Understanding the Impact of Canada’s 2024 Tax Changes, with Focus on Ontario

Introduction

The new year introduces several significant tax changes in Canada that could influence your financial planning. This article, brought to you by TheBroker.ca Ltd., aims to provide a detailed overview of these changes, with a particular focus on Ontario. For your comparison, we have included both the Federal and Ontario tax brackets for the years 2023 and 2024.

Federal Tax Brackets for 2023

The federal government has adjusted tax brackets for the 2023 tax year. The new brackets and tax rates are as follows:

  • 15% on the first $53,359 of taxable income
  • 20.5% on taxable income over $53,359 up to $106,717
  • 26% on taxable income over $106,717 up to $165,430
  • 29% on taxable income over $165,430 up to $235,675
  • 33% on any taxable income over $235,675

Ontario Provincial Tax for 2023

Ontario’s provincial tax rates for 2023 are as follows:

  • 5.05% for the first $49,231 of income
  • 9.15% for income over $49,231 up to $98,463
  • 11.16% for income over $98,463 up to $150,000
  • 12.16% for income over $150,000 up to $220,000
  • 13.16% for income over $220,000.

New Federal Tax Brackets for 2024

  • The federal tax brackets for Canada for the year 2024 have been adjusted. The new brackets and tax rates are as follows:
  • 15% on the first $55,867 of taxable income
  • 20.5% for income over $55,867 up to $111,733
  • 26% for income over $111,733 up to $173,205
  • 29.32% for income over $173,205 up to $246,752
  • 33% on any taxable income over $246,752

New Ontario Provincial Tax for 2024

  • The Ontario provincial tax brackets for the year 2024 have been adjusted. The new brackets and tax rates are as follows:
  • 5.05% on the first $51,446 of taxable income
  • 9.15% for income over $51,446 up to $102,894
  • 11.16% for income over $102,894 up to $150,000
  • 12.16% for income over $150,000 up to $220,000
  • 13.16% on any taxable income over $220,000

Please note that these tax brackets are subject to change and it’s always a good idea to check the latest information from the Canada Revenue Agency or consult with a tax professional.

Basic Personal Amount Increase

The Basic Personal Amount (BPA), a non-refundable tax credit that can be claimed by anyone who files income taxes in Canada, was increased to $15,000 for the 2023 tax year. This phased increase is part of the Government of Canada’s goal to amend the BPA to $15,705 by the year 2024.

No more flat-rate method for home office deductions

Eligible employees who worked from home in 2023 will be required to use the detailed method to claim home office expenses. This involves keeping track of all eligible expenses incurred and may require the employer to complete and sign Form T2200 or Form T2200S. The temporary flat rate method no longer applies to the 2023 tax year and any year after that. This method previously allowed employees to claim a deduction of $2 for each day they worked from home, up to a maximum of $400 in 2020 and $500 in 2021 and 2022.

EI Premium Rate Hike

The Employment Insurance (EI) premium rate for employees will increase to $1.66 (from $1.63) per $100 of insurable earnings for 2024. The employer portion has also gone up from $2.28 to $2.32 per $100 of earnings. This increase is part of the government’s efforts to ensure the sustainability of the EI program and to provide adequate benefits to Canadians who are temporarily out of work. The CFIB has commented with disappointment, claiming that this increase will put higher financial burden to both employees and employers, and it will drive up the cost of doing business for small businesses in Canada.

RRSP Dollar Limit Increase

The Registered Retirement Savings Plan (RRSP) dollar limit for 2024 will be $31,560. This increase allows Canadians to contribute more towards their retirement savings, which can be deducted from their income to reduce their tax liability.

TFSA Dollar Limit Increase

The Tax-Free Savings Account (TFSA) contribution limit will increase to $7,000 (from $6,500) for 2024. This increase provides Canadians with more room to earn tax-free investment income, which can help them meet their short-term and long-term financial goals.

Recent Changes in the Old Age Security (OAS) Program in Canada

Changes in 2023

In 2023, the OAS claw back threshold, which is the income level above which seniors must repay a portion of their OAS pension, was set at $86,9121. If a senior’s net income exceeded this amount, they were required to pay back 15% of the excess income. The maximum monthly payment for OAS in 2023 was $778.45 for those aged 75 and over, and $707.68 for those between the ages of 64 and 74.

Changes in 2024

In 2024, the OAS claw back threshold will increase from $86,912 to $90,997. This means seniors can earn up to $90,997 in 2024 before any OAS benefits start getting deducted. The full OAS pension is clawed back at an income level of $136,855 for 2024. The OAS payments are expected to increase by 4.7% as of January 2024.

Please note that these changes are subject to certain conditions and eligibility criteria. For the most accurate and up-to-date information, please consult with a tax professional or visit the official Canada Revenue Agency website.

Conclusion

Understanding these tax changes is crucial for effective financial planning. Stay informed and consult with a competent tax professional to navigate these changes effectively.

Please note that this article is brought to you by TheBroker.ca Ltd. and is intended to provide general information and does not constitute legal or tax advice. For advice tailored to your circumstances, please consult a tax or legal professional.

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