Most Canadians live their lives with only very infrequent contact with the tax authorities and are generally happy to keep it that way. Sometime between mid-February and the end of April 2025 the majority of Canadian taxpayers will file a return for 2024 with the Canada Revenue Agency. Once that return is processed, the CRA will issue a Notice of Assessment. Most taxpayers will then receive a tax refund, usually by direct deposit to their bank account, while in a minority of cases the taxpayer will have to pay a tax amount owing on or before April 30, 2025.

Most Canadians live their lives with only very infrequent contact with the tax authorities and are generally happy to keep it that way. Sometime between mid-February and the end of April 2025 the majority of Canadian taxpayers will file a return for 2024 with the Canada Revenue Agency. Once that return is processed, the CRA will issue a Notice of Assessment. Most taxpayers will then receive a tax refund, usually by direct deposit to their bank account, while in a minority of cases the taxpayer will have to pay a tax amount owing on or before April 30, 2025.

Sometimes, however, the process does not play out in quite that straightforward a way. In some cases, the CRA will have questions about information reported on the taxpayer’s return – perhaps an income amount reported does not match up with the amount reported to the CRA by the payor of that income. In other cases, the taxpayer may have claimed a deduction or credit, and the CRA wants the taxpayer to provide them with the receipt or other documentation to support that deduction or credit claim. In both cases, the CRA may contact the taxpayer to resolve the discrepancy or to obtain the information needed to finish processing the taxpayer’s return. In some cases, that contact will occur before the CRA issues the Notice of Assessment with respect to the taxpayer’s return, while in others it will not take place until after the Notice of Assessment has been issued.

While no one particularly likes hearing from the tax authorities, it is critical that the taxpayer respond to any inquiry from the CRA. Failing to do so will mean, at a minimum, that the processing of one’s tax return will be delayed, or worse, a claim made on the return will be denied because the taxpayer has not responded to requests to provide the CRA with supporting documentation.

The problem which arises for the taxpayer is determining whether a communication received is in fact a legitimate request from the CRA or is part of a scam, phishing, or fraud attempt. Scams in which fraud artists claim to be from the CRA have become so commonplace over the past decade or so that by now almost everyone has received a fraudulent communication which purports to be from the tax authorities and which requests that the taxpayer provide financial or other information – or threatens dire consequences if the taxpayer fails to make an immediate payment. And, in the past several years, those fraudulent communications have become more and more sophisticated and hard to detect

Receipt of any communication which purports to be from the tax authorities therefore puts the taxpayer in a quandary. A legitimate query from the CRA cannot be ignored, but responding to a fraudulent communication (which can be as simple as clicking on a link in a fraudulent text message or email) can result in significant financial losses, or even identity theft. The resulting (and understandable) level of concern and suspicion on the part of taxpayers has even led to instances in which taxpayers refuse to speak to genuine CRA employees who are contacting the taxpayer in connection with legitimate CRA enquiries.

Some of the difficulty, ironically, likely arises from the fact that the CRA now utilizes most of the currently available communications technology to contact taxpayers. It’s certainly more efficient, but that expanded use of communications technology has had the inadvertent effect of making it easier for scammers to fraudulently represent themselves as being from the Agency. The CRA now contacts taxpayers by phone, by regular mail, by automated voicemail, by email, and by text. About the only method the CRA doesn’t use in communicating with taxpayers is social media. Consequently, a taxpayer who receives a communication by phone, email, or text (the favourites of scammers) can’t automatically assume that such communication is not legitimate. To protect themselves, taxpayers need to know the purposes for which and circumstances in which the CRA will use different communications methods.

To that end, the CRA has made ongoing efforts, primarily through its website, to provide information on how it uses different communication methods to contact taxpayers. The Agency’s goal is two-fold: the first, of course, is to help taxpayers avoid becoming yet another victim of scams and frauds, and the second is to prevent situations in which taxpayers ignore legitimate communications from the Agency, having dismissed them as just another fraud or phishing attempt.

The following summary outlines just when the CRA will (and perhaps more importantly, when it will not) use a particular communication method to contact a taxpayer, and how to know whether a particular communication is in fact a legitimate one.

If you receive a phone call or an automated message

In a phone call, the CRA may ask for any of the following:

• personal information to verify the taxpayer’s identity, including their name, date of birth, or Social Insurance Number (SIN);
• details or additional information needed for the taxpayer’s tax account, such as receipts or supporting documents;
• tax returns which the taxpayer has not filed; or
• financial information, such as the taxpayer’s bank's name and location.

If the taxpayer has an outstanding debt owed to the CRA, the Agency may:

• ask for payment of any amount owing, using the CRA's payment options, or
• notify the taxpayer about possible legal actions to recover unpaid debts.

Finally, the CRA may notify a taxpayer by telephone or automated message about any of the following events:

• a tax return is being reviewed;
• a recent GST/HST registration is being reviewed;
• a GST/HST registration requirement is being reviewed;
• a CRA user ID and password have been revoked;
• a Notice of assessment or reassessment is being sent; or
• an audit process is being initiated.

