Tax season is here again, and if you’re filing your 2024 return, you’ll want to be aware of several important changes that could impact your tax obligations, credits, and deductions. From increased contribution limits to new penalties, here’s a breakdown of the biggest updates for Canadian taxpayers.
1. Higher Penalties for Late Filings
If you owe taxes and fail to file on time, the penalties have increased. The Canada Revenue Agency (CRA) will charge a 5% penalty on any unpaid balance, plus an additional 1% for each full month your return is late, up to 12 months.
For those who have received late-filing penalties in previous years (2021-2023), the penalty jumps to 10% of the balance owing, with an additional 2% per full month, up to 20 months. Filing on time is more important than ever to avoid unnecessary costs.
2. Increased Basic Personal Amount (BPA)
The Basic Personal Amount (BPA), which reduces the amount of income subject to federal tax, has been increased to $15,705 for 2024. This gradual increase helps provide tax relief to all Canadians and will likely continue in future years.
3. Adjusted Tax Brackets for Inflation
To account for rising costs, the government has adjusted the 2024 federal tax brackets as follows:
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15% on income up to $55,867
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20.5% on income over $55,867 up to $111,733
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26% on income over $111,733 up to $173,205
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29% on income over $173,205 up to $246,752
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33% on income over $246,752
These adjustments mean some taxpayers may find themselves in a lower tax bracket, ultimately reducing their tax burden.
4. Higher TFSA and RRSP Limits
For those looking to save, both Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) limits have been increased:
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TFSA annual limit: $7,000 (cumulative total since 2009 is now $102,000 if you’ve never contributed before)
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RRSP annual dollar limit: $31,560 (though actual contribution room is capped at 18% of your prior year’s income)
5. Changes to Old Age Security (OAS) Clawback Threshold
If you’re receiving Old Age Security (OAS), your benefit may be reduced if your income exceeds certain thresholds:
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Income over $90,997 may result in partial repayment of OAS benefits
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Income over $148,065 means you will not receive any OAS payments
This is an important consideration for retirees managing their income sources.
6. Increased Canada Pension Plan (CPP) Contributions
CPP contributions are increasing again, with a new second earnings ceiling introduced in 2024:
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The first earnings ceiling is $68,500, with a 5.95% CPP rate applied.
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A second earnings ceiling is now $73,200, subject to additional contributions:
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Employees pay 4% of income above the first ceiling, up to the second ceiling.
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Self-employed individuals pay 8% within that range.
This means higher contributions but also greater retirement benefits in the future.
7. Updates to the Disability Tax Credit (DTC)
The CRA has streamlined the Disability Tax Credit (DTC) application process. Applicants can now apply digitally through CRA My Account, allowing medical practitioners to complete the necessary forms online.
Additionally, the federal government has introduced the Canada Disability Benefit, aimed at supporting low-income individuals with disabilities aged 18-64. To qualify, you must have a valid DTC certificate.
Final Thoughts
These changes reflect Canada’s ongoing adjustments to tax policy in response to inflation and economic conditions. Whether you’re a salaried employee, self-employed, or retired, staying informed about these updates will help you make smart financial decisions and avoid costly penalties.
Need help navigating your taxes? Consider working with a financial professional to maximize your deductions and credits!