Tax numbers for 2024

Here are the new tax numbers you need to know.

Inflation adjustment factor

Most income tax and benefit amounts are indexed to inflation each year. In November, the Canada Revenue Agency announced the inflation rate to be used to index the 2024 tax brackets and that the amount would be 4.7 percent.

Increases to the tax bracket thresholds and various amounts relating to non-refundable credits take effect on Jan. 1, 2024. But increases in amounts for certain benefits, such as the GST/HST credit and Canada Child Benefit, only take effect on July 1, 2024, coinciding with the beginning of the program year for these benefit payments, which are income tested and based on your net income reported on your 2023 tax return.

Tax brackets for 2024 

All five federal income tax brackets for 2024 have been indexed to inflation using the 4.7 percent rate. The new brackets are: zero to $55,867 of income (15 percent); above $55,867 to $111,733 (20.5 percent); above $111,733 to $173,205 (26 percent); above $173,205 to $246,752 (29 percent); and anything above that is taxed at 33 percent.

Each province also has its own set of provincial tax brackets, most of which have been indexed to inflation but using their respective provincial indexation factors.

Basic personal amount

The BPA is an individual’s income without paying federal tax. In December 2019, the government announced an increase in the BPA annually until it reached $15,000 in 2023, after which it will be indexed to inflation.

As a result, the increased BPA for 2024 is now $15,705, meaning you can earn up to this amount in 2024 before paying any federal income tax. For taxpayers earning above this amount, the value of the federal credit is calculated by applying the lowest federal personal income tax rate (15 percent) to the BPA, making it worth $2,356. Because the credit is “non-refundable,” it’s only worth the maximum amount if you would have otherwise paid that much tax in the year.

However, higher-income earners don’t get the total, increased BPA because there is an income test. The enhancement to the BPA is gradually reduced, on a straight-line basis, for taxpayers with net incomes above $173,205 until it has been fully phased out once a taxpayer’s income is more than $246,752 (the threshold for the top tax bracket in 2024). Taxpayers in that top bracket who lose the enhancement will still get the “old” BPA, indexed to inflation, which is $14,156 for 2024.

CPP (QPP) contributions

For 2024, employee and employer Canada Pension Plan contribution rates will remain at 5.95 percent, but the “year’s maximum pensionable earnings,” which is also called the “first earnings ceiling,” will increase to $68,500, while the basic exemption amount remains at $3,500. This increase was calculated per CPP legislation and considered Canada’s average weekly wages and salary growth.

The 2024 maximum CPP contribution will be $3,867.50 for each employee and employer portion. The self-employed CPP contribution rate remains at 11.9 percent, and the maximum contribution will increase to $7,735.

Starting Jan. 1, 2024, however, a second CPP contribution rate and earnings ceiling are being introduced. The “year’s additional maximum pensionable earnings” will only affect workers’ income above the first earnings ceiling.

The level of the second earnings ceiling is based on the value of the first earnings ceiling. For 2024, the double ceiling was set at an amount that is seven percent higher than the first ceiling, and for 2025, the second ceiling will be set at an amount that’s 14 percent higher than the first ceiling.

As a result, pensionable earnings between $68,500 and $73,200 in 2024 will be subject to “second CPP contributions” at an employee and employer rate of four percent, with a maximum contribution of $188 each. The 2024 self-employed CPP2 contribution rate will be eight percent, and the maximum self-employed contribution will be $376.

Employment insurance premiums

These are also rising, with a contribution rate for employees of 1.66 percent (1.32 percent for Quebec) up to a maximum contribution of $1,049.12 ($834.24 for Quebec) on 2024 maximum insurable earnings of $63,200.

TFSA limit

The 2024 tax-free savings account dollar limit will increase to $7,000 (up from $6,500). For someone who has never contributed to a TFSA, has been a resident of Canada, and has been at least 18 years of age since 2009, the cumulative TFSA limit will be $95,000 in 2024.

RRSP limit

The Registered Retirement Savings Plan dollar limit for 2024 is $31,560, up from $30,780 in 2023. Of course, the amount you can contribute to your RRSP in 2024 is limited to 18 percent of your 2023 earned income, which includes (self-)employment and rental income, up to the RRSP dollar limit of $31,560, plus any unused RRSP contribution room from 2023, subject to any pension adjustments.

Old Age Security

If you receive OAS, the OAS repayment threshold is set at $90,997 for 2024, meaning your OAS will be reduced in 2024 if your taxable income is above this amount.

New Alternative Minimum Tax

Finally, remember that the proposed changes to the AMT system are set to take effect Jan. 1, 2024, although only draft legislation has so far been released. The AMT imposes a minimum level of tax on taxpayers who claim certain tax deductions, exemptions or credits to reduce the tax they owe to deficient levels. If the amount of tax calculated under the AMT system is more than the amount due under the regular tax system, the difference is payable as AMT for the year.

The 2024 AMT changes include raising the AMT rate, increasing the AMT exemption and broadening the AMT base by limiting certain exemptions, deductions and credits that reduce taxes.

Source: Financial Post