Finally, the CRA may contact a taxpayer by phone or automated message to offer a service, including a reminder of an upcoming income tax filing or payment deadline or a tax instalment payment due date, or support to help the taxpayer access benefits and credits. It’s important to note that the Agency’s automated system only leaves a message and never includes or asks for taxpayer personal information. 

If you receive an email

The CRA will send an email to a taxpayer in only two situations:

• the taxpayer has registered for email notifications and is being notified that there is a new message to view in their CRA online accounts; or
• the taxpayer has requested, in a phone call or a meeting with a CRA client services agent, that a CRA link, form, or publication be sent.

When an email purporting to be from the CRA is received, it’s important to remember that legitimate emails from the Agency will not be from a specific user, will not ask the taxpayer to reply to the email and will not include a link asking the taxpayer to enter personal or financial information. Any emails which include any of these features should be deleted.

If you receive a text or instant message

The CRA does utilize text messaging, but only for very limited and specific purposes. The Agency only sends text messages as part of multi-factor authentication for all of its online sign-in services and only if the taxpayer enrolled in that service (like My Account) and selected the telephone option.

As well, the CRA will not use instant messaging such as Facebook Messenger or WhatsApp.

Phone calls from someone claiming to represent the CRA are among the most difficult communications for taxpayers to assess with respect to authenticity, as the recipient of the call has to make an on-the-spot determination about whether the unfamiliar voice on the telephone is, in fact, a CRA employee. There are, however, procedures and processes in place to help.

Legitimate CRA employees will identify themselves when they contact a taxpayer and will provide that taxpayer with their name and phone number to call them back, if asked. (Taxpayers should be aware that relying on call display to verify the source of the call is not a good idea, as scammers have been able to manipulate technology to “spoof” a legitimate CRA phone number.)

The Agency suggests that where there is any doubt about the identity of a caller claiming to be from the CRA, taxpayers consider taking the following steps to ensure that they are in fact speaking to a CRA employee.

1. Tell the caller you would like to first verify their identity.
2. Request and make a note of their:
   • name,
   • phone number, and
   • office location.
3. End the call. Then check that the information provided during the call was legitimate by contacting the CRA. The CRA now provides an online service (available at Verify it's the CRA calling - Scams and fraud - CRA - Canada.ca) which allows the taxpayer to enter the ten digit phone number which was provided by the caller, to find out whether it is in fact a legitimate CRA phone number.

Each of these verification steps should be taken before providing any information to the caller.

Especially during tax filing season, taxpayers often contact the CRA through one of its individual or business tax help lines, which are answered by call center agents. Each of those telephone services offers an automated callback service – when wait times reach a certain threshold (as they often do during the busiest times), the taxpayer is given the option of receiving a callback rather than continuing to wait on hold. Where the taxpayer chooses the callback option, they are provided with a randomized four-digit confirmation number. The CRA call center agent who returns the taxpayer’s call will repeat that number, so that the taxpayer can be certain that it is a CRA employee who is calling.

While scams and frauds and their perpetrators have been around for literally centuries, changes in technology mean that most taxpayers are now accustomed to and at ease with conducting much of their personal and financial lives online or on their cell phones, making it much easier to carry out such deceptions. And even newer technology, like AI, poses additional threats for the future. In such an environment, the taxpayer’s best protection is to double check in order to verify the legitimacy of any unsolicited contact received with respect to matters of tax or personal finances. Protecting one’s financial and personal information in this way is no longer just prudent, it’s a necessity.

When Canadians gather together the information slips, receipts, and other documents needed to prepare and file their annual income tax return, their biggest concern is likely whether completing that return will result in the need to pay a tax amount owing. Taxpayers who are recipients of Old Age Security (OAS) benefits share that concern, of course, but they can face an additional unpleasant result when completing their tax return – finding out that they are subject to the OAS recovery tax, or clawback.

When Canadians gather together the information slips, receipts, and other documents needed to prepare and file their annual income tax return, their biggest concern is likely whether completing that return will result in the need to pay a tax amount owing. Taxpayers who are recipients of Old Age Security (OAS) benefits share that concern, of course, but they can face an additional unpleasant result when completing their tax return – finding out that they are subject to the OAS recovery tax, or clawback.

To understand how the OAS clawback works, a bit of background is helpful. The Old Age Security program is one of the two major federal retirement income programs in Canada – the other being the Canada Pension Plan. The two programs differ in two significant ways. First, while the Canada Pension Plan is funded by employer and employee contributions, OAS benefits are financed entirely out of general government revenues. Second, CPP retirement benefits are based on the amount of contributions made throughout the recipient’s working life and are unaffected by their income while receiving those retirement benefits. OAS benefits, however, can be recovered, or clawed back, by the federal government where the recipient’s income exceeds a prescribed threshold.

Most taxpayers, especially those over 65, have heard of the OAS clawback, but few are familiar with how it works in practice. While the rules governing the administration of the clawback can be confusing, the concept is a (relatively) simple one. Anyone who receives OAS benefits during a tax year and has net income for that year over a specified dollar amount threshold is required to repay a portion of the OAS benefits which were received during that year. Generally, that repayment is effected by reducing the amount of OAS benefits paid to the recipient throughout the next benefit year.

