the number of vulnerable Canadians who miss out on benefits and tax credits they are entitled to.

New Tax Credits and Deductions

Filing taxes is a complicated process for anyone. But it can be even more daunting for newcomers to Canada. Getting organized, keeping track of documents, and knowing what changes are made can help newcomers avoid any surprises come tax time.
Several tax credits and deductions have been increased over the years to support various aspects of Canadian life. Depending on your circumstances you may want to talk to a tax advisor about credits and deductions that may apply to you.

Tax Brackets and Prescribed Interest Rates

Every year, Canada incrementally adjusts its tax brackets to account for inflation. This is one of the many reasons it’s important to keep up with these changes.
Another change worth keeping up with is the prescribed annual interest rate. Starting in 2024, the CRA will charge a 10% interest rate on overdue taxes, Canada Pension Plan contributions and employment insurance premiums for the first quarter of 2024. This will help to deter taxpayers from not making their remittances in full and on time.

COVID-19 Relief Measures

While the pandemic’s direct impact on the economy is waning, some COVID-19 relief measures are still in play for the 2024 tax season. On September 14, 2023, the Prime Minister announced extended deadlines for Canada Emergency Business Account (CEBA) loan repayments, providing an additional year for term loan repayment, and additional flexibilities for loan holders looking to benefit from partial loan forgiveness of up to 33 per cent.

Child and Family Benefits

Changes to child and family benefits are another aspect of the 2024 tax season that Canadians should be aware of. The government has adjusted certain benefits to better support families, including modifications to the Canada Child Benefit and the Child Disability Benefit.
Understanding these changes can help families plan their finances more effectively and take advantage of available support.

Work-from-Home Deductions

The rise of remote work has prompted the government to address the tax implications of working from home. The rules for claiming home office expenses have changed in 2023. Since the pandemic has ended, the simplified method will no longer be available. As well, the eligibility requirements for claiming such expenses, which were relaxed during the pandemic, are now more stringent. In addition, the Canada Revenue Agency has issued a new administrative policy, effective January 1, 2024, that guides determining the province of employment (“POE”) for remote workers for tax purposes.
Whether you’re a full-time remote worker or occasionally work from home, understanding these rule changes can result in significant tax savings. Moreover, employers need to know an employee’s POE for CPP/QPP, EI, QPIP and income tax deductions.

Registered Retirement Savings Plan (RRSP) Contributions

Changes to RRSP contribution limits – are also part of the tax landscape for 2024. It’s crucial for individuals planning their retirement savings to be aware of these adjustments and maximize their contributions within the updated limits. RRSPs remain a valuable tool for tax planning, and staying informed ensures you make the most of these opportunities.

Conclusion

As the tax season approaches, Canadians must stay informed about the changes that will impact their financial obligations.
From adjustments to income tax brackets to the introduction of new measures, being aware of these modifications is crucial for making informed decisions and optimizing your tax strategy.
By staying abreast of these changes, you can navigate the 2024 tax season with confidence and ensure that you’re making the most of available opportunities while meeting your tax obligations.