Two quarterly newsletters have been added – one dealing with personal issues, and one dealing with corporate issues.

Two quarterly newsletters have been added – one dealing with personal issues, and one dealing with corporate issues.

They can be accessed below.

Corporate:

Issue #70 Corporate

Personal:

Issue #70 Personal

While almost everyone looks forward to retirement and an end to the day-to-day demands of working life, there’s also no question but that the decision to give up a regular paycheque is a stressful one. Particularly when the cost of life’s necessities – especially food and housing – seem to be continually increasing, individuals wanting to retire have to wonder whether they can actually afford to do so, or whether it would be foolhardy, in the current economic realities, to walk away from a reliable regular paycheque.

While almost everyone looks forward to retirement and an end to the day-to-day demands of working life, there’s also no question but that the decision to give up a regular paycheque is a stressful one. Particularly when the cost of life’s necessities – especially food and housing – seem to be continually increasing, individuals wanting to retire have to wonder whether they can actually afford to do so, or whether it would be foolhardy, in the current economic realities, to walk away from a reliable regular paycheque.

While retirement planning is about a lot more than just finances, it’s nonetheless the case that finances loom very large in any discussion about whether retirement in the near future is possible. The first financial task faced by anyone seeking an answer to that question is to determine what financial resources they will have to live on, and whether those resources are sufficient to meet their needs, now and in the future. And, while no one can accurately predict where inflation or interest rates are going, it is nonetheless possible to formulate both “best case” and “worst case” scenarios, and to test one’s current retirement income and expense expectations against both. 

For most Canadians, income in retirement will come from three sources. The first two sources – a Canada Pension Plan (CPP) retirement benefit and Old Age Security (OAS) payments – will be received by nearly all retirees. The fortunate minority who are members of an employer-sponsored registered pension plan will also receive a monthly benefit from that plan. For the majority of Canadian retirees who will not receive a pension from their employer, the balance of their income in retirement (after CPP and OAS) will come from private retirement savings accumulated in registered retirement savings plans (RRSPs), registered retirement income funds (RRIFs), and tax-free savings accounts (TFSAs). The real question for most Canadians is how to determine the amount of annual after-tax income which all those sources of income will generate during their retirement years, and that’s not a simple calculation.

Money can be withdrawn from an RRSP, an RRIF, or a TFSA at any age, a CPP retirement pension can start anytime from age 60 to age 70, and Old Age Security benefits can be received as early as age 65 or as late as age 70. For both CPP and OAS, benefits will rise with each month that receipt of such benefits is deferred. As well, income from the different types of retirement income may be subject to different tax treatment, meaning that the after-tax amount received on $100 of income may vary widely, depending on the nature and source of that income.

The number of factors to consider and, especially, the complexity which results from the interaction of those factors could reasonably lead the average Canadian to conclude that it’s just not possible to make an accurate determination of the best way to structure their income in retirement, in order to ensure a reasonable income throughout their retirement years. But help is available – and it’s free!

That help is in the form of two online retirement planners which are available on the Government of Canada website. The first of these are webpages which can be found at https://www.canada.ca/en/services/retirement.html and https://www.canada.ca/en/services/retirement/learn.html. While these webpages, entitled Learn and Plan for Your Retirement, do include financial calculations, they provide much more broad-based information on transitioning to and living in retirement. In particular, the website outlines a number of “rules-of-thumb” with respect to the decision on when to begin receiving CPP or OAS benefits, and explains the specific rules which must be considered by lower-income seniors who may be eligible for the Guaranteed Income Supplement or those who are already receiving provincial disability benefits.

For purely financial calculations, the federal government provides a Retirement Income Calculator. That Calculator is included in the “Learn and Plan for your Retirement” webpages, but can also be found in a stand-alone version at https://www.canada.ca/en/services/benefits/publicpensions/cpp/retirement-income-calculator.html. 

Using the Retirement Income Calculator, individual Canadian taxpayers can enter their personal data, including their date of birth, gender, and planned age of retirement, without the need to provide any personal identifying information. The user is then asked to provide information on income amounts which will be received from various sources, including any employer pension and Canada Pension Plan amounts and the age at which the user plans to begin receiving such income. Information is requested on the user’s period of residency in Canada, in order to determine whether they will be eligible to receive Old Age Security benefits and the amount of OAS benefits which will be provided at different ages. The calculator also allows the user to input the total amount of savings accumulated to date. Finally, information is requested on any other sources of income which will be available during retirement.

Using that data, the calculator estimates the amount of income which will be available to the individual from each source during each year of their retirement and generates a bar graph and a table showing those income amounts.

The real benefit of the calculator, however, lies in the individual’s ability to vary the inputs – to create “what-if” scenarios in order to determine the effect any changes made will have on retirement income at various ages. Users can change the age at which they choose to receive government-sponsored retirement benefits like CPP and OAS, or can specify a different rate of return (pre- or post-retirement) earned on retirement savings. They can also change the period of time over which retirement income will be spread (i.e., life expectancy). That way, the user can obtain answers to frequently asked questions like the following:

• How much more will I receive if I accelerate – or delay – receipt of Canada Pension Plan or Old Age Security benefits, or both, for one, two, or more years?
• What if I work an additional year or two after age 65 before starting RRSP withdrawals?
• What if I earn income from part-time employment during retirement?
• What if I choose to begin receiving CPP and OAS as soon as I am eligible, but defer making RRSP withdrawals?
• What if I live longer than the average life expectancy?

For each of these what-if fact scenarios, the calculator will determine the effect that particular change will have on the amount of income receivable from each different retirement income source, and will provide a summary of income for each year of retirement from all such sources under each fact scenario created by the user.

There are, of course, some factors which can’t be incorporated into any calculator because they cannot be predicted or planned for. No one can predict how long their retirement will last (although the Calculator does project retirement income based on average life expectancy for individuals of the age and gender of the user). Similarly, it’s never possible to know what investment returns will be earned on retirement savings during retirement, or what the rate of inflation will be. The calculator’s ability to estimate future income data based on a number of different fact patterns does, however, allow users to create retirement income projections under both “best-case” and “worst-case” retirement income scenarios. And, based on those income projections, an individual can determine whether retirement in the near future is financially feasible.

It seems incongruous, in the season of holiday gifts and celebrations, to consider the possible tax implications and consequences of those traditions. But, in some circumstances, the unwelcome spectre of an income tax bill arising from such activities does intrude.

It seems incongruous, in the season of holiday gifts and celebrations, to consider the possible tax implications and consequences of those traditions. But, in some circumstances, the unwelcome spectre of an income tax bill arising from such activities does intrude.

Fortunately, there are never any tax consequences to the exchange of gifts and holiday celebrations with family and friends. However, where gifts are given and/or holiday celebrations held where the gift giver or person or company sponsoring the holiday celebration is the employer of the recipient, unwanted tax consequences can arise.

It’s traditional for employers to provide employees with something a little “extra” at this time of year. Sometimes it’s a salary or wage bonus, or a gift, or a holiday celebration sponsored and hosted by the employer – and sometimes it’s all three. What employers certainly don’t want to do is to create a tax headache for their employees. Unfortunately, it’s also the case that a failure to properly structure such gifts or holiday parties can result in a tax cost to those employees.

Trying to formulate and administer the tax rules around holiday gifts and celebrations is something of a no-win situation for the CRA. On an individual or even a company level, the amounts involved are usually small, or even nominal, and the range of situations which must be addressed by the related tax rules are virtually limitless. As a result, the cost of drafting and administering those rules can outweigh the revenue generated by the enforcement of such rules, to say nothing of the potential ill-will generated by imposing a tax cost on holiday gifts or parties. Nonetheless, the potential exists for employers to provide what would otherwise be taxable remuneration in the guise of holiday gifts, and it’s the responsibility of the tax authorities to ensure that such situations don’t slip through the tax net.

The starting point for the Canada Revenue Agency’s rules is that any gift (cash or non-cash) received by an employee from their employer at any time of the year is considered to constitute a taxable benefit, to be included in the employee’s income for that year.

The CRA does, however, make some administrative concessions in this area, allowing non-cash gifts (within a specified annual dollar limit) to be received tax-free by employees, as long as such gifts are given on significant dates or events, like religious holidays such as Christmas or Hanukkah, or on the occasion of a birthday, a marriage, or the birth of a child.

In sum, the CRA’s administrative policy is simply that such non-cash gifts to an arm’s length employee, regardless of the number of such gifts, will not be taxable if the total fair market value of all such gifts (including goods and services tax or harmonized sales tax) to that employee is $500 or less annually. The total value over $500 annually will be a taxable benefit to the employee and must be included on the employee’s T4 for the year, and on which income tax must be paid.

