Welcome to 2024! As we usher in a new year, both businesses and individuals need to stay informed about the latest tax changes and updates. Our team at Virtual Heights Accounting is committed to keeping you updated and well-prepared for these changes. Let’s dive into some of the significant tax modifications for 2024.

1. Amended Rules for Intergenerational Corporate Business Transfers

2024 brings slight amendments to the rules governing intergenerational corporate business transfers which were introduced by Bill C-208 in 2021. The changes from the 2023 budget that came into effect starting January 1, 2024, primarily affect business owners planning to sell their businesses to the next generation. The revised rules now require more structured timelines, specific structures, and the need to make certain elections to access the capital gains exemption. This is a crucial area for those considering such transfers, and it’s advisable to consult with your accountant to understand the new requirements and explore your options well in the early planning stages.

2. Adjustments in Personal Income Tax Rates and Thresholds

The federal income tax rates and thresholds have seen an increase. Let’s compare the rates from 2023 to understand these adjustments better:

  • 2023 Federal Income Tax Rates:
    • 15% on taxable income up to $53,359
    • 20.5% on taxable income over $53,359 to $106,717
    • 26% on taxable income over $106,717 to $165,430
    • 29% on taxable income over $165,430 to $235,675
    • 33% on taxable income over $235,675

In 2024, these thresholds have increased, impacting how much tax is levied on different income brackets. It’s important to review these changes to understand their impact on your personal or business finances.

  • 2024 Federal Income Tax Rates:
    • 15% on taxable income up to $55,867
    • 20.5% on taxable income over $55,867 to $111,733
    • 26% on taxable income over $111,733 to $173,205
    • 29% on taxable income over $173,205 to $246,752
    • 33% on taxable income over $246,752

Note that these only represent the FEDERAL portions and you will pay your PROVINCIAL taxes on top of these amounts (check our provincial rates here). Overall, it should mean less taxes in 2024 compared to 2023 if you are making the same income level as the brackets have increased. But don’t get too excited we still have to file your personal tax returns first! The deadline for filing of (most) 2023 Canadian personal tax returns will be April 30, 2024. A great tool to use for checking on current year taxes is the Wealth Simple tax calculator here.

3. Introduction of the Two-Tier CPP Enhancement

The Canada Pension Plan (CPP) sees a significant change with the introduction of a two-tier system. The first tier remains at the 2023 rate of 5.95% but applies up to $68,500. That first tier is the same as we have previously seen. What is new is the introduction of the second tier. The new second tier, starting in 2024, imposes an additional 4% on amounts over $68,500 and up to $73,200. This change means an additional maximum employee cost of $188, with employers matching the contribution. Keep in mind that these ceilings are expected to rise in future years. This will mean that contributing to CPP will be more expensive in future years than it has been.

4. Increases in Alternative Minimum Tax (AMT) – Not currently legislated but still expected

2024 will also likely see an increase in the Alternative Minimum Tax (AMT), adding complexity to certain large transactions. AMT primarily affects sales of qualifying properties that utilize the capital gains deduction. If you’re involved in such transactions, it’s essential to review your tax plans with an advisor to understand the implications of AMT on your finances. Want to know more about what AMT is? Check out this article from RBC Wealth Management on Alternative Minimum Tax. We are noting this as an important to-watch item. However, it was expected to be included in fall 2023 legislation and was not. So while nothing has passed yet, it is still on the government’s list for 2024 and so has been included here.

At Virtual Heights Accounting, we understand that navigating tax changes can be challenging. We’re here to help you understand these updates and how they specifically impact you or your business. Stay ahead of the curve by consulting with our expert team. Remember, early planning and consultation can make a significant difference in how you manage your taxes in 2024. Happy New Year everyone!

This blog is intended for general use and understanding. Specific cases can alter recommendations which are often based on current court cases. These recommendations may evolve as new court cases or CRA interpretations become available. Direct professional advice is recommended to ensure you are getting the right information for you and your business.