How to Impact Your 2024 Tax Bill

Certain accounting or legal fees, such as the cost of representation on tax disputes, are deductible in the year paid. If you have these costs, be sure to pay them before the end of the year.

If you plan to give money to a charity or political party, make sure the gift or donation is made before December 31, 2024, to ensure you can claim the tax credit on your 2024 return.

If you have equipment you are planning to purchase for your business early next year, consider buying it before December 31, 2024, or before your corporate year-end, as applicable. The tax depreciation only starts when the equipment is available for use in your business. Similarly, if you are going to sell equipment, consider doing so early in 2025 rather than in 2024. Tax depreciation can only be deducted on equipment that is owned as of December 31, 2024.

Ensure that any desired distributions to or from a family trust are made by December 31, 2024. If distributions are planned, ensure appropriate dividends are paid through the trust by year-end.

Payments by cheques deposited and distributed before the end of the year are required unless detailed steps are completed.

The Tax on Split Income (TOSI) rules remain in effect and may significantly impact certain tax benefits associated with using family trusts for income-splitting purposes. Please contact your Crowe MacKay tax advisor for more details on how these rules may affect you and to identify opportunities that may be available to plan around the rules.

If you are an individual using a home office as your principal place of business (more than 50%) or exclusively for earning business income and meeting clients or customers on a regular and continuous basis, then you may be able to deduct home expenses related to the office space. Such expenses include:

• the business portion of rent,
• mortgage interest,
• property taxes,
• utilities,
• insurance,
• repairs, and
• telecommunications.

Home office expenses you are eligible to deduct depend on whether you are an employee, commissioned employee, or self-employed.

If you have realized capital gains in the current year, consider selling investments with unrealized capital losses before year-end. This strategy could reduce your tax bill as capital losses can be offset against capital gains. The key is to trigger these losses in 2024, so the last settlement day for 2024 must be considered. Where a loss has been triggered, you or an affiliated party cannot acquire the same or an identical investment within 30 days before or after the sale, or the loss will be disallowed. We recommend that you consult your Crowe MacKay tax advisor and investment advisor prior to
undertaking this strategy.

A deduction is available for certain tradespersons or apprentices, i.e. Eligible Workers or EW who work in temporary work locations. This deduction of up to $4,000 is available for expenses such as temporary lodging near the particular work location, transportation for one round trip from their home to the temporary lodging, and meals during travel of this one round trip.

To qualify for this deduction, the EW must obtain or maintain employment to provide temporary construction services at a remote work location and stay at temporary lodging in Canada near that work location and away from their ordinary residence in Canada during the relocation period. Additionally, the EW must be away from their ordinary residence for at least 36 hours, and the temporary lodging must be at least 150 km closer to the particular work location in Canada than their ordinary residence. It is important to note that EWs can claim expenses up to a maximum of 50% of their employment income from the construction activities at these work locations. They may not include expenses in respect of which they received employer-provided financial assistance that was not included in their income.

If you are entitled to a spousal tax credit for your spouse or common-law partner, you may be able to include all of your spouse's dividends from a taxable Canadian corporation in your income if doing so will allow you to claim or increase the claim for the spousal tax credit. The election should only be made if it results in lower overall taxes. Transferring this income between you and your spouse might not always be beneficial.

If you are collecting OAS and your net income in 2024 is over $90,997, you must repay some or all of your OAS benefits. This “claw back” is the lesser of your OAS benefits received in the year and 15% of your net income, which is over $90,997. The OAS claw back is calculated solely on your net income and is not affected by your spouse's income.

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If your net income is $148,451 or greater in 2024, you must repay all your OAS benefits. 

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If you are eligible to receive OAS but are subject to a full claw back, you may consider deferring receiving OAS until a year in which the claw back is reduced or eliminated. Deferring the receipt of OAS will increase your OAS entitlement when you begin to collect it, and it will increase your maximum annual net income to receive OAS.

If you are earning eligible pension income, you may be able to split up to 50% of this income with your spouse or common-law partner. Eligible pension income excludes Canada Pension Plan, Old Age Security, and certain foreign pension income. Pension income-splitting may be done by filing a joint election with your income tax return and can result in significant tax savings if your spouse or common-law partner is in a lower tax bracket. Your spouse or common-law partner may also be able to claim the pension income amount tax credit on the income that they are deemed to have received.

Collecting the Canada Pension Plan may allow you to share this income with your spouse. If a taxpayer's spouse is in a lower marginal tax bracket, this may be an effective means of income splitting and reducing the couple's overall tax bill. Individuals must apply through Service Canada by completing form ISP1002.

A $2,000 pension tax credit is available if you earn eligible pension income, which typically includes income from a registered pension plan, registered retirement income fund (RRIF), and annuity payments from an RRSP. If you are eligible to receive pension income and are not currently doing so, you may consider converting a portion of your RRSP to an RRIF to receive eligible pension income on which the pension tax credit can be claimed. Please contact your Crowe MacKay advisor to discuss the age restrictions that apply to your circumstances.

The RDSP is a registered long-term savings plan for people eligible for the disability tax credit. The beneficiary, a family member, or any other authorized contributor may make contributions. There is no annual contribution limit; however, there is a lifetime contribution limit of $200,000.

