2024 Personal Income Tax Updates

The 2024 personal income tax filing deadline is April 30, 2025. The filing deadline for self-employed individuals and their spouses (including HST returns) is June 16, 2025 (as June 15 is a Sunday). All outstanding income tax and HST payments are due on or before April 30, 2025.

Note: On January 31, 2025, the CRA announced that it will grant relief from late-filing penalties and arrears interest until June 2, 2025 to impacted T1 Individual filers reporting capital dispositions.

A checklist to assist you in gathering and summarizing your 2024 tax information can be accessed here.

Please note that the late filing of your income tax return will result in a CRA penalty of 5%* of any balance owing, plus an additional 1% for every month your return is late, up to a total of 12 months. The late payment of any balance owing (or late installment payment) will incur daily compounded interest charges at a prescribed rate that is updated every three months. As of January 2025, this rate is 8%.

Note: If the CRA charged you a late-filing penalty for 2021, 2022 or 2023 and issued a formal demand for a return, your late-filing penalty for 2024 will be 10% of your balance owing. You will be charged an additional 2% for each month that you file after the due date, to a maximum of 20 months.

We strongly encourage you to file and pay your taxes on time.

There are several updates to keep in mind as you gather information for your 2024 personal income tax return:

New Alternative Minimum Tax (“AMT”)
The AMT calculations have been significantly modified to target high-income taxpayers. Effective January 1, 2024, the federal AMT rate has been raised from 15% to 20.5%, and the basic exemption has been increased from $40,000 to $173,205. The taxable income base used to calculate AMT has also been broadened. Amongst other changes, the inclusion rate of capital gains for AMT calculations has been increased from 80% to 100%, while the inclusion rate for capital gains on donation of publicly listed securities has been increased from 0% to 30%.

Note: certain tax credits that could otherwise reduce the AMT payable have been limited, and the ability to deduct non-capital losses carried forward is reduced from 100% to 50%.

Extended deadline for Charitable Donations
The Government of Canada has announced an extension of the deadline for making charitable donations eligible for the 2024 tax year, until February 28, 2025. The Government will introduce legislation effecting these changes once Parliament resumes after the prorogation.

Increase in Lifetime Capital Gains Exemption (“LCGE”)
The Government of Canada has proposed to increase the LCGE to $1.25 million, effective June 25, 2024, from the current amount of $1,016,836 on the sale of qualified small business corporation shares and qualified farming and fishing property. As per the news release dated January 31, 2025 from the Department of Finance of Canada, it has been reaffirmed that the proposed implementation date for the increase in LCGE will continue to be June 25, 2024

Home Buyers’ Plan (“HBP”) Withdrawal
Effective April 16, 2024, the limit for withdrawal from Registered Retirement Savings Plans (“RRSPs”) under the HBP has been increased from $35,000 to $60,000.

Short-Term Rental Deductions
Normally, taxpayers can deduct reasonable expenses relating to earning rental income such as repairs, utilities, and mortgage interest.  However, effective January 1, 2024, taxpayers will not be able to deduct expenses made or incurred while the property is a ‘non-compliant short-term rental’. A ‘non-compliant short-term rental’ is a residential property that is rented or offered for rent for a period of less than 90 consecutive days, and that is located in a province or municipality that does not permit short-term rentals to operate at that location; or does not comply with all applicable provincial or municipal registration requirements. The non-compliant amount for the purpose of deduction of expenses, will be determined by the ratio of number of days the property was non-compliant to the total number of days it was used as a short-term rental.

Second CPP Contribution Rate (“CPP2”)
CPP2 is an additional contribution to CPP for earnings above a certain level. It took effect on January 1, 2024. Both employees and employers are required to contribute an additional 4% to the CPP on earnings between $68,500 (the annual maximum pensionable earnings) and $73,200 (the new additional maximum pensionable earnings). The maximum annual CPP2 contribution is $188 for employees and employers in the year 2024 ($376 for self-employed individuals).

Automobile Income Tax Deduction Limits
The automobile allowance rates paid per kilometre by employers to employees who use their personal vehicle for work have increased as follows:

The ceiling for the capital cost allowance (“CCA”) income tax deduction for the following new and used vehicles purchased in the year have increased as follows (before tax):

Deductible leasing costs have increased from $950 per month (before tax) in 2023 to $1,050 in 2024. This is set to increase to $1,100 per month (before tax) in 2025.

Personal Tax Rates
Here is an overview of the two highest combined marginal Federal & Ontario tax rates for 2024 and 2025:

Future Year Updates

Capital Gains inclusion rate increase
In the Federal Budget 2024, the Government announced an increase in the capital gains inclusion rate from one-half to two-thirds, excluding the first $250,000 in capital gains for individuals. The legislation related to the increase in capital gains inclusion rate has not been enacted yet. The proposals were scheduled to take effect from June 25, 2024. On January 31, 2025, the Department of Finance announced that it will defer the effective date from June 25, 2024 to January 1, 2026. Consequently, unless an exemption applies, all capital gains realized before January 1, 2026, will continue to be subject to the one-half inclusion rate.