It’s important to remember the “non-cash” criterion imposed by the CRA, as the $500 per year administrative concession does not apply to what the CRA terms “cash or near-cash” gifts, and all such gifts are considered to be a taxable benefit and included in income for tax purposes, regardless of amount. For this purpose, the CRA considers both currency and cheques to be cash. As well, in situations in which an employee selects and purchases something, submits a receipt to the employer, and receives reimbursement for that purchase, that employee is considered to have received a cash gift in the amount of the purchase/reimbursement.

Other instances of gifts made to employees are not so clear cut, as even a gift or award which cannot be converted to cash can be considered by the CRA to be a near-cash gift. Drawing a firm line between cash/near-cash gifts and non-cash gifts can be difficult, and the CRA provides the following information to help clarify that difference.

Examples of a near-cash gift or award

• Something easily converted to cash, such as bonds, securities or precious metals;
• Gift cards (with the exception outlined below);
• A prepaid card issued by a financial institution that can be used to pay for purchases; and
• Digital currency which is electronic money (e.g. cryptocurrencies not issued by a government or central bank).

At one time, the CRA considered all gift cards to be near-cash gifts and fully taxable to the employee who received one, but the Agency now provides an exception to that policy. Under current rules, a gift card that meets all of the following criteria will be treated as a non-cash gift, and subject to the usual rules governing such non-cash gifts:

• the card comes with money already on it and can only be used to purchase goods or services from a single retailer or group of retailers identified on the card;
• the terms and conditions of the gift card clearly state that amounts loaded on the card cannot be converted into cash; and
• the employer keeps a log to record details of the gift card information including the date, the employee’s name, and the reason for providing the gift card, as well as the type and amount of the gift card and the name of the retailer.

It may seem nearly impossible to plan for employee holiday gifts without running afoul of one or more of the detailed rules and administrative policies surrounding the taxation of such gifts and benefits. However, designing a tax-effective plan is possible, if the following rules are kept in mind.

Cash or near-cash gifts should be avoided, as they will, no matter how large or small the amount, almost always create a taxable benefit to the employee. The sole exception to that rule is the exception carved out by the CRA which now treats gift certificates as non-cash gifts, but only where such gift certificates meet the criteria listed above.

Where non-cash special occasion gifts are provided to employees, gifts with a value of up to $500 can be received free of tax. The employer must be mindful of the fact that the $500 limit is a per-year and not a per-occasion limit. Where the employee receives non-cash gifts with a total value of more than $500 in any one taxation year, the portion over $500 is a taxable benefit to the employee.

When it comes to holiday parties and celebrations, the policy followed by the CRA in determining whether such events constitute a taxable benefit for employees has a long and frequently amended history. The general and long-standing rule is that a holiday social event does not create a taxable benefit to employees where the event is open to all employees and the per person cost of the event is below a specified threshold.

For 2024, an employer-sponsored social event will not create a taxable benefit for employees if the per person cost is less than $150. Ancillary costs such as transportation home, taxi fare, and overnight accommodation for attendees are not included in the total cost limit for the event.

Finally, employers should note that where the per employee dollar limits outlined above for holiday social events are exceeded, the entire per employee cost of the event is treated as a taxable benefit – not just the amount by which the per employee cost exceeds those prescribed dollar limits. And, finally, in order to benefit from those prescribed limits, employers are restricted to holding six or fewer employer-paid social events each year.

The range and variety of social events and employee gifts which can be provided by an employer to its employees is almost limitless, and where the government seeks to draft rules to govern the tax treatment of such a range of possibilities, complexity is inevitable. The best advice to be given to employers in the circumstances is to consider carefully the kinds of gifts which are given and to be mindful of the dollar amount limits imposed on non-cash gifts and employer-paid social gatherings. After all, at the end of the day, a gift which increases the employee’s income tax bill for the year is unlikely to engender much holiday spirit or goodwill on the part of the employee who receives it.

December 31 , 2024 marks not just the end of the calendar year, but the end of the 2024 tax year for every individual Canadian taxpayer. And while the thoughts of most Canadians during the holiday season are focused on anything but their 2024 income taxes, the reality is that December 31 can be a critical date when it comes to determining how much income tax one will pay for 2024.

December 31 , 2024 marks not just the end of the calendar year, but the end of the 2024 tax year for every individual Canadian taxpayer. And while the thoughts of most Canadians during the holiday season are focused on anything but their 2024 income taxes, the reality is that December 31 can be a critical date when it comes to determining how much income tax one will pay for 2024.

In some cases, steps need to be taken by December 31 in order to obtain administrative relief from interest or penalty charges which have been imposed by the Canada Revenue Agency. In other cases, not taking certain actions prior to the end of the calendar year will mean losing out on deductions and credits which might otherwise have been claimed on the 2024 return, and which would have reduced tax payable for the year. And, in all cases, a failure to meet that December 31 deadline cannot be remedied: only actions taken prior to the end of the calendar year (with the exception of RRSP contributions) can reduce the tax bill for 2024.

While the remaining time frame in which most tax planning and tax saving strategies for 2024 can be implemented is only a few weeks, the good news is that the most readily available of those strategies don’t involve a lot of planning or complicated financial structures – in many cases, it’s just a question of considering the timing of steps which would have been taken in any event.  What follows is a listing of some of the steps which should be considered by most Canadian taxpayers as the calendar and tax year-end approaches.

Taxpayer requests for penalty or interest relief

Taxpayers are entitled to request relief from the Canada Revenue Agency for interest or penalty charges which the Agency has levied, and those who want to do so must send their request within ten years from the end of the calendar year or fiscal period concerned.

The 2024 deadline applies to taxpayer relief requests for:

• the 2014 tax year;
• any reporting period that ended during the 2014 calendar year; and
• any interest and penalties that accrued during the 2014 calendar year for any tax year or reporting period.

All such requests for relief must be submitted on or before December 31, 2024. More information on the circumstances in which relief may be provided, and how to make a request for such relief, can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/complaints-disputes/cancel-waive-penalties-interest/who-can-apply.html.

Making a final RRSP contribution

Most Canadians are aware that an RRSP contribution can be made anytime up to 60 days after the end of the calendar/tax year, and claimed as a deduction on the return for that calendar/tax year. There is, however, an important exception to that rule, of which most Canadians are likely unaware.

Every Canadian who has an RRSP must collapse that plan by the end of the year in which they turn 71 years of age – usually by converting the RRSP into a registered retirement income fund (RRIF) or by purchasing an annuity. An individual who turns 71 during the year is still entitled to make a final RRSP contribution for that year, assuming that they have sufficient contribution room. However, in such cases, the 60-day window for making a contribution after December 31 is not available. Any RRSP contribution to be made by a person who turns 71 during 2024 must be made by December 31, 2024. Once that deadline has passed, no further RRSP contributions are possible.

Reviewing tax instalments for 2024

Millions of Canadian taxpayers (particularly self-employed and retired Canadians) pay income taxes by quarterly instalments, with the amount of those instalments representing an estimate of the taxpayer’s total liability for the year.

The final quarterly instalment for this year will be due on December 15, 2024 (as that date falls on a Sunday this year, the actual due date for the instalment payment is Monday December 16). By mid-December, almost everyone will have a reasonably accurate idea of what their income and deductions will be for 2024 and so will be in a position to estimate what the final tax bill for the year will be, taking into account any tax planning strategies already put in place, as well as any RRSP contributions which will be made on or before March 1, 2025. While the tax return forms to be used for the 2024 year haven’t yet been released by the Canada Revenue Agency, it’s possible to arrive at an estimate by using the 2023 form. Increases in tax credit amounts and tax brackets from 2023 to 2024 will mean that using the 2023 form will likely result in a slight over-estimate of tax liability for 2024.

Once one’s tax bill for 2024 has been calculated, that figure should be compared to the total of tax instalments already made during 2024 (that figure can be obtained by checking one’s online tax account on the Canada Revenue Agency website, or by calling the CRA’s Individual Income Tax Enquiries line at 1-800-959-8281). Depending on the result, it may then be possible to reduce the amount of the tax instalment to be paid on December 15 – and thereby free up some additional funds for the inevitable holiday spending!

 Medical expenses

The federal and all provincial and territorial governments provide a non-refundable tax credit for eligible medical expenses incurred. Most Canadians will incur such expenses: while we benefit from a publicly-funded health care system, there is nonetheless a long list of medical and para-medical expenses which must be paid for out-of-pocket.