For example, an individual who receives full OAS during 2024 and has net income for the year over $90,997 will be subject to the clawback. They must repay OAS amounts received at a rate of 15 cents (or 15%) of every dollar of income over the clawback income threshold, as in the following simplified example.

The OAS clawback threshold for 2024 is $90,997.

If the individual’s income in 2024 was $98,000, then repayment would be 15% of the difference between $98,000 and $90,997:

$98,000 - $90,997 = $7,003

$7,003 x 0.15 = $1,050.45

The individual would have to repay $1,050.45 for the July 2025 - June 2026 period.

The federal government becomes aware of an individual’s income for 2024 only once the tax return for that year is filed, usually by April 30 of 2025. At that time, it will become apparent that $1,050.45 in OAS benefits received must be repaid. Consequently, in the following benefit year (which will run from July 2025 to June 2026), OAS benefits received will be reduced by $87.53 per month ($1,050.45 divided by 12 months).

This year, the OAS clawback affects only individuals who have an annual income of at least $90,997, much higher than the average income for a senior in Canada, and it’s arguable that at such income levels the clawback requirement does not impose any real financial hardship. Nonetheless, the OAS clawback is a perpetual irritant to those affected by it, perhaps because of the sense that they are being penalized in retirement for having lived frugally or been good managers of their finances during their working years, in order to put aside savings for a financially comfortable retirement, or to leave an inheritance for their children.

While any sense of grievance can’t alter the reality of the OAS clawback, there are strategies which can be put in place to either minimize or, in some cases, entirely eliminate one’s exposure to that clawback. Some of those planning considerations are better addressed earlier in life, prior to retirement; however, it’s not too late, once one is already receiving OAS, to make arrangements to avoid or minimize the clawback in future years.

In all cases, no matter what strategy is employed the goal, as it is with much of individual tax planning, is to “smooth” one’s income from year to year, so that net income for each year comes in under the OAS clawback threshold and, not incidentally, minimizes exposure to the higher federal and provincial income tax rates which in most cases apply once taxable income reaches between $90,000 and $100,000.

The starting point for taxpayers who are approaching retirement is to determine how much income will be received from all sources during retirement, based on CPP and OAS entitlements, any savings accrued through an RRSP, and any amounts which may be received from a private pension plan. For planning purposes, the age at which those income streams will come “online” can then be determined and arranged to produce the best result for both tax and OAS clawback purposes.

Anyone who has an RRSP must begin receiving income from those savings in the year after that person turns 71. However, it’s possible to begin receiving income from an RRSP at any time. Similarly, an individual who is eligible for CPP retirement benefits can begin receiving those benefits anytime between age 60 and age 70. OAS benefits can be received as early as age 65 or deferred up until age 70. For both CPP and OAS, the benefit amount increases for each month that receipt of that benefit is deferred.

Once the amount of annual income is determined, strategies to smooth out that income can be put in place. Those strategies could include arranging to receive OAS and CPP benefits at an earlier date or withdrawing amounts from an RRSP prior to age 71. The latter strategy will reduce the total amount within the RRSP and so thereby reduce the likelihood of having a large “bump” in income when required withdrawals kick in at age 72.

Taxpayers are sometimes understandably reluctant to take steps which they view as depleting their RRSP savings, but receiving income from an RRSP doesn’t mean spending that income. While tax has to be paid on any withdrawals (no matter what the taxpayer’s age), the after-tax amounts received can be contributed to the taxpayer’s tax-free savings account (TFSA), where they can compound free of tax. And, when the taxpayer has need of those funds, in retirement, they can be withdrawn free of tax and they won’t count as income for purposes of the OAS clawback.

The same strategy works for taxpayers who have opened a registered retirement income fund, or RRIF. All taxpayers who have an RRSP are required to collapse that RRSP by the end of the year in which they turn 71 and most taxpayers then transfer the balance of funds in the RRSP to an RRIF. Once an RRIF is opened, the holder of the RRIF is required to withdraw a specified percentage of funds from the RRIF each year (with that percentage increasing each year), and to pay tax on those withdrawals. That’s the case even where the taxpayer has no need of the funds and even where, as with the OAS clawback, receiving those funds can affect OAS benefit eligibility.

Taxpayers who have an RRIF and are age 65 or over can’t avoid making the withdrawal and paying tax on such amounts. However, where there is no immediate need for those funds, they can (like RRSP withdrawals) be contributed to the taxpayer’s TFSA. And, once again, those amounts can be invested and can grow tax-free. (If amounts withdrawn from an RRIF were invested outside of any tax sheltered plan, those investment gains would be fully taxed in the year in which they are received.) When amounts (whether original contributions or investment returns) are later withdrawn from the TFSA, no income tax is payable on those amounts and the amounts received will not be included in income for purposes of the OAS clawback.  

Taxpayers who are married can also “even out” their income by using pension income splitting, so that neither of them has sufficient income to be affected by the clawback.  Using pension income splitting, the spouse who has income over the OAS clawback threshold re-allocates the “excess” income to their spouse on the annual return, and that income is then considered to be income of the recipient spouse, for purposes of both income tax and the OAS clawback. To be eligible for pension income splitting, the income to be reallocated must be private pension income, which is generally income from an RRSP or RRIF, or from an employer sponsored pension plan. CPP and OAS benefit amounts do not qualify for pension income splitting.

