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6 Important Tax Changes in Canada for 2024 – That Might Affect You

The Canadian tax landscape is set to undergo several changes in 2024, impacting how individuals calculate their income tax, claim deductions, and benefit from credits. Here are seven key adjustments to keep in mind.

Revised Federal Tax Brackets

In response to sustained inflation, the federal government has recalibrated tax brackets for the 2023 tax year. The thresholds for each bracket have increased from 2022, resulting in lower tax rates on a larger portion of annual income. The new brackets are as follows:

  • Up to $53,359: 15%$53,359-$106,716: 20.5%$106,717-$165,430: 26%$165,430-$235,675: 29%Above $235,675: 33%
Note: Provincial tax brackets also apply.

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Alternative Minimum Tax (AMT) Rate Adjustment

Proposed changes from the 2023 budget suggest an increase in the AMT rate from 15% to 20.5%, coupled with a higher exemption of $173,000. If finalized, these changes will be effective from January 1, 2024, impacting high-income individuals subject to tax exemptions or preferential treatment.

End of Flat-Rate Method for Home Office Deductions

The flat-rate method introduced during the pandemic for home office deductions will no longer apply from 2023 onward. Taxpayers working from home must now use the detailed method, involving additional documentation.

Employment Insurance (EI) Premium Rate Hike

As of January 2, 2024, the EI premium rate for workers will increase to $1.66 per $100 of earnings, up from $1.63, and for employers to $2.32 per $100 of earnings, up from $2.28. The hike has drawn criticism from organizations like the Canadian Federation of Independent Business, expressing concerns about its impact on businesses and workers.

Basic Personal Amount (BPA) Increase

The federal BPA for 2024 is set at $15,705, up from $15,000 in 2023. Individuals with an annual income at or below this threshold will not be subject to federal income tax. High-income earners will experience a reduced enhancement based on their tax bracket.

Registered Retirement Savings Plan (RRSP) Dollar Limit Increase

The RRSP contribution limit for the 2023 tax year has risen to $30,780, a $1,570 increase from the previous year. However, individuals are reminded that their RRSP contributions are capped at 18% of their total income, with penalties for exceeding these limits.

Tax-Free Savings Account (TFSA) Dollar Limit Increase

The TFSA contribution limit has been raised from $6,500 in 2023 to $7,000 in 2024. Contributors, starting from the age of 18, can carry forward unused room from previous years. It’s essential to avoid over-contributions, as penalties apply, similar to RRSPs.

These tax changes reflect ongoing efforts to adapt to economic conditions and ensure fairness in the Canadian tax system. It’s advisable for taxpayers to stay informed and seek professional advice for their specific situations.