Individual taxpayers are entitled to claim the medical expense tax credit for all qualifying medical expenses incurred during any 12-month period which ends during the taxation year. In other words, the taxpayer can choose the 12-month period for which medical expenses incurred create the highest tax credit amount. However, as with other such credits, any expense, in order to be claimed on the 2024 tax return, must be incurred before the end of 2024.

There is an additional criterion for claims for the medical expense tax credit: only medical expenses which exceed the lesser of $2,759 or 3% of the taxpayer’s net income for 2024 can be claimed. Put in more practical terms, the rule for 2024 is that any taxpayer whose net income for the year is $91,967 or less will be entitled to claim eligible medical expenses that are greater than 3% of his or her net income for the year. Those having income of more than $91,967 will be limited to claiming qualifying expenses which exceed the $2,759 threshold.

Finally, it’s possible to combine medical expenses incurred by both spouses and by their minor children, and to make that combined claim on a single return. In most cases, the best tax result can be obtained where that claim is made on the return of the lower-income spouse, as long as that spouse has tax payable of at least as much as the medical expense tax credit to be claimed.

It is unfortunate that, given the number of Canadians who are in a position to claim the medical expense tax credit, the computation of that credit can be confusing. More information on how to calculate and claim the medical expense tax credit for 2024 can be found on the Canada Revenue Agency website at  https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4065.html. While the most current version of the publication currently available on the CRA site is for the 2023 tax year, the same rules will apply for 2024, with the exception of the applicable net income threshold, as outlined above.

Make sure to file your 2023 tax return by year-end

While making sure that one’s tax returns are filed on time is always a good idea (and delaying filing is, in all cases, a bad one), there are additional reasons this year to ensure that one’s tax returns for all years up to and including 2023 are filed by December 31, 2024.

On November 21, the federal government announced a “Working Canadians Rebate” – a tax-free rebate of $250 which will be sent to eligible Canadians in the spring of 2025. The basic requirements for eligibility for the rebate are that the individual have net income of $150,000 or less in 2023 and have earned income from employment or self-employment that year. In addition, an individual must have filed an income tax return for the 2023 tax year by the end of 2024. Canadians who are otherwise eligible but who do not file their income tax return for 2023 on or before December 31, 2024 will not receive the rebate.

The need to file a 2023 return by the end of this year is particularly important for residents of Ontario. In October of this year, the Ontario government announced that eligible residents of the province would receive a tax-free rebate of $200 early in 2025. In order to receive the Ontario rebate, an individual must have been 18 years of age or older and a resident of the province at the end of 2023, and must have filed an income tax return for the 2023 tax year on or before December 31, 2024.

On November 21, the federal government announced two new measures intended to relieve some of the financial stress currently being experienced by most Canadian families and households. That financial stress arises, in large measure, from the steady increase in the cost of goods and service over the past two years – and, while inflation has decreased significantly over the past several months, price increases for non-discretionary expenditures like food and housing continue to outpace the general rate of inflation.

On November 21, the federal government announced two new measures intended to relieve some of the financial stress currently being experienced by most Canadian families and households. That financial stress arises, in large measure, from the steady increase in the cost of goods and service over the past two years – and, while inflation has decreased significantly over the past several months, price increases for non-discretionary expenditures like food and housing continue to outpace the general rate of inflation.

The two measures seek to relieve that financial stress in different ways. The first provides an exemption from the Goods and Services Tax/Harmonized Sales Tax (GST/HST) for a wide range of goods purchased by Canadians between December 14, 2024 and February 15, 2025.

The list of goods which will be GST/HST-exempt during that two-month period is as follows.

• Prepared foods, including vegetable trays, pre-made meals and salads, and sandwiches.
• Restaurant meals, whether dine-in, takeout, or delivery.
• Snacks, including chips, candy, and granola bars.
• Beer, wine, cider, and pre-mixed alcoholic beverages below 7% alcohol by volume.
• Children’s clothing and footwear, car seats, and diapers.
• Children’s toys, such as board games, dolls, and video game consoles.
• Books, print newspapers, and puzzles for all ages.
• Christmas trees.

Some of these categories, like snacks, toys, and clothing, obviously cover a huge range of potential goods.  A detailed listing of the specific kinds of goods in each category which will be eligible for the temporary GST/HST exemption can be found in a Backgrounder which is available on the Finance Canada website at https://www.canada.ca/en/department-finance/news/2024/11/more-money-in-your-pocket-a-tax-break-for-all-canadians.html.

The tax savings to be realized by the GST/HST holiday will be different in different provinces, because of the way sales tax is structured. In Ontario, Nova Scotia, New Brunswick, Newfoundland and Labrador, and Prince Edward Island, the provincial sales tax is combined with the federal goods and services tax (GST) to create a harmonized sales tax (HST), which is levied at the point of sale and collected by the federal government. The federal GST is levied at a rate of 5% in all provinces; when that GST is combined with provincial sales tax, it results in a combined HST tax rate of 13% in Ontario and 15% in each of the Maritime provinces. In each of these provinces, the tax holiday will exempt eligible purchases from the entire 13% or 15% HST levy.

In all of the other provinces, consumers pay both federal GST of 5% and provincial sales tax (PST) at rates ranging from 6% to 9.975% (except in Alberta, which has no PST), but those taxes are imposed separately. In those provinces, the 5% federal GST is collected by the federal government and the PST is levied and collected by the provincial government. Consequently, the two-month tax holiday will be available in British Columbia, Alberta, Saskatchewan, Manitoba, and Québec only with respect to the 5% federal GST.

Working Canadians Rebate

The second measure announced by the federal government is not specifically a tax break, but a rebate program – the “Working Canadians Rebate”, which will provide a tax-free payment of $250 to each individual Canadian who meets the eligibility criteria. Those criteria, as currently structured, mean that the rebate will be available to individual Canadians who earned up to $150,000 in employment or self-employment income, or received Employment Insurance (EI) or Québec Parental Insurance Plan (QPIP) benefits during 2023, and who have filed their income tax return for 2023 on or before December 31, 2024.

The detailed criteria for receipt of the Working Canadians Rebate by an individual are as follows.

• Worked (as an employee or in self-employment) or received EI or QPIP benefits during 2023 and had $150,000 or less in net income for that year.
• Filed their 2023 tax return by December 31, 2024, and:
  • claimed the tax credit for Canada Pension Plan or Québec Pension Plan contributions on employment or self-employment earnings;
  • claimed the tax credit for EI or QPIP premiums on employment or self-employment earnings; or,
  • reported income from EI or QPIP benefits;
• Is a resident of Canada on March 31, 2025;
• Is not incarcerated for a period of at least 90 days immediately prior to April 1, 2025; and,
• Is not deceased on April 1, 2025.

The rebate will be provided to eligible Canadians, by direct deposit or by cheque, in the early spring of 2025.

The News Release announcing the two new measures can be found on the federal government website at https://www.pm.gc.ca/en/news/news-releases/2024/11/21/more-money-your-pocket-tax-break-all-canadians-and-working-canadians.

It has been nearly five years since the start of the pandemic, and the work-from-home arrangements which became a necessity during that time have now become a choice for employers and employees.

It has been nearly five years since the start of the pandemic, and the work-from-home arrangements which became a necessity during that time have now become a choice for employers and employees.

Relatively few employees still work from home on a full-time basis – many have returned to the office full-time and many more likely now utilize some kind of hybrid arrangement, dividing their work week between their employer’s work site and a home office.

There are any number of benefits to working from home – avoiding a lengthy and often stressful commute, and the costs associated with such a commute, and being able to have a better work/life balance. There are other financial benefits as well, as employees who work from home can sometimes claim tax deductions for expenses incurred to create and maintain their home office.

As the necessity and availability of work-from-home arrangements changed (and changed again) over the past five years, the tax rules governing the deductions which could be claimed for home office expenses changed (and changed again) to meet those realities.

 Employees who work from home have always been able to claim a tax deduction for costs related to a home office. Under the tax rules in place prior to 2020, a claim for a deduction for home office expenses was available only where employees met a number of criteria and could provide the tax authorities with an itemized accounting of eligible home office expenses incurred, as well as an attestation from their employer of the terms of the work-from-home arrangement – known as the “detailed” method. However, when work-from-home arrangements became effectively mandatory in 2020, for public health reasons, the federal government greatly simplified the rules governing those claims to provide a temporary flat-rate method which essentially eliminated the requirement for documentation. That flat-rate method, however, was available only during 2020, 2021, and 2022, and can no longer be utilized.

For 2024, the “detailed method” for claiming home office expenses will be the only method under which such costs may be deducted for tax purposes. What follows is a summary of the current rules outlined on the Canada Revenue Agency (“CRA”) website with respect to claims for home office expense deductions which will, absent an unlikely change in CRA policy, continue to apply to such claims during 2024.

