2024 Personal Tax Planning Tips for Canadians 

As we approach the end of 2024, it’s an ideal time for Canadians to assess their finances and explore strategies to maximize tax savings before the year closes. Whether you’re a seasoned taxpayer or new to proactive tax planning, these practical tips will help you reduce your tax bill, capitalize on deductions, and set yourself up for financial success in 2025.

There are several major changes in 2024 which will substantially impact Canadians, such as the proposed capital gains inclusion rate increase, proposed increase to the Lifetime Capital Gains exemption, as well as changes to the stock option rules as well as Alternative Minimum Tax. Interestingly, the capital gains increases have yet to receive first reading in the house of parliament, presenting a very real possibility that the changes may not ever become effective.

Tax Planning Checklist for 2024

Here is a short checklist that can help you keep track of key tax-saving opportunities and ensure no details slip through the cracks as the year-end approaches.

Income & Investment Planning

☐ Contribute to your RRSP (Registered Retirement Savings Plan) up to the maximum limit.

☐ Review investment portfolio for tax-loss selling opportunities on non-registered investments.

☐ Contribute to your TFSA (Tax-Free Savings Account) up to the 2024 limit which is $7,000 for 2024 and $95,000 since the inception of the program.

☐ Consider RESP contributions (Registered Education Savings Plan) if you have children, and track government grants.

Tax Credits & Deductions

☐ Gather receipts for charitable donations made by December 31.

☐ Review medical expenses and collect receipts for eligible out-of-pocket medical costs.

☐ Determine eligibility for the Canada Workers Benefit (CWB) if applicable.

☐ Consider Home Accessibility Tax Credit for qualifying expenses if you or a dependent is over 65 or qualifies for the Disability Tax Credit (DTC).

Family & Estate Planning

☐ Pay reasonable salaries to family members for legitimate work done in a family business.

☐ Review Canada Child Benefit (CCB) entitlements and any provincial benefits for children.

☐ Consult with a financial advisor for estate planning if you’ve experienced major life changes in 2024.

Important Deadlines for 2024 Tax Planning

Keeping track of these deadlines will help ensure you don’t miss valuable tax-saving opportunities or incur penalties for late contributions.

Detailed 2024 Year-End Tax Planning Tips

Use these strategies to further optimize your tax situation and take advantage of the most effective tax savings available.

1. Maximize RRSP Contributions

One of the most effective ways to reduce your taxable income is by contributing to a Registered Retirement Savings Plan (RRSP). For 2024, the contribution limit is 18% of your earned income, up to a maximum of $31,560 ($32,490 for 2025). Contributions made by February 28, 2025, can still count toward your 2024 tax return.

Tip: If you’re short on cash, consider an RRSP loan to contribute now, with plans to pay it off when your tax refund arrives.

2. Tax-Loss Selling for Non-Registered Investments

If you have non-registered investments that have declined in value, selling them at a loss can help offset gains from other investments. Complete any sales by December 31 to apply the losses to this tax year. Note the “superficial loss” rule, which disallows losses if you repurchase the same asset within 30 days of the sale.

3. Charitable Donations

Charitable donations made by December 31 qualify for a federal tax credit of 15% on the first $200 donated and 29% on amounts beyond that, with provincial credits varying.  In Alberta, the provincial tax credit is 10% on the first $200 and 21% on amounts over $200, so there is a potential to receive a 50% tax benefit for donations made in Alberta.

Donating appreciated securities directly, rather than cash, can also allow you to avoid capital gains tax, while still receiving the benefit of the donation credit.

4. TFSA Contributions

For the 2024 calendar year, you can contribute up to $7,000 to your Tax-Free Savings Account (TFSA), provided you are at least 18 years old and a resident of Canada. If you have not made any contributions to your TFSA in previous years you may be eligible to contribute a cumulative total of $95,000.

If you need to withdraw funds from your TFSA, remember that withdraws are not added back to your TFSA contribution room until the start of the following year, so it may be advisable to make the withdraw during the current year.

5. Canada Workers Benefit (CWB)

If you’re a low-income worker, check your eligibility for the Canada Workers Benefit (CWB), which can reduce taxes owed or provide a refundable credit. New adjustments to the CWB thresholds in 2024 may impact your claim.

6. Family Income Splitting

If family members work in your business, paying them a reasonable salary can help you shift income to lower tax brackets. Ensure all work performed is documented, and wages are in line with market standards to avoid issues with the CRA.

7. Medical Expense Claims

The CRA allows you to claim medical expenses that exceed 3% of your net income or $2,635, whichever is lower. Pooling expenses and having the lower-income spouse claim them can maximize your deduction. Ensure all receipts are ready by December 31.

8. Home Accessibility Tax Credit

If you or a family member is over 65 or qualifies for the Disability Tax Credit (DTC), you can claim up to $10,000 for home modifications that improve accessibility. Qualifying expenses include ramps, lifts, and other modifications, and must be made by December 31.

9. Family Benefits

Canada Child Benefit (CCB)

If you have children, check that you’re receiving the maximum CCB and any provincial supplements.

Registered Education Savings Plan (RESP)

Consider contributing to a RESP for each child. Contributions to RESPs grow tax-free, and the federal government matches up to 20% through the Canada Education Savings Grant (CESG), with a lifetime limit of $7,200 per child under 18 years old.

