Tax season, already? These are the changes you should factor into your return this year. As many are preparing for tax season and the filing of their personal income tax return for 2024, new changes were put into effect for the 2024 tax year that may impact you, including new credits and deductions that you may be eligible for.
To make things simple, we’ve provided a breakdown of how these changes could affect you and put together the most important changes you should know about when filing your return in 2024.
Key takeaways
- Tax brackets and many contribution amounts and limits have been increased to account for rising living costs and inflation.
- If you file late for 2024, the penalty is now 5% of your 2024 balance owing, plus an additional 1% for each full month that you file after the tax filing due date—to a maximum of 12 months.
- New for 2024, the first earnings ceiling of the Canada Pension Plan has increased to $68,500, which will see the 5.95% CPP rate applied. Also, a second ceiling became effective January 1, 2024, up to $73,200.
Unpaid tax penalty increases
There are a few rules to pay attention to regarding penalties on unpaid taxes as well as late filings. For 2024, if you have a balance owing, the Canada Revenue Agency (CRA) will charge you compound daily interest on any unpaid amounts starting the day after the balance is due. This holds true for reassessments as well.
If you file late for 2024, the penalty is 5% of your 2024 balance owing, plus an additional 1% for each full month that you file after the tax filing due date, to a maximum of 12 months.
Looking further back, if the CRA charged you a late-filing penalty for 2021, 2022, or 2023 and requested a formal demand for a return that they haven’t received, your late-filing penalty for 2024 will be 10% of your balance owing. Then you will be charged an additional 2% for each full month that you file after the due date, to a maximum of 20 months.
Filing and making payments on time can help to keep costs down.
Basic personal amount (BPA) increase
As part of their policy to continue increasing it over time, the government boosted the basic personal amount for the 2024 tax year to $15,705. This increase reduces the amount of income subject to federal tax, providing additional relief to taxpayers. And it’s likely you can expect another increase next year as well.
Tax brackets shifted
The government has adjusted tax brackets for 2024 to help maintain buying power for Canadians as prices of goods continue to increase.
The new federal tax brackets for are as follows:
- 15% on income up to $55,867
- 20.5% on income over $55,867 up to $111,733
- 26% on income over $111,733 up to $173,205
- 29% on income over $173,205 up to $246,752
- 33% on income over $246,752
The adjustment upwards means that Canadians on the edge of a tax bracket might find themselves shifted into a lower bracket this year and therefore pay less taxes.
TFSA and RRSP limits increase
The Tax-free Savings Account (TFSA) annual contribution limit is $7,000 for 2025, the same for 2024. This means that if you’ve had an account since 2009, were 18 years of age and have been a resident of Canada throughout that period, the cumulative total you can have in your TFSA is now $102,000.
The Registered Retirement Savings Plan (RRSP) annual dollar limit for the tax year 2024 is $31,560. Remember that your RRSP contribution limit is capped at 18% of your earned income in the previous year. This means the dollar limit is the maximum amount you can contribute regardless of your income.
New OAS limit amounts
The Old Age Security (OAS) benefit is designed to provide retirees with a source of income to support their retirement. However, if your income is more than a certain limit, you might find your OAS amount reduced or even cancelled entirely.
For the 2024 tax year, if your taxable income was over $90,997, you would need to repay some of your OAS. Similarly, if your taxable income was over $148,065, you would not have received any OAS payments.
CPP maximum contribution increase
The Canada Pension (CPP) and Quebec Pension Plan (QPP) have been increased by 6.4%.
New for 2024, the first earnings ceiling of the CPP has increased to $68,500, which will see the 5.95% CPP rate applied. A second ceiling became effective January 1, 2024, up to $73,200. Individuals earning above the first and below the second ceiling will be subject to an additional CPP contribution.
CPP2 contributions are made by anyone who earns wages above the first earnings ceiling. These are calculated as a percentage of wages above the first earnings ceiling up to the amount of the second earnings ceiling.
Employees contribute 4% of the amount they earn between the first earnings ceiling and the second earnings ceiling. Self-employed individuals contribute 8% of the amount they earn between the first earnings ceiling and the second earnings ceiling.
If you earn less than the first earnings ceiling, you will not make CPP2 contributions. You will continue to make base and first additional CPP contributions of 5.95% if you are an employee or an employer, or 11.9% if you are self-employed.
Quebecers also have the option to increase their QPP premiums, by making extra contributions, to the enhanced plan. The enhancement of the QPP will provide future retirees with an increase in their pension premiums from 25% to 33.3%. Note that any self-employed individuals must account for both the employer and the employee contributions. For 2024, the maximum contribution amount for the CPP is $7,735 and for the QPP it is $8,320.
These contributions are crucial for securing retirement, disability, and survivor benefits through the CPP.
Disability tax credit updates
Applying for the Disability Tax Credit (DTC) notoriously has been a lengthy process. However, the CRA made this process easier in 2023 by going digital. Via CRA My Account, individuals wanting to apply can complete Part A of the application, and receive a reference number, which can be provided to a qualified medical practitioner who can then complete Part B digitally for you. There’s no need to print and bring the forms to your medical practitioner anymore.
More changes loom for tax year 2024 since Canada’s federal budget provides for funding for a new Canada Disability Benefit. The proposed benefit plans to support low-income individuals with disabilities between the ages of 18 and 64. You must have a valid Disability Tax Credit certificate to qualify. Check the CRA’s Canada Disability Benefit page for updates.
The bottomline
Tax season is a headache for most with all the constant changes. The above changes are the changes you should factor into your return this year. As many are preparing for tax season, new changes have been put into effect for the 2024 tax year that may impact you, including new credits and deductions that you may be eligible for.
Being on top of this, or working with an advisor in this regard, will ensure your tax process is straightforward and you are current with the tax changes and Keeping Life Current.
