6 noteworthy tax changes for 2024
Chances are, staying up-to-date with tax changes may be low on your to-do list. But in today’s ceaselessly evolving economic landscape, being well-informed is everything.
Here are 6 recent tax changes for 2024 that are worth taking a moment to digest:
1. The RRSP contribution limit has gone up, making wealth accumulation easier…for some
In 2024, the Registered Retirement Savings Plan (RRSP) contribution limit rose to $31,560—an increase of roughly $800 from the previous year. Higher income earners in particular stand to benefit significantly here, as it allows for a greater portion of income to be sheltered from immediate taxation. The result? More effective wealth accumulation, and potentially more financial security at retirement.
2. The TFSA contribution limit has gone up, making more room for tax-free growth
While Tax-Free Savings Account (TFSA) contributions are not tax-deductible like RRSPs, any growth remains tax-free, making it ideal for both short and long-term goals—even retirement. The 2024 contribution limit for TFSAs has increased to $7000 from $6500 in 2023. Effectively this means more room for tax-free growth in investments and savings, with a cumulative limit of $95,000 for those who were eligible when TFSAs were first introduced in 2009.
3. The FHSA is still new, and still a great option for first-time home buyers
Introduced in 2022, the First Home Savings Account (FHSA) was created with first-time homebuyers’ downpayment needs in mind. It combines elements of both RRSPs and TFSAs, with contributions being tax-deductible and growth being tax-free. Withdrawals for the purchase of a home are likewise tax-free. In 2024, the FHSA annual contribution limit is $8000, with a lifetime contribution limit of $40,000. Eligibility for the FHSA requires being a first-time homebuyer—but if you haven’t owned a home in the last five years, this means you too.
4. The CPP contribution rate has gone up, impacting the self-employed
The yearly maximum pensionable earnings (YMPE) under the Canada Pension Plan (CPP) has increased from $66,600 to $68,500. If you’re an employee within this threshold, you’ll pay a maximum of $3,867.50 in contributions. Then there’s CPP 2.0, AKA the yearly additional maximum pensionable earnings (YAMPE). How it works: if you make $68,500+, you’ll pay an additional 4% on earnings up to $73,500, for a maximum contribution of $4055.50. If you’re an employer, you’ll have to match these higher contributions. Self-employed individuals will feel the biggest impact: they must cover both employee and employer contributions, with a maximum cost of over $8100. Just because it’s a safety net doesn’t mean it’s not painful.
5. Income thresholds for federal tax brackets have increased, reducing tax burdens
Adjustments to federal tax brackets for 2024 are a clear response to inflation and economic changes. While tax rates remain the same, the income thresholds for each bracket have increased, effectively allowing Canadians to retain more of their income at lower tax rates before moving into a higher bracket. For example, the lowest bracket now applies to incomes up to $55,867, up from $53,359. Good news: similar adjustments have been made to subsequent brackets.
6. The LCGE has gone up, making business owners happy
The Lifetime Capital Gains Exemption (LCGE) has seen an increase, and is now set at $1,016,836 for 2024, up from $971,190. This change is advantageous to Canadian business owners because it allows a larger portion of gains from the sale of qualified business shares to be tax exempt, offering a significant (non-taxable!) cash infusion to anyone selling off their business.
The 2024 Canadian tax changes introduce key adjustments ultimately aimed at enhancing fairness in the tax system, even when it doesn’t feel that way. One thing’s for sure: when it comes to taxes, knowledge is definitely power.
