12 months-end tax-saving ideas for Canadians for 2024

Cut back taxes within the present yr

There are a number of methods to do that:

• Fill tax effectivity gaps: Many Canadians have unused tax-advantaged financial savings room in registered accounts—and this can be a actual miss. For instance, you may spend money on your registered retirement financial savings plan (RRSP) to scale back web earnings and thereby not simply cut back your taxes payable but additionally improve social advantages you might qualify for, such because the Canada Baby Profit (CCB), the GST/HST Credit score and the Canada Dental Care Plan. Open a primary residence financial savings account (FHSA) in the event you qualify to save lots of as much as $8,000 a yr for a brand new residence. You should open the account to create the annual room, so achieve this earlier than yr finish, even in the event you can solely put a small sum of money apart. 

• Plan taxes on capital positive aspects. New greater capital positive aspects inclusion charges (66.7%) will apply to capital positive aspects over $250,000 per particular person, generated after June 24, 2024. Under this the inclusion price stays 50%. This may have an effect on belongings in non-registered accounts, private residences together with cottages, rental properties or sure enterprise belongings. On the time of writing the new capital positive aspects guidelines have been anticipated to be handed into legislation. 
• Plan enterprise earnings ranges. Unincorporated enterprise homeowners might want to pay Canada Pension Plan (CPP) premiums on the finish of the yr with their taxes. The prices are going up steeply; they will exceed $8,000 a yr when web earnings is over $70,000. However it’s attainable to scale back web earnings with a deduction for capital price allowance (CCA) on a brand new asset buy, resembling a automotive or new furnishings. Verify this out with your advisor.  
• Handle tax installment funds: If you happen to owed $3,000 or extra if you filed your taxes final yr and in both of the 2 previous tax years, you’ll have been requested by CRA to make quarterly tax installment funds. Farmers and fishers make that fee solely as soon as, on the finish of December. However what in case your earnings has dropped this yr? It will not be essential to make the December fee. Use the money circulate to make tax-wise investments earlier than yr finish as a substitute.

Get well taxes beforehand paid

Most individuals are unaware which you could modify for errors or omissions on prior filed returns as much as 10 years again. So, for 2024, which means 2014 to 2023. It could actually pay to look again and assessment prior filed returns for missed tax credit like medical bills, tuition charges, charitable donations or profitable deductions like little one care, shifting bills or funding carrying costs. You possibly can carry again capital losses unused in a single tax yr to offset capital positive aspects earnings within the earlier three years. It’s also possible to carry ahead unused capital losses indefinitely into the longer term. Charitable donations made in a single tax yr will be carried ahead as much as 5 years.

Set your self as much as reduce taxes sooner or later 

This includes understanding the carry-over provisions described above. Equally essential is understanding what tax bracket your earnings falls into. The Canadian tax system relies on progressivity: the extra you earn, the upper the tax price you pay.  That’s decided by varied tax charges utilized to earnings brackets, proven beneath.   

Federal Tax Brackets and Charges for 2024 and projected for 2025 

If there’s an earnings hole earlier than the subsequent tax bracket, think about “topping earnings up.” Seniors may make an additional withdrawal from their registered retirement earnings fund (RRIF), for instance. Others may think about producing some capital positive aspects from the sale of monetary belongings held outdoors of a registered account.  

Be aware, although, that prepaying tax may appeal to quarterly installment funds. Nonetheless, as a rule, averaging out earnings from yr to yr is helpful, particularly in the event you anticipate to generate a big earnings supply, for instance from a sale of an asset, sooner or later.

If any earnings has spilled into the subsequent tax bracket, think about lowering it with an RRSP contribution or doing a little tax-loss harvesting to scale back capital positive aspects earnings. You may also be capable to break up sure earnings sources (like a pension) along with your partner.  

Tax financial savings with registered accounts

Lastly, arrange your future with tax-advantaged accounts beneath. They don’t generate a tax deduction this yr however they are going to ship on turbo-charging your future wealth:

• Prime up your TFSA: All you might want to be is no less than 18 and a resident of Canada to have a tax-free financial savings account (TFSA). As talked about, the contributions aren’t deductible, however on withdrawal there is no such thing as a tax on both the earnings or the principal. It is a nice dipping pot for emergencies, but additionally doubtlessly a part of a million-dollar retirement plan, relying on how lengthy the cash stays within the plan and your charges of return. 
• Maximize training financial savings in RESPs. To get the associated Canada Schooling Financial savings Grant and Canada Studying Bond from the federal authorities, you might want to contribute to a registered training financial savings plan (RESP) for a kid. The account can earn a CESG of as much as $600 every year if you make investments as much as $2,500 (the grant is income-tested). The CLB can also be primarily based in your web earnings; it attracts $500 within the yr the RESP is opened after which $100 a yr till the kid turns 15, for a complete of $2,000. So it’s essential to file a tax return every year and cut back your web earnings with allowable deductions like little one care and FHSA/RRSP contributions. 
• Maximize RDSPs contribution room: Registered incapacity financial savings plans (RDSPs) complement pension for disabled individuals in a household. Once more, relying on earnings ranges, the RDSP contribution will appeal to profitable authorities grants and bonds.
• Seek the advice of with a tax specialist to discover extra. That’s essential as a result of there are a number of new quirks this yr, together with modifications to the Various Minimal Tax (AMT) which impacts these within the fourth tax bracket: above $173,206 in 2024 and $177,883 in 2025.   

12 months-end tax planning questions

This text received’t reply all of your year-end tax questions. So I’ve listed extra tax-planning questions you need to be asking your self and your advisor, each December (or sooner, actually).