Although contributions to the plan are not tax-deductible, income earned inside the plan is only taxed once the beneficiary withdraws it. Contributions can be made until the end of the year in which the beneficiary turns 59. Payments from the RDSP must begin by the end of the year in which the beneficiary turns 60.

There are currently two income-based programs to enhance the funds contributed to the RDSP: the Canada Disability Savings Grant Program and the Canada Disability Savings Bond Program.

The rules related to RDSPs can be complex. We recommend that you speak with your Crowe MacKay tax advisor if you believe this program may be right for you or a family member.

Make contributions to a RESP before December 31 to qualify for any 2024 grants you may be eligible for. As in years past, beneficiaries under 18 qualify for the Canada Education Savings Grant, which is equal to 20% of annual contributions made for a beneficiary, subject to a $500 annual cap and a $7,200 lifetime maximum. Additional grants are possible where there is unused grant room from a previous year and for families with lower net income.

Regular and spousal contributions for the 2024 taxation year may be made up to March 1, 2025. Similarly, if you must repay a portion of your Home Buyers’ Plan or your Lifelong Learning Plan, payments must be made by that date.

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Overall, tax savings are most significant for individuals currently in a high tax bracket but in a lower bracket when the RRSP money is withdrawn.

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There may be an opportunity to income-split with your spouse if you contribute to a spousal RRSP and withdraw from that spousal RRSP in a subsequent year. Be careful of attribution rules that will apply if the funds are withdrawn within three years of your last contribution to a spousal RRSP. If you turn 71 and can no longer contribute to your own RRSP, you can still contribute to a spousal RRSP until the end of the year in which your spouse turns 71.

The Home Buyers’ Plan and Lifelong Learning Plan are also useful RRSP tools as they allow you to withdraw funds from your RRSP on a tax-deferred basis to help fund a home purchase, full-time training, or education. Please be aware that if the required repayments under these plans are not made by the RRSP deadline, these amounts would be included in your income for the 2024 tax year.

We suggest contacting your Crowe MacKay tax advisor if you have questions about RRSPs.

The RRSP contribution limit is 18% of your previous year's earned income, up to a maximum of $31,560 for 2024 and $32,490 for 2025.

If you have a shareholder loan from your company that has been outstanding since the December 31, 2023, year-end (i.e. it is at risk of showing up as a receivable on two consecutive balance sheets), ensure it is repaid by December 31, 2024, or it may result in a deemed taxable benefit to you. Consult your Crowe MacKay tax advisor to determine if the amount must be repaid and what repayment methods are available, such as dividends or net wage compensation.

If you have a spousal or family income splitting loan, ensure the interest is paid by January 30, 2025, by a “documented” method such as a deposited cheque. These loans with interest at the prescribed rate (currently 5%) are typically used for income-splitting where families have large investment pools (generally over $1M).

The FHSA is a registered plan that allows a first-time home buyer to save to buy or build a qualifying first home tax-free. Contributions to the account are tax-deductible in a similar fashion to an RRSP, but the withdrawal (provided it was for the purchase of a new home) is non-taxable, similar to the existing tax-free savings account.

The maximum lifetime contribution limit is $40,000. Unused contribution room can be carried over to the next year, up to a maximum of $8,000, and contributions can be made for up to 15 years.

To be eligible, an individual must be at least 18 (and no less than the age of majority in your province), be a resident of Canada, have a Social Insurance Number and not have owned a home where they lived this year or at any time in the preceding four calendar years.

The MHRTC allows for the deduction of certain renovation expenses that are incurred for the explicit purpose of creating a self-contained secondary unit. For the expenses to be eligible, the secondary unit needs to be occupied by a family member who is a senior citizen (someone over the age of 65) or an adult eligible for the disability tax credit.

Qualifying costs up to $50,000 can be claimed, 15% of which will be eligible for the credit to a maximum of $7,500. To be eligible for the credit, the renovation needs to have been completed in the year (regardless of when it was started) and must have the following characteristics:

• Relate to a self-contained secondary unit with a private entrance, kitchen, bathroom, and sleeping area.
• The unit is newly constructed or created from an existing living space that did not already meet local requirements to be considered a secondary dwelling unit.

In general, the person making the claim must be a resident of Canada, reside (or intend to reside) in the renovated home, and be the family member described above, or related to that individual. This credit is refundable, so a refund will be received if the amount of this credit exceeds taxes otherwise owing.

The maximum employment deduction for tradesperson's tools is $1,000. A tradesperson can generally claim a deduction of up to $1,000, by which the total cost of eligible new tools acquired in a taxation year as a condition of employment exceeds the amount of the Canada Employment Credit ($1,433 in 2024).

As a result of this change, extraordinary tool costs eligible under the apprentice mechanics' tools deduction are those that exceed the greater of:

• The combined amount of the increased deduction for tradesperson's tool expenses ($1,000) and the amount of the Canada Employment Credit ($1,433 in 2024), or
• 5% of the taxpayer's income earned as an apprentice mechanic (including apprenticeship grants less any claim for the tradesperson's deduction for tools and the amount of any apprenticeship grant overpayments repaid during the taxation year).