In order to claim a deduction in 2024 for costs related to a work-at-home space, an employee must be required by their employer to work from home during the year. The requirement to work from home doesn’t have to be included in the employee’s employment contract, but can be simply a written or verbal agreement with the employer. Where an employee has entered into a formal telework arrangement with his or her employer, that arrangement will satisfy the “required work from home” criteria.

In addition, as outlined on the CRA website, at least one of the following criteria must also be satisfied in order for an employee to claim work-from-home costs for 2024.

• The work-at-home space is where the individual mainly (more than 50% of the time) did their work for a period of at least four consecutive weeks during the year; or
• The individual uses the workspace only to earn their employment income. They must also use it on a regular and continuous basis for in-person meetings with clients, customers, or other people in the course of their employment duties.

While the rules are (fairly) straightforward, it can be difficult to apply them in practice to the almost infinite variety of work-from-home arrangements which can be utilized by an employer and employee. Recognizing that reality, the CRA provides a number of examples on its website of how to analyze a particular work situation in order to determine whether it fits within the CRA’s criteria. Those examples can be found on the Agency’s website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-22900-other-employment-expenses/work-space-home-expenses/who-claim/detailed-method.html#h-2.

Once the CRA’s criteria are met, a broad range of costs become deductible by the employee. Specifically, a salaried employee can claim and deduct the part of specified costs that relate to their work-from-home space, such as rent; utilities costs like electricity, heating, and water (or the portion of a condo fee attributable to such utilities costs); home maintenance and minor repair costs; and internet access (but not internet connection) fees.

Once total expenses are tallied, the taxpayer must determine the percentage of those expenses which can be deducted as home office expenses, and the CRA provides detailed information on its website of how such determination is made. Generally, the employee determines that percentage based on the square footage of the workspace as a percentage of the overall square footage of the home. Where the work space is not a separate room but is a shared or multi-purpose space like a dining room, the employee must also calculate the number of hours for which that space is dedicated to work from home activities. Detailed information on how to make those calculations (including an online calculator) can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-22900-other-employment-expenses/work-space-home-expenses/work-space-use.html. In all cases, the Canada Revenue Agency can ask the taxpayer to provide documentation and support for claims made using the detailed method.

There is one further requirement for employees who seek to deduct costs incurred in relation to a home office. Each such employee must obtain from their employer a completed form T2200 Declaration of Conditions of Employment - Canada.ca. On that form, the employer must certify the work-from-home arrangement and confirm that the employee is required to pay their own home office expenses and is not being reimbursed for any such expenses incurred. Where there is any kind of reimbursement provided, the employer must specify the type of expense reimbursed, and the amount of reimbursement. And, of course, the employee cannot claim a deduction for any expenses for which reimbursement was received.

The ability to claim a deduction for home office expenses can mean that significant expenses (like the cost of rent and utilities) which would have to be incurred by the employee in any case can give rise to tax savings. There’s no denying, though, that the record keeping required to support such deduction claims can be onerous, and it’s likely that few taxpayers record and document such costs on a routine basis. However, given the potential tax benefits, it’s worth doing some upfront planning to determine whether a deduction claim for home office expenses can be made for 2024 and to ensure that any record keeping needed to support that deduction is done before tax filing season arrives a few months from now.

For most Canadians, the subject of making RRSP or TFSA contributions, or making RRIF withdrawals, isn’t usually top of mind at year-end. Most Canadians know that the deadline for making contributions to one’s registered retirement savings plan (RRSP) comes 60 days after the end of the calendar year, around the end of February, but relatively few are aware that in some circumstances an RRSP contribution must be (or should be) made by December 31, in order to achieve the best tax result. As well, while a contribution or withdrawal from a TFSA can be done at any time, additional flexibility can be gained where withdrawals, in particular, are timed to take best advantage of the rules governing TFSAs. Finally, most Canadians who have opened a registered retirement fund (RRIF) are aware that they are required to make a withdrawal of a specified amount from that RRIF each year, with the percentage withdrawal amount based on the RRIF holder’s age – although few are aware of when and how that required withdrawal is calculated.

For most Canadians, the subject of making RRSP or TFSA contributions, or making RRIF withdrawals, isn’t usually top of mind at year-end. Most Canadians know that the deadline for making contributions to one’s registered retirement savings plan (RRSP) comes 60 days after the end of the calendar year, around the end of February, but relatively few are aware that in some circumstances an RRSP contribution must be (or should be) made by December 31, in order to achieve the best tax result. As well, while a contribution or withdrawal from a TFSA can be done at any time, additional flexibility can be gained where withdrawals, in particular, are timed to take best advantage of the rules governing TFSAs. Finally, most Canadians who have opened a registered retirement fund (RRIF) are aware that they are required to make a withdrawal of a specified amount from that RRIF each year, with the percentage withdrawal amount based on the RRIF holder’s age – although few are aware of when and how that required withdrawal is calculated. 

There are, in sum, significant advantages which can be obtained (and significant disadvantages avoided) by taking some time to consider and plan for RRSP and TFSA contributions and withdrawals before the end of the calendar year. What follows is an outline of steps which should be considered, before the end of the 2024 calendar year, by Canadians who have an RRSP, an RRIF, or a TFSA – or maybe all three.

Timing of RRSP contributions

When you are making a spousal RRSP contribution

Under Canadian tax rules, a taxpayer can make a contribution to a registered retirement savings plan (RRSP) in their spouse’s name and claim the deduction for the contribution on their own return. When the funds are withdrawn by the spouse, the amounts are taxed as the spouse’s income, at a (presumably) lower tax rate. However, the benefit of having withdrawals taxed in the hands of the spouse is available only where the withdrawal takes place no sooner than the end of the second calendar year following the year in which the contribution is made. Therefore, where a contribution to a spousal RRSP is made in December of 2024, the contributor can claim a deduction for that contribution on their return for 2024. The spouse can then withdraw that amount as early as January 1, 2027 and have it taxed in their own hands. If the contribution isn’t made until January or February of 2025, the contributor can still claim a deduction for it on the 2024 tax return, but the amount won’t be eligible to be taxed in the spouse’s hands on withdrawal until January 1, 2028. It’s an especially important consideration for couples who are approaching retirement and may plan on withdrawing funds in the relatively near future. Even where that’s not the situation, making the contribution before the end of the calendar year will ensure maximum flexibility should an unforeseen need to withdraw funds arise.

When you are turning 71 during 2024

Every Canadian who has an RRSP must collapse that plan by the end of the year in which they turn 71 years of age – usually by converting the RRSP into a registered retirement income fund (RRIF) or by purchasing an annuity. An individual who turns 71 during the year is still entitled to make a final RRSP contribution for that year, assuming that they have sufficient contribution room. However, in such cases, the 60-day window for contributions after December 31 is not available. Any RRSP contribution to be made by a person who turns 71 during the year must be made by December 31 of that year. Once that deadline has passed, no further RRSP contributions are possible.

RRIF withdrawals for 2024

Under Canadian law, anyone who has an RRIF is required to make a minimum withdrawal from that RRIF each year. The amount of the withdrawal is calculated as a specified percentage of the balance in the RRIF at the beginning of the calendar year, with that percentage based on the age of the RRIF holder at that time.

Taxpayers who have no immediate need of funds held within an RRIF are often reluctant to make a withdrawal and pay the tax on those amounts, especially where the value of investments held in an RRIF has declined. While there is no way of avoiding the requirement to withdraw that minimum amount from one’s RRIF, and to pay tax on the amount withdrawn, such taxpayers can consider contributing those amounts to a tax-free savings account (TFSA). Where that is done, the funds can be invested and continue to grow. As well, neither the original contribution nor the investment gains will be taxable when the funds are withdrawn from the TFSA, and amounts withdrawn will not be included in income when determining the taxpayer’s eligibility for means-tested federal benefits and credits, like Old Age Security, the GST/HST credit, or the age credit.

Planning for TFSA withdrawals and contributions

Each Canadian aged 18 and over can make an annual contribution to a tax-free savings account (TFSA) – the current-year contribution limit for 2024 is $7,000. As well, where an amount previously contributed to a TFSA is withdrawn from the plan, that withdrawn amount is added to the taxpayer’s total TFSA contribution limit, but not until the year following the year of withdrawal.

Consequently, it makes sense, where a TFSA withdrawal is planned (or the need to make such a withdrawal might arise) within the next few months, to make that withdrawal before the end of the calendar year. A taxpayer who withdraws funds from their TFSA on or before December 31, 2024 will have the amount which is withdrawn added to their TFSA contribution limit for 2025, which means it can be re-contributed, where finances allow, as early as January 1, 2025. If the same taxpayer waits until January of 2025 to make the withdrawal, the amount withdrawn won’t be added to the taxpayer’s TFSA contribution room until 2026.

