JBS BUSINESS SERVICES
“B U I L D I N G S U C C E S S T O G E T H E R”
778 Rossland Ave, Trail, BC, V1R 3N3
250 364 2235 info@jbsbiz.ca www.jbsbiz.net
TAX PREP CHANGES & REFRESHERS
Below is an overview of some of the more universal changes for 2024 tax prep. This list is not exhaustive. Do your research. Talk to a tax professional or visit the CRA website.
Below the current changes listed for 2024, is a “refresher” of changes over past years so not all detail may still be current.
What is NOT new for Tax Year 2024 that was supposed to be happening … ?
The highly publicized capital gains inclusion rate increase from 50% to 67% that was to be effective June 25, 2024 has been delayed to January 1, 2026 … that’s correct, 2026, not 2025. The plan is to have the first $250,000 of capital gains and losses retain the 50% inclusion rate for individuals, proprietors, and personal trusts, and then increase to 67% if the capital gains or losses surpass $250,000. At the same time, corporations and regular trusts will have the 67% inclusion rate apply for all its capital gains and losses.
What IS new for Tax Year 2024?
Charitable giving cutoff date has been extended from Dec 31/24 to Feb 28/25. If you make a donation before March 1/25 you can claim it on your 2024 tax return.
The withdrawal amount from the Home Buyers Plan with no tax consequence has been increased to $60,000 from $35,000.
The expenses for operating short term accommodation will be denied for non-compliant short term rental units in specified areas of BC, notably Nelson and Shoreacres/Bonnington Falls in our area.
For those situations when travel expenses can be claimed for 2024, the mileage reimbursement rate for 2024 is $0.72. The flat meal rate remains at $23/meal. For employer reimbursement of 2024 travel expenses, the rate was $0.70/km for the first 5,000 km, then drops to $0.64/km, and now in 2025 those rates are $0.72 and $0.66
The CND-USA 2024 annualized exchange rate is 1.3698. The annualized rate is used when related multiple conversions are spread throughout the year. In the case of one-off transactions, the exchange rate for that particular month may be used.
There’s a new box on the T4A slip this year, Box 15 for the reporting of dental coverage. This follows last year’s addition of Box 45 on the T4 slip for the same purpose. Reminder that in 2022 the T4 slip had box 16A added to report the enhanced CPP program.
Here are the more common proposed changes not yet approved by the government BUT have been implemented by CRA for 2024 tax reporting.
The disability supports deduction has had the list of allowable expenses expanded.
The Alternative Minimum Tax (AMT) rules have been redefined. Check them out if you know the AMT will apply to you for 2024.
There is an increase to the Lifetime Capital Gains Exemption (LCGE) for small business corporations.
Changes over the past few years (some may have changed or no longer be applicable, so check them out)
The Multi-Generational Home Renovation Credit is a refundable tax credit of 15% of up to $50,000 of renovation expenses. This is designed to transition a family member into a home owned by another family member.
The Property Flipping Rule, otherwise known as the “365 day rule” or the “anti-house flipping rule”. This new tax rule denies the capital gains exemption if a house is bought and sold within 365 days. Instead, the full profit from the sale is included as taxable income. However, there is a list of defined exceptions to the 365 day rule such as change in marital status, employment change, health issues for self or immediate family member, etc.
The First Home Savings Account (FHSA) now exists and if an account is set up and a contribution made prior to December 31, a T4FHSA slip will be issued to claim a tax deduction, just like an RRSP contribution. If funds were withdrawn from an FHSA in 2024, this tax slip is also issued but as long as a home was purchased there is no tax consequence since these investment funds aren’t reported as taxable income if used for that purpose.
The BC Renters Tax Credit is a $400 refundable tax credit for a household income under $60,000, reducing to a zero credit at $80,000. The renting of a unit in 2024 must include a minimum of 6 months of renting, and those 6 months can be 30 day periods. There is only one $400 claim for spouses whether they live in one rental together or two separate rentals. However, unrelated roommates living in one common rental can each make a $400 claim. There is a broad definition of rental unit, including long term care facilities and student housing. Excluded are rentals owned by a family member, free employer provided rentals, rent to own agreements, and rentals in mobile and trailer parks.
