What's New for the 2024 Tax Season
As we approach tax season, several important updates will impact the way Canadians file their 2023 taxes and beyond. Below, we cover key developments to keep in mind for individuals, businesses, and trusts, as well as upcoming changes in 2024.
What’s New for Individuals
Several changes will apply to 2023 T1 personal tax returns, generally due on April 30, 2024. Here are some key updates for individuals:
Automatic Canada Workers Benefit (CWB) Payments
Advance payments of the Canada Workers Benefit will be automatically issued to eligible individuals, eliminating the need to apply. Form RC201 is now discontinued.
Increased Deduction for Tradesperson’s Tools
The maximum deduction for tradespeople’s tools has doubled to $1,000 for 2023, allowing qualifying employees to claim a greater portion of their expenses.
First Home Savings Account (FHSA)
The FHSA, introduced in 2023, enables Canadians to save for their first home with deductible contributions and tax-free growth. Qualified withdrawals to purchase a first home are also tax-free.
Multigenerational Home Renovation Tax Credit
This new credit provides up to $7,500 (15% of $50,000) for eligible renovation expenses to support a qualifying relative’s residency in a family home.
Residential Property Flipping Rule
To ensure fair taxation, profits from selling residential property held for less than a year will generally be classified as business income, with exceptions for specific life events such as death or marital breakdown.
Home Office Deduction Update
The temporary flat rate method for home office deductions is no longer available for 2023 onward, so individuals must use the detailed method for their claims.
What’s New for Businesses
Businesses should note the following changes impacting capital expenses, tax credits, and financial regulations:
- Immediate Expensing: Immediate expensing of certain capital assets remains in place for eligible property available for use before January 1, 2025.
- Accelerated Investment Incentive: This incentive applies to eligible property acquired after November 2018, with a phase-out period reducing the capital cost allowance rate through 2027.
- Zero-Emission Vehicle Incentives: The enhanced 100% Capital Cost Allowance rate for zero-emission vehicles will start to phase out after 2023.
- Substantive CCPCs: New rules prevent private Canadian corporations from avoiding CCPC status to benefit from refundable tax regimes.
- Excessive Interest and Financing Expense Limitation (EIFEL): EIFEL rules now apply to specific entities for tax years beginning on or after October 1, 2023.
- Clean Economy Investment Tax Credits (ITC): New ITCs are available for carbon capture, clean technology, hydrogen, and other green initiatives.
What’s New for Trusts
Significant changes for trusts include new reporting requirements and exclusions:
Beneficial Ownership Reporting
Trusts, including bare trusts, with tax years ending after December 30, 2023, must file a T3 return annually, including beneficial ownership details. Late-filing penalties for bare trusts will be waived for 2023.
Charities and Internal Trusts
Charities with internal trusts holding property as a gift under specific terms are generally exempt from the expanded trust reporting rules.
Other Key Developments
- Electronic Payments Requirement: Taxpayers must remit payments over $10,000 electronically or face a $100 penalty. A grace period will facilitate this transition.
- Underused Housing Tax (UHT): Changes would define “excluded owners” for UHT purposes, potentially exempting Canadian corporations, partnerships, and trusts.
- Prescribed Rates: The CRA’s prescribed interest rates have been adjusted for the first quarter of 2024.
Looking Ahead to 2024
- Alternative Minimum Tax (AMT): Updates to the AMT aim to address policy issues. Stay tuned for final changes.
- Mandatory Disclosure and General Anti-Avoidance Rules: Expanded disclosure rules require reporting of certain transactions from mid-2023.
- Intergenerational Business Transfers and Employee Ownership Trusts: New conditions streamline family business transfers, effective January 1, 2024.
- Short-Term Rental Compliance: Tax deductions for non-compliant rentals may be denied, starting in 2024.