The approach of the calendar year end doesn’t usually prompt Canadians to consider the details of making contributions to an RRSP, or withdrawals from a TFSA or an RRIF. There is, however, no flexibility in the deadlines for taking such actions, and considering what steps may be needed or advisable now means one less thing to remember as the December 31 deadline nears.

For most Canadians, tax planning for a year that hasn’t even started yet may seem premature or even unnecessary. However, most Canadians will start paying their taxes for 2025 in less than two months, starting with the first paycheque they receive in January.

For most Canadians, tax planning for a year that hasn’t even started yet may seem premature or even unnecessary. However, most Canadians will start paying their taxes for 2025 in less than two months, starting with the first paycheque they receive in January.

For most Canadians, (certainly for the vast majority who earn their income from employment), income tax, along with other statutory deductions like Canada Pension Plan contributions and Employment Insurance premiums, are paid periodically throughout the year by means of deductions taken from each paycheque received, with those deductions then remitted to the Canada Revenue Agency (CRA) on the taxpayer’s behalf by their employer.

Of course, each taxpayer’s situation is unique and so the employer has to have some guidance as to how much to deduct and remit on behalf of each employee. That guidance is provided by the employee/taxpayer in the form of TD1 forms which are completed and signed by each employee, sometimes at the start of each year, but certainly at the time employment commences. Each employee must, in fact, complete two TD1 forms – one for federal tax purposes and the other for provincial tax imposed by the province in which the taxpayer lives. Federal and provincial TD1 forms for 2025 (which have not yet been released by the CRA but, once published, will be available on the Agency’s website at https://www.canada.ca/en/revenue-agency/services/forms-publications/td1-personal-tax-credits-returns/td1-forms-pay-received-on-january-1-later.html) list the most common statutory credits claimed by taxpayers, including the basic personal credit, the spousal credit amount and the age amount. Adding amounts claimed on each form gives the Total Claim Amounts (one federal, one provincial) which the employer then uses to determine, based on tables issued by the CRA, the amount of income tax which should be deducted (or withheld) from each of the employee’s paycheques and remitted on their behalf to the federal government.

While the TD1 completed by the employee at the time their employment commenced will have accurately reflected the credits claimable by the employee at that time, everyone’s life circumstances change. Where a baby is born, a child starts post-secondary education, there is a separation or a divorce, a taxpayer turns 65 years of age, or an elderly parent comes to live with their children, the affected taxpayer(s) will often become eligible to claim tax credits not previously available. And, since the employer can only calculate source deductions based on information provided to it by the employee, those new credit claims won’t be reflected in the amounts deducted at source from the employee’s paycheque.

Consequently, it’s a good idea for all employees to review the TD1 form prior to the start of each taxation year and to make any changes needed to ensure that a claim is made for any and all credit amounts currently available to them. Doing so will ensure that the correct amount of tax is deducted at source throughout the year.

As well, it’s often the case that a taxpayer will have available deductions which cannot be recorded on the TD1, like RRSP contributions, deductible support payments, or child care expenses. While such claims make things a little more complicated, it’s still possible to have source deductions adjusted to accurately reflect those claims, and the employee’s resulting reduced tax liability for 2025. The way to do so is to file Form T1213, Request to Reduce Tax Deductions at Source with the CRA. The most recent version of the T1213 was issued by the CRA in September 2024, and can be found on the Agency’s website at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t1213.html.

Once the T1213 form is filed with the CRA, the Agency will, after verifying that the claims made are accurate, provide the employer with a Letter of Authority authorizing that employer to reduce the amount of tax being withheld from the employee’s paycheque – and thereby increasing the employee’s take-home income. 

Of course, as with all things bureaucratic, having one’s source deductions reduced by filing a T1213 takes time. While a T1213 can be filed with the CRA at any time of the year, the sooner it’s done, the sooner source deductions can be adjusted, effective for all subsequent paycheques. Providing an employer with an updated TD1 for 2025 as soon as possible, along with filing the T1213 with the CRA where circumstances warrant, will ensure that source deductions made starting January 1, 2025 will accurately reflect all of the employee’s current circumstances, and consequently their actual tax liability for the year – and, potentially, provide the employee with a little more cash flow to meet day-to-day expenses.

Canada’s income tax system is a self-assessing one, in which residents of Canada are expected (and in most cases, required) to file an annual tax return in which all sources of worldwide income are reported, and the amount of tax owed on that income calculated and paid.

Canada’s income tax system is a self-assessing one, in which residents of Canada are expected (and in most cases, required) to file an annual tax return in which all sources of worldwide income are reported, and the amount of tax owed on that income calculated and paid.

While the onus is on individual Canadians to determine the sources and amounts of income which have been received during the year, the process is not entirely an “honour” system in which amounts reported are not subject to cross-checks or verification. Rather, where income (whether salary, wages, investment income, or pension/retirement income) is paid to Canadians, the payor must prepare an information slip (a T4 or T5, or T4RRIF or T4RSP) setting out the amount and nature of the monies paid and the personal identification details (i.e., name, address, social insurance number) of the recipient. A copy of that information slip is provided to that recipient and another copy filed with the Canada Revenue Agency (CRA). The CRA is therefore able to cross-check income amounts reported by each Canadian taxpayer with the income payment information which has been filed with the Agency by the payor of that income.

There are very few types of income that escape the Canadian tax net, and in almost all cases the CRA is able to determine the amount and types of income received by each Canadian taxpayer through the system of information slips filed by payors. Where that system has not, to date, been as effective is in the tracking and reporting of income earned by Canadians through online or digital sales of goods or services.

Millions of Canadians earn income from online sales, through websites or apps. In some cases, such sales are infrequent, where an individual wants to earn a bit of additional income by selling possessions which are no longer needed or wanted, but are still saleable. In other cases, however, where such sales are done on a regular and frequent basis, the amount of income earned through online sales can be very substantial.

While it’s impossible to quantify or even know for certain, it’s likely the case that substantial amounts of income earned by Canadians from online sales are never reported to the tax authorities and are therefore never taxed. In some cases, that may be because recipients genuinely believe that such income does not need to be reported, while others who don’t report may simply be hoping that their omission never comes to the attention of the tax authorities.

Whatever the motivation or belief, the perception that online income doesn’t have to be reported is incorrect – as stated clearly on the CRA website, “income from platform economy activities is subject to taxation”. More generally, every resident of Canada is required to report all income received from all sources, both within Canada and worldwide. That includes income from what the CRA terms the “peer-to-peer” economy, in which goods are sold through online platforms including (but not limited to) Kijiji, Etsy, eBay, and Amazon.

To date, there has not been a practical mechanism by which the tax authorities can track amounts of income received by Canadians through online sales. That will change when, in January 2025, online platform operators will be required for the first time to report income amounts earned by individuals to the CRA. The actual reporting requirements came into force at the beginning of 2024, but the deadline for filing a report to the CRA with respect to online income earned by individual Canadians during 2024 is January 31, 2025. Information filed by online platform operators with the CRA with respect to any Canadian taxpayer will, of course, also be provided to that taxpayer, in the same way that taxpayers receive a copy of a T4 or T5 slip. The information filed with the CRA will include personal identifying information, including social insurance numbers, income figures, and bank account numbers, for any individual who meets the definition of a “reportable seller”.

The purpose of limiting such reporting to sales carried out by “reportable sellers” is to create a minimum activity/income threshold. The general definition of a “reportable seller” is any Canadian resident who is registered with a platform and has received amounts during the year from sales made on that platform. However, while all income from online sales are reportable as income, the cost to the CRA of pursuing taxpayers who earn very small amounts from such sales and/or do so very infrequently would almost certainly outweigh the benefit of any additional tax revenue collected as a result. Consequently, individuals who meet the definition of a reportable seller, but who trade infrequently or for very small amounts, are considered to be “excluded sellers” who are exempted from the new reporting requirements.

Notwithstanding, the threshold amounts which allow an individual to be characterized as an excluded seller (and for that reason exempt from the reporting requirements) are actually quite low. In order to be an excluded seller, an individual must have fewer than 30 sales per year and have earned no more than a total of $2,800 on such sales. Consequently, an individual who, during 2024, makes an average of three sales per month (36 per year) and receives an average of $80 per sale would be considered to be a reportable seller and the activities and income earned by that individual during 2024 would be reported to the CRA by January 31, 2025.