If you are unable to take advantage of the maximum contribution limit this year, there are scenarios where you may be able to carry the contribution room forward. In this scenario the CESG is capped at the lower of $1,000 or 20% of the unused CESG room.

10. Sell investments with unrealized capital gains / losses?

If you hold investments with unrealized capital losses, consider selling them before the year ends to realize the loss and offset any net capital gains you have realized during the year or in the past three years. Remember that losses on securities sold are typically denied if you repurchase the securities avoid repurchasing the securities sold at a loss within 31 days.

If you plan to sell investments with unrealized capital gains during 2024 which cannot be offset with capital losses, consider spreading those dispositions out over two years, or moving the disposition to 2025 to defer tax. If you have unused capital losses carried forward from previous years, evaluate whether selling investments with unrealized capital gains now could be beneficial to utilize these losses and improve your cash flow but lack capital losses to offset them. A tricky aspect of this evaluation is considering the timing of the proposed increase to the capital gains inclusion rate on gains exceeding $250,000 realized on or after June 25, 2024, which could impact your tax liability for 2024.

Remember that these proposals include a $250,000 exemption where gains will remain at 50%, rather than the increased 2/3 rate for individuals. A further complication is the effect of the change in the capital gains inclusion rate on the Alternative Minimum Tax (AMT), if the change applies to your scenario.

11. Moving?

Relocating to a different province

The province in which you reside on the last day of the year (December 31) is where you pay provincial tax. If you have a move scheduled near the end of the year, to a higher tax province, consider delaying the move until the start of the following year. You location of residence at the end of the year also impacts your provincial donation credits.

Principal resident exemption

If you are selling your principal residence during 2024, you’ll need to report it on your tax return, even if there is no tax payable due to the principal residence exemption. Keep track of your original purchase date, purchase price, and selling price of the property for reporting purposes. If you owned the property for less than 12-months, you will need to consider the new “residential property flipping” rules and if you fall under one of the exceptions to those rules to avoid the sale being taxable.

Moving expenses

To claim moving expenses, you must meet certain conditions. These expenses can be deducted if they are incurred due to an “eligible relocation,” which means moving to start a new job, run a business, or attend a post-secondary institution full-time. The new home must be at least 40 kilometers closer to the new work or school than the old home. Eligible expenses can include travel costs, moving and storage of household items, temporary living expenses, lease cancellation fees, selling.

Buying your first home

The First Home Savings Account (FHSA) is a new savings vehicle designed to help Canadians save for their first home. Contributions to an FHSA are tax-deductible, and the account allows for tax-free growth of investments. Withdrawals from the FHSA are also tax-free, provided they are used to purchase a qualifying first home. The annual contribution limit is $8,000, with a lifetime limit of $40,000. This account combines the benefits of both a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA), making it an attractive option for first-time homebuyers.

The Home Buyers’ Plan (HBP) allows first-time homebuyers to withdraw up to $35,000 from their RRSPs to buy or build a qualifying home. The withdrawal is tax-free, but the amount must be repaid to the RRSP over a 15-year period to avoid tax penalties. The HBP can be used in conjunction with the FHSA, providing additional financial flexibility for those looking to enter the housing market.

12. Underused Housing Tax

Certain owners of residential properties in Canada, including foreign nationals and some Canadian individuals and corporations, may be subject to the new UHT rules. Broadly, the UHT is a 1% annual tax on vacant or underused homes, effective from January 1, 2022. Owners need to check if their property is considered underused, meaning it is vacant or not occupied for much of the year. There are exemptions, such as for vacation homes, properties not suitable for year-round use, or newly constructed homes. Even if exempt, owners must file an annual return by April 30 of the following year. Failure to comply can result in significant penalties

13. Plan for 2025 with a Financial Review

The end of the year is a good time to review your financial plan, estate planning, and debt management. Consulting with a financial advisor can help ensure that your strategies remain aligned with your goals and identify any new tax-planning opportunities for the new year.

While tax planning can feel daunting, these actionable steps can make a substantial difference on your 2024 tax return and position you for a financially successful 2025. By taking a proactive approach to tax savings, you can look forward to a smoother tax season and a potentially lower tax bill. If your finances are complex or you’ve experienced life changes in 2024, consult a Achen Henderson CPAs for tailored guidance.

Top Combined Marginal Tax Rates for 2024

(1) For 2024, the lifetime capital gains exemption limit for qualified farm property, qualified fishing property, and qualified small business corporation shares has been raised to $1,016,836 from the previous $971,190. The federal budget for 2024 proposes an additional increase to $1.25 million, effective for dispositions on or after June 25, 2024. This exemption is also set to be indexed for inflation annually starting in 2026.

Capital Gains Inclusion Rate Increase Might Not Happen

The same budget proposes raising the capital gains inclusion rate to 66.67% from 50% for annual capital gains exceeding $250,000 for individuals (not corporations), effective for gains realized on or after June 25, 2024. Quebec has indicated it will align its rules with this federal change.

(2) Effective January 1, 2024, Saskatchewan has increased its Dividend Tax Credit (DTC) rate for non-eligible dividends to 2.52% from 2.11%.

(3) Prince Edward Island has raised its top marginal personal tax rate on interest and regular income to 18.75% from 16.7%, effective January 1, 2024. The province has also eliminated its 10% surtax starting in 2024.