The Canadian Entrepreneurs’ Incentive (“CEI”)
In the Federal Budget 2024, the Government announced a new CEI with an objective to encourage entrepreneurship. This incentive reduces the inclusion rate to one-third on a lifetime maximum of $2 million in eligible capital gains. This incentive takes effect from January 1, 2025, and the maximum would increase by $400,000 each year, reaching $2 million in 2029. However, the necessary legislation has not passed, and a change of government may affect this proposal.

Previous Year Updates

Reporting the Sale of a Principal Residence
Individuals selling their principal residence must report the sale on their tax return and designate the years it was their principal residence to claim the Principal Residence Exemption (“PRE”). Failing to report can result in a maximum penalty of $8,000. Changing a principal residence to a rental property may trigger a deemed disposition unless an election is filed. Please discuss this with us, if applicable to you.

Home Office Expenses
The temporary flat rate method for claim of home office expenses does not apply to 2023 and later tax  years. Employees wishing to claim home office expenses in 2024 should continue to use the detailed method and obtain a completed Form T2200 from their employer. The CRA allows electronic signatures if compliant with guidelines. The Form T2200 does not need to be filed with the return but must be kept in case the CRA requests it.

Foreign Reporting
Canadian residents holding specified foreign property with an aggregate cost over $100,000 at any time during the year must file form T1135 Foreign Income Verification with their personal income tax return. Specified foreign property includes investments outside Canada (e.g., bank and brokerage accounts, foreign companies and trusts, real estate, debt, foreign insurance policies, precious metals, crypto, etc.) or foreign investments held in Canada (e.g., foreign equities, crypto on a non-Canadian exchange).

Though form T1135 is an information return, accurate completion is crucial, as failure to file can result in severe penalties from the CRA. Since this information isn’t always available during tax preparation, please provide details of specified foreign properties held in 2024 with an aggregate cost of at least $100,000. We recommend consulting your investment advisor, as they can often provide a summary of investment holdings by foreign country.

Residential Property Flipping Rule
Effective January 1, 2023, residential properties that are bought and sold within one year (with exceptions) do not qualify for capital gains treatment or the PRE. Exceptions include life events such as death, household additions, separation or divorce, safety threats, serious illness, work relocation, involuntary termination of employment, insolvency, natural disasters, or expropriation.

Multigenerational Home Renovation Tax Credit
Effective January 1, 2023, this credit offers a 15% tax refund on eligible renovation expenses for creating a self-contained secondary unit for a senior (65+) or an adult eligible for the disability tax credit. Eligible expenses are capped at $50,000 (maximum credit of $7,500) per completed renovation. The claim must be made in the tax year the renovation is completed.

First Home Savings Account (“FHSA”)
First-time homebuyers can contribute up to $40,000 lifetime and $8,000 per year to a FHSA. Contributions are tax-deductible, and withdrawals are tax-free for the purchase of a first home. Unused contribution room of prior years can be carried forward up to $8,000. For example, if no contributions are made in 2024 and 2025, the 2026 contribution room will be $16,000 ($8,000 for 2026 plus $8,000 from 2025).

Underused Housing Tax (“UHT”)
The UHT is an annual federal 1% tax on the ownership of vacant or underused residential housing in Canada that took effect on January 1, 2022. Starting in 2023, certain specified Canadian trusts, partnerships, and corporations may be exempt from UHT filing. The UHT form and the tax are due by April 30^th each year.

Immediate Expensing for Self-Employed Individuals
If you carried on an unincorporated business and acquired capital property in 2024, you may be eligible for a 100% deduction this year. The immediate expensing rules allow individuals and partnerships to deduct up to $1.5 million of certain capital property acquired after January 1, 2022, and became available for use before 2025.

First Time Home Buyers’ Tax Credit}An eligible first-time home buyer can claim $10,000 for the purchase of a qualifying home. This non-refundable tax credit could result in a maximum tax savings of up to $1,500.

Home Accessibility Tax Credit (“HATC”)
The HATC is a non-refundable tax credit allowing individuals aged 65 or older or those eligible for the disability tax credit to claim up to $20,000 in home renovation expenses for improved accessibility, providing tax savings of up to $3,000.

Ontario Childcare Access and Relief from Expenses (“CARE”) Tax Credit
The Ontario CARE Tax Credit is a refundable tax credit for Ontario taxpayers. Families can receive up to $6,000 per child under seven, $3,750 per child aged 7-16, and $8,250 per child with a severe disability if they qualify for the full 75% credit.

Digital Subscription Tax Credit
This non-refundable tax credit applies to amounts paid for qualifying subscriptions to Canadian journalism organizations between 2019 and 2025. The maximum credit is 15% of qualifying expenses, up to $500.

Canada Training Credit (“CTC”)
The CTC is a refundable tax credit for eligible workers aged 26-65 who paid tuition fees to an eligible Canadian institution in or after 2020. Eligible workers can accumulate $250 per year, up to a lifetime limit of $5,000.

Labour Mobility Deduction
This deduction allows eligible tradespeople to claim eligible temporary relocation expenses (such as transportation, meals, lodging) expenses, up to $4,000.

S+C Partners is committed to helping you.
Our dedicated team of tax professionals is here to assist you. Please contact us at 905-821-9215 or tax@scpllp.com if you have any questions regarding any of the tax updates.

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