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What’s New In Tax? Part 1

Brian Quinlan is a contributing editor for the Canadian MoneySaver. Learn more on “What’s New In Tax?” in the article he wrote for the January 2024 edition.

Individuals

  • Tax brackets and tax rates.  The 2023 tax brackets increased by 6.3% to account for inflation.  There are no changes to tax rates for 2023.  For 2024, the alternative minimum tax (AMT) system has changed significantly.  Part of the change is a new tax rate of 20.5% (up from 15%) and an increase in the AMT exemption to $173,000 (up from $40,000). 
  • Basic personal tax credit.  The maximum threshold for the basic personal tax credit in 2023 is $15,000.  This can be claimed when income is $165,430 or less.  When income is above $235,675, the threshold drops to $13,520.  Where income is between $165,430 and $235,675, the threshold amount is in the range of $13,520 and $15,000. 
  • Canadian Dental Care Plan.  As of October 1, 2022, dental expenses incurred for a child under 12 are reimbursed by the federal government up to $650 per year.  The $650 is based on the family not having dental insurance and earning less than $70,000.  Families with income between $70,000 and $90,000 are entitled to lower amounts.  In 2023, the program was expanded to uninsured individuals under 18, individuals with disabilities and seniors.  In 2025, the plan will include all uninsured individuals where family income is below $90,000.

Housing

  • First Home Savings Account.  Individuals (18+) can now open a FHSA to help save for the purchase of a first home.  The FHSA allows for an annual tax-deductible contribution of $8,000 and a lifetime maximum contribution of $40,000.  The income and growth of the FHSA investments are not subject to tax and withdrawals from the FHSA are tax-free when used to purchase a first home.  Both the FHSA and the RRSP Home Buyers’ Plan (HBP) can be used together.  The HBP permits a taxpayer to borrow up to $35,000 from their RRSP to purchase a first home.  The loan is interest-free and is to be paid back over 15 years.
  • Multigenerational Home Renovation Tax Credit.  Beginning in 2023, renovations that create a secondary dwelling (private entrance, kitchen, bathroom and sleeping area) for a related senior (65+) or adult with disabilities can be eligible for this tax credit.  This tax credit is 15% of eligible expenses up to $50,000 incurred in the year.  The maximum credit is $7,500.  This tax credit is separate from the Home Accessibility Tax Credit (began in 2016) which permits a maximum tax credit of $3,000 in respect of a senior incurring costs to make their dwelling easier to access, increase their mobility in the dwelling or to reduce the risk of harm while in or accessing the dwelling (e.g., wheelchair ramp, walk-in bathtub, wheel-in shower, grab bars).
  • Flipping.  Flipping is the purchase of real estate with the intent of reselling at a profit after a short period of time.  Beginning in 2023, profits from the sales of residential property held for less than 12 months are taxed as business income and not as a capital gain.  This means 100% of the profit is taxed – versus 50% if taxed as a capital gain – and the profit cannot be sheltered from tax by the principal residence exemption.  There are exclusions to this rule where a sale is due to a life event (e.g., an expanding family, marriage breakdown, illness, disability, death, taking a new job).
  • Underused Housing Tax.  As of January 1, 2022, there was a 1% tax on the value of vacant or underused residential properties owned by any non-resident, non-Canadian.  Each year, the owner is required to file a return for each residential property under this rule.  UHT tax returns – tax form UHT 2900 – for both 2022 and 2023 are due April 30, 2024.  Often, a Canadian resident that owns a residential property through a trust or corporation has a UHT 2900 filing responsibility even when the tax works out to $nil.  The penalty for non-compliance can be as high as $10,000.  (The federal UHT is separate from “vacant home tax” declarations made to a municipality.)
  • Foreign Home Buyer Ban.  A two-year ban on non-Canadians purchasing Canadian residential real estate began on January 1, 2023.  There are some exemptions to the ban.

Saving and retirement

  • Tax-Free Savings Account.  The TFSA contribution limit for 2024 is $7,000 – up from $6,500 in 2023. As of January 1, 2024, the cumulative TFSA contribution limit is $95,000 for an individual that was 18+ when TFSAs began in 2009.
  • Registered Retirement Savings Plan.  The maximum RRSP contribution limit is $30,780 for 2023 (achieved when 2022 earned income was at least $171,000) and $31,560 for 2024 (achieved when 2023 earned income is at least $175,334).  Where an individual is a member of a registered pension plan, the RRSP contribution limit is reduced by their prior year’s pension adjustment.  The deadline to contribute to an RRSP and claim a 2023 tax deduction is February 29, 2024.
  • Old Age Security.  The income threshold for OAS repayment (“clawback”) began at $86,912 in 2023.  The repayment is 15% of income in excess of the threshold, to a maximum of the amount of OAS received for the year.
  • Canada Pension Plan.  Enhancements to the plan began in 2019.  The second phase of the enhancement begins in 2024.  CPP contributions will continue to increase each year.

Source: https://www.canadianmoneysaver.ca/authors/brian-quinlan