There are two reasons why pension income splitting is a particularly attractive strategy for avoiding or minimizing the OAS clawback. First, there is no need to actually change the source or amount of income received by each spouse, as the reallocation of income is “notional”, existing only on the return for the year. Second, no decision has to be made on pension income splitting until it’s time to file the return for the previous year, meaning that spouses can easily calculate exactly how much income has to be reallocated to produce the desired result. More information on the kinds of income eligible for pension income splitting, and the mechanics of the process, can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/pension-income-splitting.html.

While the concept of planning to smooth out income in order to minimize taxes in retirement and avoid the OAS clawback is straightforward, most retirees have multiple sources of income and determining just how much income will be available from each source in each future year is difficult. However, the federal government provides an extremely useful online calculator which can be used to make that determination. The particular value of that calculator is that, based on inputs provided by the user, it enables that user to run “what-if” scenarios to determine the effect of, for instance, receiving OAS and CPP benefits at the earliest possible time, or by deferring receipt of those benefits for one, two, or more years. Based on the inputs provided by the user, the calculator will determine the amount of income which will be received annually from each income source in each future year. That calculator is available on the federal government website at https://srv111.services.gc.ca/generalinfo/index.

Detailed information on the OAS clawback can be found on the same website at https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/repayment.html.

Most taxpayers sit down to do their annual tax return (or wait to hear from their tax return preparer) with some degree of anxiety. In most cases taxpayers don’t know, until their return is completed, what the “bottom line” will be, and it’s usually a case of hoping for the best and fearing the worst.

Most taxpayers sit down to do their annual tax return (or wait to hear from their tax return preparer) with some degree of anxiety. In most cases taxpayers don’t know, until their return is completed, what the “bottom line” will be, and it’s usually a case of hoping for the best and fearing the worst.

Most taxpayers are, of course, hoping for a refund – the bigger the better. And for most taxpayers, that hope is realized. Of the approximately 5.5 million tax returns filed with the Canada Revenue Agency (CRA) between mid-February and March 17 of 2025, 67% resulted in the payment of a refund to the taxpayer (with an average refund of $2,000), while only 13% resulted in a tax amount owed. (The remaining 20% were nil returns, resulting in neither a refund nor a tax balance owed.) However, while only a small percentage of returns result in a tax balance owed to the government, that’s not much consolation to the 13% of tax filers who find themselves in that situation.

The worst-case scenario, for all taxpayers, is to find out that they are faced with a large tax bill and an imminent payment deadline, and that they just don’t have the funds needed to make the required payment by that deadline. This year, that payment deadline is Wednesday April 30, 2025 for ALL individual taxpayers (including self-employed taxpayers and their spouses who have until Monday June 16, 2025 to file their returns, and individual taxpayers who are reporting capital gains or capital losses for the 2024 tax year, who will not be assessed late-filing penalties or interest provided their returns for 2024 are filed on or before Monday June 2, 2025).

The April 30 payment deadline is inflexible and, where payment in full is not made on or before that date, interest charges on any unpaid balance will be levied by the CRA beginning on May 1, 2025. Interest charges levied by the CRA tend to add up quickly, for two reasons. First, the interest charged by the CRA on outstanding tax amounts is, by law, higher than current commercial rates – the rate charged from April 1 to June 30, 2025 is 8.0%. Second, interest charges levied by the CRA are compounded daily, meaning that each day interest is levied on the previous day’s interest charges. It is for these reasons that a taxpayer is, where at all possible, likely better off arranging private borrowing – for example, through a line of credit or low-interest credit card – in order to pay any taxes owing by the April 30, 2025 deadline.

Where the taxpayer can’t pay their tax bill out of current resources and is unable to borrow the funds to do so, there is another option. Like most creditors, the CRA would rather get paid on time and in full, but the Agency’s ultimate goal is to collect the full amount of taxes owed. If a tax bill can’t be paid on time, in full or in part, the Canada Revenue Agency is open to making a payment arrangement with the taxpayer, providing them with the option of paying an amount owed over time, plus interest.

There are two avenues available to taxpayers who want to propose such a payment arrangement. The first is a call to the CRA’s automated TeleArrangement service at 1-866-256-1147. When making such a call, it is necessary for the taxpayer to provide their full name and address, social insurance number, and date of birth and to have the Notice of Assessment for the last tax return for which the taxpayer filed. For taxpayers who are up to date on their tax filings, that will be the Notice of Assessment for the return for the 2023 tax year. The TeleArrangement Service is available Monday to Friday, from 7 a.m. to 10 p.m., Eastern time.

Taxpayers who would rather speak directly to a CRA employee can call the Agency’s debt management call centre at 1-888-863-8657 from 7 a.m. to 8 p.m. Eastern Time Monday to Friday. Where there is a long wait time, the taxpayer can request that a CRA representative return the call, or can complete an online form (available at https://apps.cra-arc.gc.ca/ebci/iesl/showClickToTalkForm.action) requesting a callback from a CRA agent.