Where reporting is required, the obligation to report falls on the platform operator, who must provide the CRA with both identification and activity information with respect to each reportable seller, and provide a copy of that information to the reportable seller. The information reported can include:

• Identification information
  • Name of seller;
  • Seller’s primary address;
  • Sellers’s date of birth;
  • Seller’s tax identification number (for Canadian individuals, that means their social insurance number); and
  • Seller’s financial account identifiers (meaning bank account numbers)
• Activity information
  • Total income from sales (paid or credited), and number of sales, broken down by calendar quarter, and
  • Fees, commissions, or taxes withheld or charged by the platform operator.

Platform operators who are required to report under the new rules may ask sellers who are registered with their platform for additional information, in order to confirm whether an individual is a reportable seller for purposes of those reporting rules. Responding to such a request is not optional, as the new rules permit the CRA to assess a penalty of $500 where a seller fails to provide his or her social insurance number when such information is requested by a platform operator.

Detailed information on the new reporting rules for digital platform operators can be found on the CRA website at https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/reporting-rules-digital-platforms.html. Individuals who sell goods or services through online platforms or apps can find information summarizing their income tax and goods and services/harmonized sales tax obligations with respect to income earned from those activities on the same website at https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/platform-economy.html.

While the need for charitable donations for any number of causes is a year-round reality, appeals for such donations tend to increase as the holiday season and the end of the calendar year approach. And generally, those appeals are met, as Canadians have a well-deserved reputation for supporting charitable causes, through donations of both money and goods. Our tax system supports that generosity by providing both federal and provincial tax credits for qualifying donations made. In all cases, in order to claim a credit for a donation in a particular tax year, that donation must be made by the end of that calendar year.

While the need for charitable donations for any number of causes is a year-round reality, appeals for such donations tend to increase as the holiday season and the end of the calendar year approach. And generally, those appeals are met, as Canadians have a well-deserved reputation for supporting charitable causes, through donations of both money and goods. Our tax system supports that generosity by providing both federal and provincial tax credits for qualifying donations made. In all cases, in order to claim a credit for a donation in a particular tax year, that donation must be made by the end of that calendar year.

There is an additional reason, when planning charitable donations, to ensure that such donations are made by December 31. The credit provided by the federal government is a two-level credit, in which the percentage credit claimable increases with the amount of donation made. For federal tax purposes, the first $200 in donations is eligible for a non-refundable tax credit equal to 15% of the donation. The credit for donations made during the year which exceed the $200 threshold is, however, calculated as 29% of the excess. Finally, where the taxpayer making the donation has taxable income (for 2024) over $246,752, charitable donations above the $200 threshold can receive a federal tax credit of 33%.

As a result of the two-level credit structure, the best tax result is obtained when donations made before the end of the calendar year are maximized. For example, a qualifying charitable donation of $400 made in December 2024 will receive a federal credit of $88.00 ($200 times 15% plus $200 times 29%). If the same amount is donated, but the donation is split equally between December 2024 and January 2025, the total credit claimable is only $60.00 ($200 times 15% plus $200 times 15%), and the 2025 donation can’t be claimed until the 2025 return is filed in April of 2026. And, of course, the larger the donation made in any one calendar year, the greater the proportion of that donation which will receive credit at the 29% level rather than the 15% level.

It’s also possible to carry forward, for up to five years, donations which were made in a particular tax year, but not claimed on the tax return for that year. So, if donations made in 2024 don’t reach the $200 level, it’s usually worth holding off on claiming the donation and carrying it forward to the next year in which total donations, including carryforwards, are over that threshold. Of course, this also means that donations made but not claimed in any of the 2019, 2020, 2021, 2022, or 2023 tax years can be carried forward and added to the total donations made in 2024, and the total then claimed on the 2024 tax return. There is a ceiling on the amount of donations which can be claimed in any one calendar year, but that ceiling is a very generous one – a taxpayer can claim any qualifying current or carryforward donations up to a limit of three quarters of the taxpayer’s net income for the year.

When claiming charitable donations, it’s possible to combine donations made by oneself and one’s spouse and claim them on one spouse’s return. Generally, it makes sense to do so in order to maximize the total amount of donations claimed by a single individual, and therefore the amount of donations which can qualify for the higher tax credit rate(s).

Regardless of when a charitable donation is made or who claims it for tax purposes, would-be donors are well advised to carefully consider the charities to which they donate. It’s an unfortunate reality that while most organizations seeking charitable donations are legitimate, the charitable sector attracts its share of scammers and fraudsters whose only aim is to personally profit from the generosity of others. Such charitable donation frauds arise, in particular, whenever there are Canadian or world events like wars or natural disasters and people are particularly motivated to help. After every such event a flurry of “instant” charities spring to life, seeking donations which may or may not actually be used as represented. And, while some of the individuals or organizations who seek to raise funds in response to particular events may actually be well intentioned, the reality is that they are unlikely to have either the infrastructure or the experience needed to actually carry out their stated or intended aims. And others, of course, are simply scammers seeking to capitalize on the desire of Canadians to help in response to disaster or other need.

There are two ways to ensure that one’s charitable dollar is actually utilized as intended. The first is to donate only to large international charities which have been in existence for some time and which have both expertise and experience in utilizing charitable donations in an efficient and effective way. However, where a donor is deciding whether to make a donation to a newer or less well-known charity, it’s relatively easy to find information about that charity on the website of the Canada Revenue Agency.

Only donations made to registered charities can be claimed for purposes of the charitable donations tax credit. The Canada Revenue Agency maintains on its website a listing of all such registered charities; that listing (which is searchable) can be found at https://apps.cra-arc.gc.ca/ebci/hacc/srch/pub/dsplyBscSrch?request_locale=en.

That webpage will also provide information on the charity’s activities, including the date on which it became a registered charity. Through that site (which is updated daily by the Canada Revenue Agency), it’s also possible to obtain information on the countries in which the charity operates, the nature of its charitable activities, and details of its revenues and expenditures, all of which can help a would-be donor to determine whether or not to make a donation.

Detailed information on calculating and claiming the charitable donation tax credit is available on the same website at Giving to charity: Information for donors - Canada.ca.

Residents of the eight Canadian provinces in which the federal fuel charge (more commonly known as the federal carbon tax) is levied are entitled to claim and receive the federal Canada Carbon Rebate (CCR). That rebate (formerly known as the Climate Action Incentive Payment) is a non-taxable payment made four times a year (in April, July, and October of 2024 and January 2025) to help offset the cost of that federal carbon tax.

Residents of the eight Canadian provinces in which the federal fuel charge (more commonly known as the federal carbon tax) is levied are entitled to claim and receive the federal Canada Carbon Rebate (CCR). That rebate (formerly known as the Climate Action Incentive Payment) is a non-taxable payment made four times a year (in April, July, and October of 2024 and January 2025) to help offset the cost of that federal carbon tax.

For 2024, residents of Alberta, Saskatchewan, Manitoba, Ontario, Nova Scotia, Newfoundland and Labrador, New Brunswick, and Prince Edward Island are eligible for the CCR. Unlike other federal credits, eligibility for the CCR is based solely on the province of residence of the individual, and is not affected in any way by the income of the person claiming it. Specifically, all individuals who were resident in Canada during the previous month and are resident in any of the above eight provinces on the first day of the month in which the rebate is paid are eligible to receive it, regardless of income.

The CCR has two elements – the basic rebate and the rural supplement. The amount of both will differ, depending on the taxpayer’s province of residence. The basic annual rebate amounts payable for the 2024-25 payment year (April 1, 2024 – March 31, 2025) are as follows.

                              First Adult     Second Adult     Each Minor Child

Alberta                       $900              $450                    $225

Saskatchewan             $752              $376                    $188

Manitoba                    $600              $300                    $150

Ontario                      $560              $280                     $140

Nova Scotia                $412              $206                     $103

New Brunswick           $380              $190                     $95

PEI                            $440              $220                     $110

Nfld and Labrador       $596              $298                     $149

The rural supplement, as the name implies, is provided to Canadians who live outside metropolitan areas and who are likely to have higher energy needs and consequently greater federal carbon tax expenditures. The rural supplement is calculated as a percentage of the basic rebate and was formerly equal to 10% of that basic rebate. However, that percentage amount has been increased, effective as of June 2024, to 20% of the basic rebate.

The increased rural supplement was not included in the April and July 2024 payments; consequently, the payment to be made on October 15 will include both the increased rural supplement for October, as well as retroactive payments for April and July.

While the general rules provide that the rural supplement is provided to Canadians who live outside metropolitan areas, all residents of Prince Edward Island automatically receive the rural supplement, and that is reflected in the figures shown above.

