Introduction:
As we approach the new fiscal year, it’s essential to stay informed about any changes in income tax regulations. The Canada Revenue Agency (CRA) has recently released updates for the 2024 fiscal year, which will impact various aspects of taxation. In this blog, we will explore the key changes and their implications for taxpayers.
1. TFSA and RRSP contribution Increases:
The Tax-Free Savings Account (TFSA) contribution limit for 2024 has been officially set at $7,000, up from $6,500 in 2023. This increase marks the first time in consecutive years that the TFSA limit has risen. It is important to note that the TFSA limit is indexed to inflation and rounded to the nearest $500.
Registered Retirement Savings Plan (RRSP) contribution limit for 2024 is $31,560 up from $30,780 in 2023. You can contribute up to 18% of your earned income to your RRSP, up to a maximum of $31,560. If you have unused RRSP contribution room from previous years, you can carry it forward and use it in future years.
2. Federal Tax Bracket Thresholds:
The federal tax bracket thresholds will also be adjusted higher in 2024. Here are the new thresholds:
· 33.0% tax rate begins at taxable income over $246,752, up from $235,675 in 2023.
· 29.0% tax rate begins at taxable income over $173,205, up from $165,430 in 2023.
· 26.0% tax rate begins at taxable income over $111,733, up from $106,717 in 2023.
· 20.5% tax rate begins at taxable income over $55,867, up from $53,359 in 2023.
· Income up to $55,867 is taxed at 15.0%.
The Canada Revenue Agency (CRA) has released a tax calculator that individuals can use to estimate their taxes for 2024. This calculator is available on the CRA website.
3. Basic Personal Amount:
The Basic Personal Amount (BPA) for 2024 is set at $15,705 for taxpayers with net income of $173,205 or less. The BPA gradually decreases for higher-income earners until it reaches $14,156 for net income of $246,752. The BPA is the amount of income an individual can earn without paying federal tax.
4. CPP (QPP) Contributions:
For 2024, the employee and employer Canada Pension Plan (CPP) contribution rates will remain at 5.95%. The maximum pensionable earnings will increase to $68,500, while the basic exemption amount remains at $3,500. Self-employed individuals will have a CPP contribution rate of 11.9%, with a maximum contribution of $7,735.
5. Other Changes:
– Employment Insurance premiums will increase, with a contribution rate of 1.66% for employees, up to a maximum contribution of $1,049.12 on 2024 maximum insurable earnings of $63,200.
– The Old Age Security (OAS) repayment threshold for 2024 is $90,997. OAS benefits will be reduced if taxable income exceeds this threshold.
Conclusion:
Being aware of the income tax changes for the upcoming fiscal year is crucial for individuals and businesses. The 2024 tax changes include an increase in the TFSA limit and RRSP contribution, adjustments to federal tax bracket thresholds, changes to the Basic Personal Amount, CPP contributions, and more. It is advisable to consult with a tax professional or refer to the CRA’s official guidelines for detailed information and personalized advice. Stay informed and plan your finances accordingly to make the most of the new tax regulations.
Sources:
https://www.advisor.ca/tax/tax-news/tfsa-limit-rises-to-7000-for-2024-officially/
Economic and Real Estate market update: August 2024
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