Taxpayers who have registered for the CRA’s online service My Account can also log into their account to schedule a series of pre-authorized debits from their bank account which will discharge their tax debt. My Account is available on the CRA website at https://www.canada.ca/en/revenue-agency/services/e-services/cra-login-services.html.

Finally, regardless of the taxpayer’s circumstances, there is one strategy which is in all circumstances the wrong choice. Taxpayers who can’t pay their tax bill by the deadline sometimes conclude that there is no point in filing if payment can’t be made. That’s the wrong decision, and potentially a very costly one. Where an amount of tax is owed and the return isn’t filed on time, there is an immediate tax penalty imposed of 5% of the outstanding tax amount – and interest charges start accruing on that penalty amount (as well as on the outstanding tax balance) immediately. For each full month that the return isn’t filed, a further penalty of 1% of the outstanding tax amount is charged, to a maximum of 12 months. Higher penalty amounts are charged, for a longer period, where the taxpayer has incurred a late-filing penalty within the past three years. In the worst-case scenario, the total penalty charges can reach 50% of the tax amount owed – and that doesn’t count the compound interest which is levied on all penalty amounts, as well as on all unpaid taxes. In all cases, no matter what the circumstances, the right answer is to file one’s tax return on time and, where necessary, contact the CRA to make an arrangement to pay tax amounts owed over time.

Detailed information on the options available to taxpayers who can’t pay their taxes on time and in full can be found on the CRA website at  Call us if you can't pay in full or on time - Debt collection at the CRA - Canada.ca and https://www.canada.ca/en/revenue-agency/services/payments-cra/payment-arrangements.html.

Notwithstanding the considerable complexity of the Canadian income tax system, there is one rule which applies to every individual taxpayer living in Canada, regardless of location, income, age, or circumstances. That rule is that income tax owed for a year must be paid, in full, on or before April 30 of the following year. This year, that means that individual income taxes owed for 2024 must be remitted to the Canada Revenue Agency (CRA) on or before Wednesday April 30, 2025. No exceptions and, absent extraordinary circumstances, no extensions.

Notwithstanding the considerable complexity of the Canadian income tax system, there is one rule which applies to every individual taxpayer living in Canada, regardless of location, income, age, or circumstances. That rule is that income tax owed for a year must be paid, in full, on or before April 30 of the following year. This year, that means that individual income taxes owed for 2024 must be remitted to the Canada Revenue Agency (CRA) on or before Wednesday April 30, 2025. No exceptions and, absent extraordinary circumstances, no extensions.

It is very much in the CRA’s interest to make paying taxes as simple and as straightforward as it can be and so the Agency offers individual taxpayers a wide range of choices when it comes making that payment. There are, in fact, no fewer than eleven separate options available to individual residents of Canada in paying their taxes for the 2024 tax year. The rules and procedures for the methods most frequently used by individual taxpayers are outlined below: the first four options involve payment by electronic means, while the last three describe those available to taxpayers who would prefer to make their payments in person, or by sending a cheque to the CRA.

Pay using online banking

Millions of Canadians transact most or all of their banking using the online services of their particular financial institution. The list of financial institutions through which a payment can be made to the Canada Revenue Agency is a lengthy one (available at Pay online with your bank or credit union - Payments to the CRA - Canada.ca), and includes all of Canada’s major banks and credit unions.

The specific steps involved in making that payment will differ slightly for each financial institution, depending on how their online payment systems are configured. What’s important to remember is that the nature of the payment – i.e., tax balance owed on filing, as distinct from current year tax instalment payments – must be specified, and the taxpayer’s social insurance number must be provided, in order to ensure that the payment is credited to the correct account for the correct taxation year.

It’s not necessary to access any particular CRA form in order to make an online payment of taxes through one’s financial institution.

Using the CRA’s My Payment

The CRA also provides an online payment service called My Payment. There is no fee charged for the service, and it’s not necessary to be registered for any of the CRA’s other online services in order to use My Payment.

What is necessary is that the taxpayer have an activated debit card with a VISA Debit or Debit MasterCard logo from a participating Canadian financial institution, as My Payment is set up to accept payment using only those cards. It’s not possible to use a credit card to make a payment on My Payment; in addition, cards bearing only the Interac Debit logo, which were formerly eligible, are no longer accepted on My Payment.

Anyone intending to use My Payment should also confirm that the amount of any payment to be made is within any transaction limits imposed by their particular financial institution.

A list of participating financial institutions for each type of card and more details on this payment method can be found at https://www.canada.ca/en/revenue-agency/services/e-services/payment-save-time-pay-online.html.

Payment by credit card, PayPal, or Interac e-transfer

While it’s possible to pay one’s taxes using a credit card, PayPal or Interac e-transfer, such payments can be made only through third-party service providers (that is, payments by those methods cannot be made directly to the Canada Revenue Agency), and such third-party service providers will impose a fee for the service.

There are currently only three service providers through which individual income tax amounts owed can be paid – Pay Simply, Plastique, and TelPay. Links to each such service are available at https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/pay-credit-card.html.

