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Canada Tax Changes to Be Aware of in 2024
As the year begins, so does the tax year, and taxpayers must file their returns in accordance with the most current adjustments. Significant changes affecting Canada’s tax system will occur in 2024.
The laws that determine your income tax liability, together with any tax credits and deductions you may be eligible for, are updated periodically. Numerous changes made this year may impact taxes and payroll in Canada in 2024.
In this article we are going to compile and discuss in detail about all the major Canada Tax Changes to Be Aware of in 2024.
Canada Tax Important Deadlines
Canadians need to note these crucial deadlines.
- For employers, to avoid fines, T4, T4A, and T5 slips must be filed by February 29. If there are more than five of these slips, they must be provided online.
- The deadline for submitting Schedule 15 beneficial ownership information and T3 trust reports is April 2.
- Individuals who are self-employed have until June 17 to file their personal income tax forms; the deadline is April 30.
- The deadline to contribute to an RRSP for the 2023 tax year is February 29.
If more than six returns are being filed, one can file an electronic tax return to lower the penalty.
All Canada Tax Changes and Who will be affected?
In this section we have listed some tax changes that has been introduced by the Canadian government and its potential effects. You may have a look:
New federal tax brackets
The federal government has changed the tax brackets for the 2024 tax year once more due to the continued high rate of inflation over the last year. Federal indexation factor for 2023 was fixed at 6.3%, a significant increase from 2.4% in 2022. This component is expected to somewhat decline to 4.7% for the 2024 tax year.
The Canada Revenue Agency (CRA) calculates the tax that Canadians pay on various income levels in the next year using the previous year’s inflation index. From the 2022 levels, each bracket has witnessed a raise, so taxpayers will pay less of their yearly income overall.
Modifications to your costs and potential savings
Although it is only done every three months rather than yearly, Old Age Security is also adjusted for inflation. OAS benefit payouts will increase by 0.8% during the first quarter of 2024 as compared to the preceding three-month period.
On January 2, the premiums for Employment Insurance also increased. Employers will contribute $2.32 per $100 of salary, up four cents from the previous year, while employees will contribute $1.66 per $100 of earnings, an increase of three cents.
Updated alternative minimum tax rate
The alternative minimum tax was created to ensure that wealthy people pay a minimal amount of tax even when they receive credits, deductions, or preferential treatment, or when their income comes from sources exempt from taxes.
The AMT is now imposed at a 15% rate, with a $40,000 exception. The increased AMT rate, if approved, will apply to subsequent tax years and take effect on January 1, 2024.
Increase in the EI premium rate.
The rate of employment insurance premiums will rise on January 2, 2024. The Canada Employment Insurance Commission determines the EI premium rate annually using a predicted break-even rate based on a seven-year projection. The rate for employers’ EI premiums has increased from $2.28 to $2.32 per $100 of earnings for 2024, and 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 will rise to $7,000 from $6,500 in 2023. Once you reach eighteen, you may begin contributing to a TFSA and carry over any unused capacity from prior years. For example, if you start contributing to a TFSA this year, you have $88,000 of potential capacity.
Payment adjustments for the Canada Pension Plan
In 2024, middle-class workers will begin to see a greater percentage of their paychecks allocated to payments to the Canada Pension Plan. The CPP will have a second wage cap starting in 2024. There are now extra payroll deductions for those who earn more than a certain amount.
Under the first tier, which operates identically to the previous one, employees contribute a predetermined percentage of their wages to CPP, up to a government-set maximum of $68,500 in 2024. There is a second contribution level that peaks out at $73,200 for anyone making more than that amount. Members of this category pay an extra 4% on their second-tier earnings, which is the difference between $68,500 and $73,200.
The goal of these tax code adjustments is to increase Canadians’ take-home pay. The revised CPP rules, which are still being phased in until the next year, were intended to give Canadians a much higher retirement income—from 25% of their qualified income to 33%.
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