This article summarizes key tax changes coming to Canada in 2024, highlighting important information for individuals looking to optimize their tax situation.
Shocking Changes:
- Short-Term Rental Restrictions: Major restrictions are being placed on short-term rentals like Airbnb in cities facing housing shortages like Vancouver, Toronto, and Montreal. Income tax deductions for expenses related to short-term rentals will be denied, aiming to free up housing units for long-term residents. Starting in May 2024, short-term rentals will be limited to a principal residence and one secondary dwelling.
- Reduced Cost of Therapy: The federal government is removing GST/HST from psychotherapy and counseling services, making them more affordable for Canadians.
Contribution Limits:
- TFSA: The Tax-Free Savings Account contribution limit increases by $500 to $7,000 in 2024. Unused contribution room is carried forward for future contributions.
- RRSP: The Registered Retirement Savings Plan deduction limit remains at 18% of your previous year’s earned income or the RRSP dollar limit, whichever is lower. The 2024 RRSP dollar limit is $31,500, and unused room is carried forward.
- FHSA: The First Home Savings Account allows tax-free contributions up to $40,000 lifetime and a maximum of $88,000 annually. Unused contributions can be carried forward for future use.
Other Important Updates:
- CPP: The Canada Pension Plan maximum monthly benefit for new retirees starting at age 65 in October 2023 is $1,364.60. The CPP contribution rate remains at 5.95%, but there is a new additional contribution for high earners.
- Tax Brackets: Federal and provincial tax brackets have been adjusted for 2024, with higher income now taxed at slightly lower rates.
Conclusion:
Canadians should be aware of these significant tax changes, particularly the restrictions on short-term rentals and contribution limit updates for TFSAs, RRSPs, and FHSAs. Understanding these changes can help you make informed financial decisions and potentially save money.