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New Year – More Taxes

It isn’t just your housing, groceries and other purchases that bear the immediate impact of inflation. Taxes are also impacted by inflation, not to mention that New Year’s Day is a convenient time for governments to adjust your fees and taxes. Here is some of what you can expect from the federal government (not a complete list – just some of the most common). Please note this is a guideline but is not professional tax advice. Please consult the CRA website or your financial advisor when doing your taxes.

Tax Changes for Canadians

The inflation rate to be used by the Canada Revenue Agency to index 2024 taxes is 4.7%.

Tax Brackets: the tax brackets will be adjusted upward by 4.7% for 2024 income, so you can earn a little more before you are bumped into a higher bracket. The new brackets are:

  • 0 to $55,867 (15%)
  • $55,867 to $111,733 (20.5%)
  • $111,733 to $173,205 (26%)
  • $173,205 to $246,752 (29%)
  • Above $246,752 (33%)

GST credit and Child Tax Credit: These will be increased by inflation, but not until July 1, 2024. These are income texted, based on your 2023 tax return. More info: child tax credit and GST/HST credit.

Basic Personal Amount: This is what you can earn before you are taxed, and is a deduction on your tax form. For your 2024 taxes it will be $15,705 (for your 2023 taxes, it is $15,000). As a tax credit, it is calculated at 15% so it is worth $2356 for most people. As a non-refundable credit, it is only worth the maximum benefit if you would have otherwise paid that much tax. It is income tested: if you earn more than $173,205, it is reduced until it reaches $14,156 at an income of $246,752.

CPP Contributions: The contribution rate for employees and employers will remain at 5.95% for 2024, but the maximum earnings (the cap on which you pay the premium) will increase to $68,500 with a basic exemption of $3,500, which means your contribution for 2024 will max out at $3,867.50 for both employee and employer. The self employed rate remains at 11.9% and maxes out at $7,735. However, starting in 2024, a SECOND CPP contribution will be required from people earning over $68,500. People earning between $68,500 and $73,200 in 2024 will pay 4% on the additional salary (both employees and employers) to a maximum of $188 (a rate of 8% for the self employed, to a cap of $376). In 2025, the ceiling for this second contribution will rise to 14% above the basic first ceiling.

EI Contributions: These are also rising, to a rate of 1.66% for employees, to a maximum of $1,049.12 on maximum insurable earnings of $63,200. The employer rate increases to 2.32% to a maximum of $1468.77.

CPP Payments: Payments will increase by the CRA inflation rate of 4.7% effective January 1, 2024. The amount you receive depends on various personal circumstances.

OAS Payments: Payments will increase by the CRA inflation rate of 4.7% effective January 1, 2024. If your income is higher than $93,208, your OAS payment will be reduced by 15% up to an income of $134,748. Above that earnings level, OAS is completely eliminated.

TFSA Limits: Your 2024 annual contribution limit will rise to $7,000 (from $6,500 in 2023). If you have never contributed, and have been a resident of Canada, aged over 18, since 2009, your cumulative limit for 2024 is $95,000. If you have a TFSA already, subtract any amount you have previously contributed from $95,000 to find your personal contribution limit. If you have an account with CRA, you can also find your limit online there.

RRSP Limit: The contribution limit for 2024 increases to $31,560. Your personal contribution limit is 18% of your 2023 earned income (which includes self-employed and rental income) up to that limit, plus any unused contribution room from 2023, minus any pension adjustment if you have a pension plan with your employer. Again, consult your CRA online account to find the exact contribution limit for you for 2024.

Alternative Minimum Tax (AMT): The AMT applies to people who claim certain deductions that reduce their tax to very low levels. Changes are supposed to take place effective January 1, 2024, Although details are not yet published, expect raising the AMT rate from 15% to 20.5%, increasing the exemption, and limiting certain exemptions, deductions and credits. This generally applies to people with higher incomes and more complex financial affairs, so I recommend seeking advice and reading the CRA information.

Alcohol Tax: The excise tax on beer, wine and spirits will go up automatically on April 1, 2024 by the inflation rate of 4.7%, adding about 20 cents to a 24 bottle case of beer.

Carbon Tax: the carbon tax will go up by another $15/tonne on April 1st, from $65 to $80. This will directly raise the tax on a litre of fuel from 14.3 to 17.6 cents; and raise the tax on natural gas from 12 to 15 cents per cubic metre. Of course, the tax is also directly or indirectly added to the price of everything that is grown, manufactured, served or transported, fueling inflation. The Parliamentary Budget Officer (PBO) estimates the tax will cost the average Canadian household between $377 and $911, after subtracting the rebate. The PBO estimates the average household in Alberta will pay $710 – after the rebate – in 2023, rising to $911 in 2024. You can get a rough estimate of the impact on your household using this CBC calculator and estimate your rebate here.