Unlike some other federal credit and rebate programs, there is no requirement for individual Canadians to file an application for the CCR for adults. However, in order to receive the CCR, all individuals must file an annual tax return with the Canada Revenue Agency, as information on that return is used to determine both eligibility (based on province of residence) and the amount of the available rebate (based on family composition) for the upcoming benefit year. There is no need to check any box or complete any particular line of the return in order to receive the basic rebate; however, individuals who are claiming the rural supplement (other than residents of PEI) must check off a box on page 2 of the federal income tax return, indicating that they are eligible for that supplement. Finally, in order to receive the CCR for a minor child, it is necessary that the child be registered for purposes of either the Child Tax Benefit program, or the GST/HST tax credit.

As shown above, a rebate amount is issued for each adult and each child in a family. However, only one global payment including rebate amounts for all family members is issued each quarter (around the 15^th of April, July, October, and January). Those payments (of both the basic rebate and the rural supplment) are made to the adult in the family whose tax return for the previous year is filed first. Where parents share custody of a child or children, 50% of the rebate for that child or children will be paid to each parent.

The Canada Carbon Rebate is among the easiest and most beneficial of the federal rebates and credits to qualify for and to claim, in that the only qualification needed is that the taxpayer be a resident of one of the provinces in which the federal carbon tax is levied, the only step needed to claim the rebate is the filing of an annual tax return, and finally, the full amount of the rebate (which can be as much as $1,800 annually for a family of four) is non-taxable and is received regardless of individual or family income.

The basic rules governing the Canada Carbon Rebate program are straightforward, and any needed computation of the amount of benefit claimable is done by the CRA when the taxpayer’s return is assessed. Taxpayers who have questions about the CCR can find detailed information on the program on the CRA website at https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-carbon-rebate.html and https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4215.htm.

The Old Age Security (OAS) program is one of the two major federal benefit programs available to older Canadians – the other being the Canada Pension Plan (CPP). While both programs provide taxable monthly payments to Canadians, there are significant differences between the two. The Canada Pension Plan is a contributory system, with Canadians contributing a percentage of income earned during their working years, and with the amount of benefits receivable based on the amount of contributions made. By contrast, OAS benefits are paid out of general government revenues, with no requirement that recipients pay into the plan. The amount of the monthly OAS benefit is a fixed amount which is payable to anyone who has been resident in Canada for at least 40 years after the age of 18. (Reduced benefits are payable to those whose period of Canadian residence after the age of 18 is between 10 and 40 years.) For the fourth quarter of 2024 (October to December), that maximum monthly benefit for recipients under the age of 75 is $728., while benefit recipients aged 75 and older can receive up to $800. per month.

The Old Age Security (OAS) program is one of the two major federal benefit programs available to older Canadians – the other being the Canada Pension Plan (CPP). While both programs provide taxable monthly payments to Canadians, there are significant differences between the two. The Canada Pension Plan is a contributory system, with Canadians contributing a percentage of income earned during their working years, and with the amount of benefits receivable based on the amount of contributions made. By contrast, OAS benefits are paid out of general government revenues, with no requirement that recipients pay into the plan. The amount of the monthly OAS benefit is a fixed amount which is payable to anyone who has been resident in Canada for at least 40 years after the age of 18. (Reduced benefits are payable to those whose period of Canadian residence after the age of 18 is between 10 and 40 years.) For the fourth quarter of 2024 (October to December), that maximum monthly benefit for recipients under the age of 75 is $728., while benefit recipients aged 75 and older can receive up to $800. per month.

The other difference between the OAS and CPP programs is that eligible Canadians can begin to receive a CPP retirement benefit at age 60, but OAS benefits can start only once an individual turns 65. Formerly, OAS benefits were automatically paid to eligible recipients once they reached that age. Now, however, Canadians who are eligible to receive OAS benefits are able to defer receipt of those benefits for up to five years, to when they turn 70 years of age. For each month that an individual Canadian defers receipt of those benefits, the amount of benefit eventually received increases by 0.6%. The longer the period of deferral, the greater the amount of monthly benefit eventually received. Where receipt of OAS benefits is deferred for a full 5 years, until age 70, the monthly benefit received is increased by 36%.

It can, however, be difficult to determine, on an individual basis, whether and to what extent it would make sense to defer receipt of OAS benefits. Some of the difficulty in deciding whether to defer – and for how long – lies in the fact there are no hard and fast rules, and the decision is very much an individual one. Fortunately, however, there are a number of factors which each individual can consider when making that decision.

The first such factor is how much total income will be required, at the age of 65, to finance current needs. It’s also necessary to determine what other sources of income (employment income from full- or part-time work, Canada Pension Plan retirement benefits, employer-sponsored pension plan benefits, annuity payments, and withdrawals from registered retirement savings plans (RRSPs) and registered retirement income fund (RRIFs)) are available to meet those needs, both currently and in the future, and when receipt of those income amounts can or will commence or cease. Once income needs and the sources and possible timing of each is clear, it’s necessary to consider the income tax implications of the structuring and timing of those sources of income. The tax rate payable on retirement income (as with all income) increases as income rises and, in addition, the availability of a number of federal tax credits and benefits is eroded at higher incomes. The ultimate goal, as it is at any age, is to ensure sufficient income to finance a comfortable lifestyle while at the same time minimizing both the tax bite and the potential loss of tax credits and benefits.

In making those calculations, the following income tax thresholds and benefit cut-off figures are a starting point.

• Income in the first federal tax bracket is taxed at 15%, while income in the second bracket is taxed at 20.5%. For 2024, that second income tax bracket begins when taxable income reaches $55,867.
• The Canadian tax system provides (for 2024) a non-refundable tax credit of $8,790 for taxpayers who are age 65 or older at the end of the tax year. The amount of that credit is reduced once the taxpayer’s net income for the year exceeds $44,325.
• Individuals can receive a GST/HST refundable tax credit, which is paid quarterly. For 2024, the full credit is payable to individual taxpayers whose family net income is less than $44,324.
• Taxpayers who receive Old Age Security benefits and have income over a specified amount are required to repay a portion of those benefits through a mechanism known as the “OAS recovery tax”, or clawback. Taxpayers whose net income for 2024 is more than $90,997 will have a portion of their future OAS benefits “clawed-back”.

What other sources of income are currently available?

More and more, Canadians are not automatically leaving the work force at the traditional retirement age of 65. Those who continue to work at paid employment and whose employment income is sufficient to finance their chosen lifestyle may well prefer to defer receipt of OAS. Similarly, a taxpayer who begins receiving benefits from an employer’s pension plan when they turn 65 may be able to postpone receipt of OAS benefits.

Is the taxpayer eligible for Canada Pension Plan retirement benefits, and at what age will those benefits commence?

Nearly all Canadians who were employed or self-employed after the age of 18 paid into the Canada Pension Plan and are eligible to receive CPP retirement benefits. While such retirement benefits can be received as early as age 60, receipt can also be deferred and received any time up to the age of 70. As is the case with OAS benefits, CPP retirement benefits increase with each month that receipt of those benefits is deferred. Taxpayers who are eligible for both OAS and CPP will need to consider the impact of accelerating or deferring the receipt of each benefit in structuring retirement income.  

Does the taxpayer have private retirement savings through an RRSP?

Receipt of a monthly pension from an employer-sponsored pension plan is no longer the reality for the majority of Canadian retirees; such retirees have generally saved for their retirement through a registered retirement savings plan (RRSP). While taxpayers can choose to withdraw amounts from such plans at any age, they are required to collapse their RRSPs by the end of the year in which they turn 71, and to begin receiving income from those savings. There are a number of options available for structuring that income but, whatever the option chosen (usually converting the RRSP into a registered retirement income fund (RRIF) or purchasing an annuity), it will mean that the taxpayer will begin receiving taxable income amounts from those RRSP funds in each year after they turn 71. Taxpayers who have significant retirement savings in RRSPs should, in determining when to begin receiving OAS benefits, consider the tax impact that receipt of that additional taxable income amount from their RRSP will have in every future year.

The ability to defer receipt of OAS benefits does provide Canadians with more flexibility when it comes to structuring retirement income. The price of that flexibility is increased complexity, particularly where, as is the case for most retirees, multiple sources of income and the timing of each of those income sources must be considered, and none can be considered in isolation from the others.

Individuals who are undertaking that decision-making process will find some assistance on the Service Canada website. That website provides a very helpful Retirement Income Calculator, which, based on information input by the user, will calculate the amount of OAS which would be payable at different ages. The calculator will also determine, based on current RRSP savings, the monthly income amount which those RRSP funds will provide during retirement. To use the calculator, it is necessary to know the amount of Canada Pension Plan benefit which will be received. Taxpayers who are registered for online access to My Service Canada Account can find that information there; those who are not can obtain that figure by calling Service Canada at 1-800 277-9914.