Payment by pre-authorized debit

It’s possible to set up a pre-authorized debit (PAD) arrangement with the CRA, authorizing the Agency to debit a specific bank account for an amount of taxes owed, on dates specified by the taxpayer.

Individuals who make instalment payments of tax throughout the year may already have such an arrangement in place and can certainly use that existing arrangement to schedule a PAD of any balance of taxes owed for the 2024 tax year. However, any such payments must be scheduled at least five business days before the date the payment is to be made – i.e., April 30, 2025. A taxpayer who makes a payment of taxes only once a year is likely better off using another of the available payment methods.

There is also another option for taxpayers who have their return prepared and E-FILED by an authorized electronic filer. Such taxpayers can have that E-FILER set up a PAD agreement on their behalf in order to make a “one-time” payment for a current year tax amount owed. Such an arrangement is only for the payment of a current year tax balance and can’t be used for other payments like instalment payments of tax. Details on how to set up a pre-authorized debit arrangement, whether for a single payment or for recurring payments, are outlined on the CRA website at https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/pay-authorized-debit.html.

Paying in person at your financial institution

For those who don’t use online banking, or simply prefer to make a payment in person, it’s possible to pay a tax amount owed at a bank or credit union. Doing so, however, requires that the taxpayer have a specific personalized remittance form – the T7DR, Amount owing Remittance Voucher

If the taxpayer has not received the required remittance form from the Canada Revenue Agency, it’s possible to download and print that form from the CRA website. Instructions on how to do so can be found on that website at https://www.canada.ca/en/revenue-agency/services/forms-publications/request-payment-forms-remittance-vouchers.html.

Paying at a Canada Post outlet

All Canada Post outlets can receive payments of individual income tax balances owed, in cash or by debit card, but will impose a service charge for doing so. A specific form is needed to make tax payments at Canada Post outlets.

In this case, the taxpayer must have a QR code which contains the information needed for the CRA to credit the amount paid to the taxpayer’s account.

While a QR code is sometimes included on remittance forms sent to the taxpayer by the CRA, it’s also possible to generate a QR code online through the CRA website. A link to instructions on how to do so can be found on that website at https://www.canada.ca/en/revenue-agency/corporate/about-canada-revenue-agency-cra/pay-canada-post.html.

Paying by cheque

While it’s not as common anymore, it’s still possible to pay any tax balance owed on filing by cheque, as outlined on the CRA website at https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/pay-cheque.html.

Such cheques are made payable to the Receiver-General for Canada, and are mailed, together with the required remittance form, to the CRA, using the address found on the back of the payment remittance form. As is the case with payments made at a financial institution, the taxpayer can print such a remittance form from the CRA’s website. Instructions on how to do so can be found at https://www.canada.ca/en/revenue-agency/services/forms-publications/request-payment-forms-remittance-vouchers.html.

The CRA also suggests that, where payment of taxes owed is made by cheque, the taxpayer should include their social insurance number on the memo line found on the front of the cheque and, in addition, provide information about the tax account (that is, 2024 income tax balance owed on filing) to which the payment should be applied.  Doing so will help ensure that the payment is credited to both the correct taxpayer and the correct tax account of that taxpayer.

A decision on what method to use to pay one’s taxes includes another important consideration of which most taxpayers are unaware. Under longstanding Canada Revenue Agency policy, the CRA considers that a payment is actually made on the date on which it is received by the Agency. However, depending on the payment method chosen, that date of receipt usually isn’t the same day the payment is made by the taxpayer, and it can be as much as several days later. And, of course, where payment is made close to the payment deadline, that delay can mean the difference between a timely payment and one that is late and incurs interest charges.

Helpfully, the CRA provides information, for each payment method, on both which types of tax payments can be made using that method and how the date of receipt is determined for that particular method. That information can be found on the CRA’s website at Canada Revenue Agency https://www.canada.ca/en/revenue-agency/services/payments-cra/individual-payments/make-payment.html.

Finally, once payment has been made, by any payment method, the CRA provides taxpayers with an online method for confirming that a payment has been received and applied to the taxpayer’s account, through the Agency’s My Account service. That service is available at https://www.canada.ca/en/revenue-agency/services/payments-cra/confirm-payment.html. Taxpayers who have not signed up for My Account can confirm that their payment has been received and applied to their 2024 tax account by calling the CRA’s Individual Income Tax Enquiries Line at 1-800-959-8281.

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.

Corporate:
Issue #71 Corporate

Personal:
Issue #71 Personal

A few decades ago retirement, for most Canadians, was an event which marked the change from full-time work to not working at all. Usually, that transition took place at age 65, following which the new retiree would begin to receive Canada Pension Plan (CPP) and Old Age Security (OAS) benefits, and perhaps monthly payments from an employer-sponsored pension plan.

A few decades ago retirement, for most Canadians, was an event which marked the change from full-time work to not working at all. Usually, that transition took place at age 65, following which the new retiree would begin to receive Canada Pension Plan (CPP) and Old Age Security (OAS) benefits, and perhaps monthly payments from an employer-sponsored pension plan.

