It’s a new year, which means that the 2023 tax year is officially over and Canadians can begin filing their tax returns. The tax filing deadline to avoid late penalties is Tuesday, April 30.
Although some may wait until the last minute to start their taxes, I’ve always been a proponent of preparing ahead of time. This will save you time and help you take full advantage of the numerous tax breaks and credits offered by the CRA.
Below, I’ll share some of the most important tax breaks you should look into this tax season and review some of the to Canada’s tax code for 2024.
Although the CRA hasn’t introduced any new tax credits this year, these are some of the most common tax breaks you may want to discuss with your accountant or tax preparer to help you save more on your taxes.
Basic personal amount
The (BPA) for the 2023 tax year is $15,000. This non-refundable tax credit can be claimed by all taxpayers and is an excellent way to reduce (or even eliminate) your income taxes.
Taxpayers who earn less than $15,000 are exempt from paying federal income taxes since their total annual income is below the threshold. Those who earn more than $15,000 can use the basic personal amount to reduce their total tax liability.
If you earn $60,000, for example, you can subtract the $15,000 BPA and will only be taxed on the remaining $45,000.
Homebuyers
Introduced in 2009, the allows disabled and/or first-time home buyers to claim a non-refundable tax credit of $10,000, provided they purchased a qualifying home that falls into one of these categories:
If you’ve recently purchased a home and have not applied for this tax break before, you can also file for it retroactively. For homes purchased in 2021 or earlier, you can claim a $5,000 credit, and for homes purchased in 2022 or 2023, you can claim the full $10,000 credit.
Work from home expenses
The percentage of Canadians working from home has , according to a report from Statistics Canada. While working from home comes with a number of perks and benefits, it also comes with increased home office expenses.
As a small business owner, you can write off a number of home office expenses. However, employees who work from home can also get credit for their extra expenses, including:
In late January 2024, the CRA will be releasing an to make calculating your deductions easier. If you work from home, be sure to keep an eye out for it.
Moving expenses
In 2023, many Canadians from more expensive city centres like Vancouver and Toronto to reduce their cost of living.
The good news is that if you moved away and moved to accept a new job, work position, or school, you can deduct many of your associated moving costs.
Major changes to taxes for 2024
While there weren’t any new tax credits introduced this year, there were several important changes made to Canadian tax codes for the 2024 tax season. While these won’t affect your 2023 tax returns, they may affect your bottom line when filing next year’s taxes.
Here are some of the key changes that will affect your taxes in 2024, according to the most recent report from the .
Higher federal income taxes and contributions
In part due to rising payroll contributions and EI premiums, Canadian employees will see an increase in their federal payments. The increases aren’t major but still represent a creeping bracket. Here’s how much more you can expect to pay in federal income taxes and contributions next year, based on your income:
Increase in maximum pensionable earnings (CPP)
The maximum pensionable earnings for CPP will increase from $66,600 to $68,500, which will result in a $113 increase for both employers and employees in the 2024 tax year. However, this should result in for retiring Canadians in the future.
Increase Employment Insurance (EI) premiums
In 2024, both employees and employers will be subject to higher EI premiums. Employees will pay a total of $1,049 in EI premiums with a maximum of insurable earnings of $63,200, which is a $47 increase from the 2023 tax year.
Increased carbon and alcohol taxes
On April 1, 2024, carbon taxes will increase from $65 to $80 per tonne, which means taxpayers will be paying 17.6 cents per litre of fuel at the pump, compared to the previous rate of 14.3 cents per litre.
In addition, the federal government will be increasing alcohol taxes by 4.7 percent in 2024. The Canadian Taxpayers Federation expects this alcohol tax increase will cost Canadians $100 million.
New rules for bare trusts
A bare trust is a specific kind of trust where the trustee has no rights other than to deal with the property as instructed by the beneficiaries.
The trustee holds the legal title, while the beneficiary has the beneficial ownership and complete control over the trustee's actions relating to the property.
Traditionally, bare trusts were not required to file a trust return in Canada due to their tax treatment, allowing for property transfers without triggering taxable events unless the beneficial ownership changes.
The require trustees of bare trusts to file annual T3 trust returns for tax years ending after December 30, 2023.
This includes providing detailed information about stakeholders such as:
Although these changes are designed to enhance transparency, CPA Canada has that many well-intentioned taxpayers could get caught off guard and face tax penalties if they fail to meet the new filing requirements.
Since the change will go into effect for next year’s tax season, it’s a good idea for trustees and beneficiaries of bare trusts to get familiar with the new requirements.
What is the best way to take advantage of tax breaks?
Thanks to free and low-cost e-filing software, filing your taxes has never been easier. However, the downside is that many taxpayers fail to take full advantage of tax credits.
The easiest way to make sure that you’re getting all the breaks you’re owed is to enlist the help of a trusted accountant or tax preparer. However, if you’re filing yourself, you can still prepare by reading up on all of the major tax credits and using a trusted tax filing software that will help guide you through all of your potential deductions.
Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers on his .
This column has been corrected to reflect that CPP and EI are contributions and insurance premiums rather than taxes.
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