There’s recently been lots in the news about support for first time home buyers, in particular the newly introduced First Home Savings Account (FHSA) that comes into effect in 2023. The basic tax benefits are summed up like this. The FHSA is like an RRSP in terms of the contributions being tax deductible, and the FHSA is like a TFSA in terms of the withdrawal not being taxable income as long as it is used to purchase a home, or transferred to another registered account. Many more details to come in 2023.
In the meantime, there is other news for the first time home buyer that is really not new, just better. The First Time Home Buyers Tax Credit that has been around for a number of years, has been doubled from $5,000 to $10,000. It’s simply claimed during tax return preparation. To qualify, a person can’t have owned a home within the four years prior to the year the home was purchased, and this includes a spouse or common-law partner. And just to be nice, this doubling of the credit is applicable to homes purchased from January 1, 2022, onward.
Sticking with real estate, the recently announced “anti-house flipping” rule does not apply for 2022. The new rule denies the capital gains exemption if a house is bought and sold within 365 days, with some defined exceptions to the rule.
From real estate to renovations. The “home accessibility renovation” expense limit has been increased from $10,000 to $20,000, to support people to remain living at home. To be eligible you must qualify for the Disability Tax Credit, or be 65 years of age.
Recently announced but not applicable until 2023, the new “multi-generational home renovation credit” is a refundable tax credit of 15% of expenses to a maximum of $50,000. This is designed to transition a family member into a home owned by another family member.
On the medical front, the government has expanded the list of allowable expenses to include fertility clinic and donor bank services provided to an individual and also for a surrogate mother. In addition, some costs incurred for a surrogate or donor are considered eligible expenses.
Also with medical, the government has now deemed type 1 diabetes as an acceptable diagnosis to grant a Disability Tax Credit, conditional on the person requiring a specific weekly regimen of medical life sustaining therapy.
New for the construction industry, the government has introduced the Labour Mobility Deduction for tradespeople and apprentices working in the industry who have to live away from home on a temporary basis. The maximum claim is $4,000 for relocation expenses and must be supported by paid receipts and reported on Schedule T777.
Face masks: If you own a business that requires face masks to be worn by staff and/or clients and you supply the face masks, you can expense the cost of the masks against income on your financial statement. If you wear a mask in your workplace and supply them at your own expense, if your employer completes a T2200 Conditions of Employment Schedule stating that you have to buy your own face masks, you can deduct that cost as an employment expense by reporting it on Schedule T777. If neither of those two options define your situation and you buy and wear your own face masks, you will need a doctor’s note stating that the wearing of a face mask by you is medically necessary, and then you can claim the cost of the masks as a medical expense on Schedule T1-Medical.
Vehicles that qualify to be used as an expense: The traditional Class 10 vehicle is now Class 54, and has had it’s maximum recorded initial value for tax purposes raised to $34,000. More interesting is the change to Class 16 vehicles. This is now Class 55 and includes zero emission vehicles with a maximum recorded initial value for tax purposes of $59,000. Additionally, Class 56 has been created for zero emission automotive equipment that are not road licensed motor vehicles (aircraft, watercraft, rail craft, etc).
Canada Training Credit (CTC): It will work in the background accumulating by $250 in credit per year to a lifetime maximum of $5,000 that you can use toward fees for skills training. The CTC will be shown on your Notice of Assessment like RRSP and TFSA contribution room.
Medical: Perhaps as no surprise, medical cannabis with a doctor prescription is now a legit medical claim. Some other new items have been added to the ever growing eligible Medical Expense list. The costs associated with medically assisted pregnancy is now claimable, as are the costs to design a personal therapy plan in some situations, and also allowable to claim are the costs for service animals to aid persons with severe diabetes.