While that scenario is still possible, it no longer represents the retirement reality (or the retirement plan) of most Canadians, to such an extent that the word “retirement” no longer has a single meaning. Rather, it’s now the case that each individual’s retirement plans look a little different than anyone else’s. Some will take a traditional retirement of moving from a full-time job into not working at all, while others may stay working full-time past the traditional retirement age of 65. Still others will leave full-time employment at some point but will continue to work part-time, either out of financial necessity or simply from a desire to stay active and engaged in the work force.

The increasingly flexible nature of retirement plans is reflected in changes made over the past couple of decades to Canada’s government-sponsored retirement income programs, particularly the Canada Pension Plan. Every Canadian worker (employed or self-employed) contributes to the Canada Pension Plan starting at age 18 and continuing throughout his or her working life. The amount of contributions made is based on the individual’s income for the year, and total contributions made will determine the amount of CPP retirement benefit for which the individual will be eligible.

It’s possible to begin receiving Canada Pension Plan benefits as early as age 60 and as late as age 70, with the amount of benefit increasing with each month that receipt of benefits is deferred past age 60. Many Canadians now choose to begin receiving their CPP retirement benefit while continuing to participate, part-time or full-time, in the work force.

At one time, beginning to receive CPP retirement benefits meant that, even for those who chose to remain in the work force, no further CPP contributions were allowed. In 2012 that changed, with the introduction of the CPP Post-Retirement Benefit, or PRB. The availability of the PRB means that those who are aged 65 to 70 and continue to work while receiving CPP retirement benefits must decide whether or not to continue making CPP contributions. Such individuals who make the choice to continue to contribute to the Canada Pension Plan will see an increase, as the result of the PRB, in the amount of CPP retirement benefit they receive each month for the remainder of their lives.

The rules governing the availability of the PRB differ, depending on the age of the taxpayer. In a nutshell, an individual who is receiving the CPP retirement benefit and who continues to work will be subject to the following rules:

• Individuals who are 60 to 65 years of age and continue to work are required to continue making CPP contributions.
• Individuals who are 65 to 70 years of age and continue to work can choose not to make CPP contributions. To stop contributing, such an individual must fill out Form CPT30 (https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/cpt30.html). A copy of that form must be given to the individual’s employer and the original sent to the Canada Revenue Agency (CRA). An individual who has more than one employer must make the same choice (to continue to contribute or to cease contributions) for all employers and must provide a copy of Form CPT30 to each employer.
  
  A decision to stop contributing can be changed and contributions resumed, but only one such change can be made per calendar year. To make that change, the individual must complete section D of CRA Form CPT30 https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/cpt30.html, give one copy of the form to their employer(s), and send the original to the CRA.
• Individuals who are over the age of 70 and are still working cannot contribute to the CPP.

For individuals aged 65 to 70 who are still working, a decision on whether to continue making CPP contributions is, essentially, a cost/benefit analysis – each individual must determine whether the cost of making such contributions is justified by the increase in CPP retirement benefits which will result. To make that calculation, it’s necessary to start by knowing how much continuing contributions will cost. And, beginning with the 2024 tax year, the decision on whether to continue contributions to the CPP will be made more complex for some individuals by the introduction of “second tier CPP contributions”.

The contribution structure and amounts for 2025 are as follows.

• In 2025, each employee contributes first tier contributions of 5.95% of income earned, to a maximum first tier CPP contribution amount of $4,034.10.
• In 2025, individuals who have employment or self-employment income of more than $71,300 will be required to pay additional CPP contribution amounts of 4% of income between $71,300 and $81,200, with the maximum second tier contribution amount (for employees) being $396.
• For self-employed individuals (who must pay both the employer and employee portions of CPP contributions), the maximum first tier CPP contribution in 2025 will be $8,068.20 and the maximum second tier contribution will be $792. 

For individuals who are trying to decide whether to continue contributing to the CPP, there are some general rules of thumb which can be useful in making that determination. Generally speaking, continuing to contribute makes the most sense for younger individuals whose current CPP retirement pension is significantly less than the maximum allowable benefit (which, in 2025, is $1,433 per month), as making such contributions will mean an increase in the individual’s CPP retirement benefit each month for the rest of their life. Conversely, for individuals who are already receiving the maximum CPP retirement benefit, or even close to it, there is likely little or no benefit to be derived from continuing to contribute. Those individuals who are self-employed will need to factor in the reality that they will be required to pay both the employer and employee contribution amounts. Finally, those whose income is more than $71,300 in 2025 will need to consider the additional cost of making second tier CPP contributions.

More individualized information can be obtained from a very useful online tool provided by the CRA. That online tool – the Retirement Income Planner – includes an option which provides users with an estimate of how much PRB they can expect to receive in each subsequent year if they continue to contribute to the CPP. That Retirement Income Planner is available on the CRA website at  General Information - Canada.ca.