The Retirement Income Calculator can be found at https://www.canada.ca/en/services/benefits/publicpensions/cpp/retirement-income-calculator.html.

In the 2024-25 Federal Budget released earlier this year, the federal government announced changes to the rules which govern mortgage lending in Canada. Those changes had two goals: making it easier for first-time home buyers to qualify for a mortgage, and providing an incentive to encourage the building of new residential properties in Canada. Finance Canada recently announced two additional changes to mortgage lending rules; the first of those changes builds on one of the Budget announcements, while the second reduces the amount of the down payment which some home purchasers are required to make.

In the 2024-25 Federal Budget released earlier this year, the federal government announced changes to the rules which govern mortgage lending in Canada. Those changes had two goals: making it easier for first-time home buyers to qualify for a mortgage, and providing an incentive to encourage the building of new residential properties in Canada. Finance Canada recently announced two additional changes to mortgage lending rules; the first of those changes builds on one of the Budget announcements, while the second reduces the amount of the down payment which some home purchasers are required to make.

To understand the purpose and impact of these changes, a bit of background on how mortgage lending works is necessary. In Canada, all home purchasers must make a down payment on the purchase price of a home. The current required minimum down payment is a percentage of the purchase price, as follows:

A mortgage is a loan obtained to help finance the purchase of a home, and the mortgage amount is the difference between the down payment made and the purchase price. Where any home purchaser makes a down payment of less than 20% of the purchase price of the property, they are required to obtain (and pay for) mortgage default insurance through the Canada Mortgage and Housing Corporation (CMHC). The home purchaser must, as well, repay that mortgage (known as a “high-ratio mortgage”) within 25 years (known as the “amortization period”). Where the down payment amount is more than 20% of the purchase price of the home, there is no limit on the length of time the homeowner can take to repay the full mortgage amount (although, as a practical matter, the maximum amortization period which most major mortgage lenders in Canada will provide is 30 years.).

In its Budget for the 2024-25 fiscal year, the federal government announced that an extended amortization period would be provided for first-time home buyers purchasing a new residential property. In July of this year, Finance Canada provided details of that change, announcing that mortgage lenders would be allowed to provide 30-year amortization periods on insured mortgages to all first-time home buyers who were purchasing a new residential property. In other words, the existing 25-year limit on amortization periods for high-ratio mortgages insured by the Canada Mortgage and Housing Corporation would be extended to allow for 30-year amortization periods – but only for first-time home buyers purchasing new residential properties. That change was effective as of August 1, 2024. On September 16, Finance Canada announced that eligibility for a 30-year amortization (that is, the option to repay a mortgage over 30 years rather than 25 years) would be expanded to become available to ALL first-time home buyers and to ALL buyers of new residential properties. That change will take effect on December 15, 2024.

In the same announcement made on September 16, changes were made to the rules which determine how large a down payment a home purchaser must make. Specifically, the current requirement to make a minimum 20% down payment on a home costing $1 million or more is increased to apply only to homes costing $1.5 million or more. That change is also effective for any mortgage taken out on or after December 15, 2024. As of that date, required down payments will be as follows:

As with all such measures, there are additional rules which must be consulted to determine eligibility for either an extended amortization period and/or the ability to make a lower down payment. Those rules are outlined in detail in a Backgrounder to the September 16 announcement; that Backgrounder can be found on the Finance Canada website at https://www.canada.ca/en/department-finance/news/2024/09/delivering-the-boldest-mortgage-reforms-in-decades.html. The press releases for the July and September announcements are available on the same website at https://www.canada.ca/en/department-finance/news/2024/07/government-announces-30-year-amortizations-for-insured-mortgages-to-put-homeownership-in-reach-for-millennials-and-gen-z.html, and https://www.canada.ca/en/department-finance/news/2024/09/government-announces-mortgage-reform-details-to-ensure-canadians-can-access-lower-monthly-mortgage-payments-by-december-15.html.

Two quarterly newsletters have been added – one dealing with personal issues, and one dealing with corporate issues.

Two quarterly newsletters have been added – one dealing with personal issues, and one dealing with corporate issues.

They can be accessed below.

Corporate:

Issue #69 Corporate

Personal:

Issue #69 Personal

While the current state of the Canadian health care system is far from perfect, Canadians are nonetheless fortunate to have a publicly funded health care system, in which most major medical expenses are covered by provincial health care plans. Notwithstanding, there is a large (and growing) number of medical and para-medical costs – including dental care, prescription drugs, physiotherapy, ambulance trips, and many others – which must be paid for on an out-of-pocket basis by the individual. In some cases, such costs are covered by private insurance, usually provided by an employer, but not everyone benefits from private health care coverage. Self-employed individuals, those working on contract, or those whose income comes from several part-time jobs do not usually have access to such private insurance coverage. Fortunately for those individuals, our tax system acts to help cushion the blow by providing a 15% federal non-refundable medical expense tax credit (METC) to help offset out-of-pocket medical and para-medical costs which must be incurred.

While the current state of the Canadian health care system is far from perfect, Canadians are nonetheless fortunate to have a publicly funded health care system, in which most major medical expenses are covered by provincial health care plans. Notwithstanding, there is a large (and growing) number of medical and para-medical costs – including dental care, prescription drugs, physiotherapy, ambulance trips, and many others – which must be paid for on an out-of-pocket basis by the individual. In some cases, such costs are covered by private insurance, usually provided by an employer, but not everyone benefits from private health care coverage. Self-employed individuals, those working on contract, or those whose income comes from several part-time jobs do not usually have access to such private insurance coverage. Fortunately for those individuals, our tax system acts to help cushion the blow by providing a 15% federal non-refundable medical expense tax credit (METC) to help offset out-of-pocket medical and para-medical costs which must be incurred.

The difficulty for such individuals is that while the tax credit claimable is simple in concept, it can be difficult to determine just what kinds of expenses are claimable for purposes of that credit (not all are, and others are claimable only if certain criteria are met), the extent to which expenses can be claimed (only expenses which exceed a certain amount can be claimed, and that amount changes with the income of the taxpayer), and who should claim the expenses (usually, but not always, it makes more sense for the lower-income spouse to claim medical expenses incurred by the entire family).

It's not hard to see why taxpayers can become confused and frustrated when trying to file a claim for medical expenses on the annual return. However, the process of determining the available claim really comes down to answering three questions, as follows.

1. Which of my expenses are claimable and are there additional criteria imposed?
2. Of my total medical expenses, how much can I claim?
3. Should I or my spouse should make the claim for the medical expense tax credit?

Which of my expenses are claimable, and are there additional criteria imposed?

The good news for taxpayers is that there are a great number of different kinds of medical expenses which qualify for the medical expense tax credit, and the Canada Revenue Agency provides a detailed alphabetical (and searchable) listing of those expenses on its website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/lines-33099-33199-eligible-medical-expenses-you-claim-on-your-tax-return.html.

While each of the medical expenses listed on the CRA website are eligible to be claimed for purposes of the medical expense tax credit, for each such expense it’s necessary to determine whether there are additional criteria which must be met in order to make that particular expense eligible for the credit.

Probably the most important criterion for most taxpayers is that, in some cases, a particular expense is only claimable if a prescription has been obtained from a medical doctor indicating a need on the part of the taxpayer to incur that expense. However, making a determination of when it’s necessary to obtain a prescription from a medical professional in order to ensure that the planned expenditure will qualify for the credit is far from intuitive. For instance, in order to claim the medical expense tax credit for the cost of a cane or a walker, it is necessary to obtain a prescription for that cane or walker. However, where costs are incurred to purchase a wheelchair, those costs are eligible for the medical expense credit, with no requirement that a prescription of any kind be obtained.

The listing of eligible medical expenses found on the CRA website does indicate the kinds of expenses for which a prescription is required; where the amount of a planned expenditure for a medical expense is significant, it’s well worth consulting the CRA website to ensure that the purchase is done in a way that will make it possible to claim the METC for the cost incurred.

Other types of medical expense costs can be claimed for purposes of the credit only where the person incurring that expenditure qualifies for the federal disability tax credit. Once again, the listing found on the CRA website indicates the types of expenditures to which this requirement applies.

Of my total medical expenses, how much can I claim?

Here again, the basic rule which determines how much a taxpayer can claim in a particular taxation year can be stated simply, but is more complex to apply. The basic rule is that for a taxation year a taxpayer can claim eligible medical expenses which exceed 3% of the taxpayer’s net income, or $2,759, whichever is less.

Put in more practical terms, the rule for 2024 is that any taxpayer whose net income for the