Registered Disability Savings Plan: A person who has a life expectancy of 5 years or less may now withdraw more from the plan annually without adversely affecting the tax situation.
Family Caregiver Tax Credit: is an additional $2,000 non-refundable tax credit available if you are supporting a disabled or infirm dependant as defined by a spouse or an eligible dependant.
Adoption Expense: has been increased to $15,000 per adopted child. This is a non-refundable tax credit calculated by adding up eligible expenses and subtracting reimbursement received, if any. The net amount can be split between adoptive parents.
Tuition Tax Credit: Has been expanded so that fees paid to an educational institution, professional association or government ministry for a required examination to obtain professional status recognized by provincial or federal statute or necessary for licensing or certification in order to practice a profession or trade in Canada are now an acceptable tuition expense.
Foreign Courses: For those who enroll in educational courses offered in foreign countries, the 13 consecutive week full-time enrolment rule has been reduced to only 3 weeks to qualify for the Tuition and Education Tax Credits.
Registered Education Savings Plans: There is now greater flexibility with the sharing of funds from between siblings without tax implications and repayment of federal education grants.
T2091 Sale of Principal Residence: this is a form that’s been around for years but now is being enforced by CRA. You are required to report the sale of your home (principal residence). CRA is likely trying to identify house flippers escaping taxation by claiming the principal residence capital gain exemption.
T5008 Statement of Securities Transactions: started appearing for 2015 tax prep and will likely continue to increase in usage this year as a result of CRA’s increased reporting requirements for investors. It shows a summary of trading information completed by a professional manager, although the original acquisition price for the securities sold may be absent on the form, a very important part to this reporting on your tax return.
T5018 Statement of Contract Payments: is issued by a company that contracts the services of a self-employed construction tradesperson. The tradesperson uses this information for input into their T2125 Business Activity Schedules or T2 Tax Return.
Pension Income Splitting – not new, but each year “new” retirees enquire:
Since 2007, Canadian residents were allowed to split certain pension income with their resident spouse or common-law partner. This can be done if the following conditions are met:
- the pensioner and spouse or common-law partner were not, because of a breakdown in marriage or common-law partnership, living separate and apart from each other at the end of the year and for a period of 90 days commencing in the year (if living apart at the end of the year for medical, educational, or business reasons, pension income can still be split)
- the pensioner and spouse or common-law partner are residents of Canada on December 31 of the year; or
- if deceased in the year, resident in Canada on the date of death; or
- if bankrupt in the year, resident in Canada on December 31 of the calendar year in which the tax year (pre- or post-bankruptcy) ends.
- the pensioner received pension income that is eligible for the pension income amount tax credit.
- definitions: pension transferor – the one who receives qualified pension income; pension transferee – the one to whom the split-pension is transferred (the recipient of the transfer).
No funds are actually transferred using pension splitting. It’s simply a method for reducing the taxable income of one spouse by allocating income on the tax return, to the other spouse. The transfer must be agreed upon by the spouses and form T1032 filed with each spouses’ return. And both spouses have to sign both forms.
Up to 1/2 of eligible pension income may be allocated to the pensioner’s spouse when the tax returns are filed. Doing the pension split shares the income between the two spouses, effectively reducing the overall household tax liability if the two spouses would have been in different tax brackets without the split.
In addition, there is a federal pension income tax credit on the first $2,000 of eligible pension income*. The pension split may increase, or even create, a pension tax credit for the transferee – definitely a bonus to the pension split itself.
Notably, even if the spouses are in the same tax bracket and pension splitting doesn’t provide the benefit of a reduction in the marginal tax rate, the pension split may still be financially beneficial if it creates or increases a pension tax credit for the transferee.
* Pension splitting will only create a pension income tax credit for a pension transferee who is under age 65 if the pension transferor has received qualified pension income, which is eligible for the pension income tax credit for a taxpayer of any age.