Where an individual decides that continuing to make CPP contributions makes sense in their circumstances, and the required forms are completed and submitted, the amount of any CPP post-retirement benefit earned will automatically be calculated by the federal government (no application is required), and the individual will be advised of any increase in the monthly CPP retirement benefit each year. The PRB will be paid to that individual automatically the year after the contributions are made, effective January 1 of that second year. Since the federal government doesn’t have all of the information needed to make such calculations until T4s and T4 summaries are filed by the employer by the end of February, the first PRB payment is usually made in a lump-sum amount in the month of April. That lump-sum amount represents the PRB payable from January to April. Thereafter, the PRB is paid monthly and combined with the individual’s usual CPP retirement benefit in a single payment.

More information on the PRB generally is available on the same website at https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-post-retirement.html.

While it’s true that the best year-end tax planning starts on January 1 of the tax year, the reality is that most Canadians don’t turn their attention to their tax situation for 2024 until the spring of 2025, when the deadline for filing a tax return for 2024 approaches. And while that means that there is plenty of time to get the return prepared and filed, it also means that the most significant opportunities to reduce or minimize the tax bill for 2024 are no longer available. Almost all such tax-planning or saving strategies, in order to be effective for 2024, must have been implemented by the end of that calendar year.

While it’s true that the best year-end tax planning starts on January 1 of the tax year, the reality is that most Canadians don’t turn their attention to their tax situation for 2024 until the spring of 2025, when the deadline for filing a tax return for 2024 approaches. And while that means that there is plenty of time to get the return prepared and filed, it also means that the most significant opportunities to reduce or minimize the tax bill for 2024 are no longer available. Almost all such tax-planning or saving strategies, in order to be effective for 2024, must have been implemented by the end of that calendar year.

The fact that the clock has run out on most major tax-planning opportunities for 2024 doesn’t, however, mean that there are no tax-saving strategies left. At this point, there are a couple of ways to minimize the tax hit for 2024 – by claiming all available deductions and credits on the return, and also by making sure that those deductions and credits are structured and claimed in the way which will give the taxpayer the greatest tax benefit.

In some cases, a claim for a tax deduction or credit can only be made on the return for the year in which the expense is incurred, while in other cases claims can be made for expenses incurred in the previous tax year or even as far back as five years previously.  Consequently, getting the best tax result on one’s return requires an assessment of which deductions and credits are available to claim in the current year, whether some or all of them can be carried forward and claimed in a future year, or claimed in the current year by another family member, and whether it makes sense to do so. It may seem counterintuitive, or even illogical, to not claim every available deduction and credit in order to obtain the best possible tax result for the year. However, in some cases (albeit for different reasons) there are situations in which it makes sense to defer an available claim to a future year, or to transfer the claim to another family member.

Those considerations apply to two of the most common tax credit claims made by Canadian taxpayers – the charitable donation tax credit and the medical expense tax credit.

Charitable donation tax credit

Taxpayers are entitled to make a claim on the annual tax return for charitable donations made in the current (that is, 2024) year or any of the previous five years. The reason it can sometimes makes sense not to claim a charitable donation in the year it was made arises from the way in which the charitable donations tax credit is structured to order to encourage higher donations.

That credit, at both the federal and provincial/territorial levels, is a two-tier credit. Federally, the first $200 in donations receives a credit of 15% of the total donation, or $30. However, donations above the $200 level receive a credit equal to 29% of the donation amount over $200.

Take, for example, a taxpayer who makes a regular contribution to a favourite charity of $100 each month, or $1,200 per year. Where they claim that donation on the annual return each year, that claim will result in a federal credit of $320 ($200 times 15%, plus $1,000 times 29%). Where, however, the same taxpayer defers the claim to the following year and claims a total of $2,400 in donations on a single return, they will receive a federal credit of $668 ($200 times 15%, plus $2,200 times 29%). Where the donations are accumulated and claimed once every five years, the federal credit received will be $1,712 ($200 times 15%, plus $5,800 times 29%). Under each scenario, the total charitable donation made is the same, but the amount of credit received increases with each year that the claim is deferred. Since each of the provinces and territories provides a two-tier credit (at different rates, depending on the jurisdiction), the same result will be seen when calculating the provincial/territorial credit.

It's important to note as well that charitable donations made by either spouse can be combined and claimed on the return for one of those spouses, thereby increasing the amount of charitable donations available to claim and possibly the amount of credit which can be received.

Medical expenses

Notwithstanding our publicly funded health care system, there are a great (and increasing) number of medical and para-medical expenses for which coverage is not provided and which must be paid on an out-of-pocket basis. In many instances, it’s possible to claim a medical expense tax credit for those out-of-pocket costs.

The federal credit for such expenses is 15% of allowable expenses. As is usually the case, the provinces and territories also provide a credit for the same expenses, albeit at different rates.

Many taxpayers, with some justification, find the rules on the calculation of a medical expense tax credit claim confusing. First, there is an income threshold imposed. Medical expenses eligible for the credit are qualifying expenses which exceed 3% of net income, or (for 2024) $2,759, whichever is less. Put more practically, for 2024, taxpayers who have net income of $92,000 or more can claim medical expenses incurred over $2,759. Those with lower incomes can claim medical expenses which exceed 3% of that lower net income. For instance, a taxpayer having $35,000 in net income could claim qualifying medical expenses incurred over $1,050 (3% of $35,000).

The other aspect of the medical expense tax credit which can be confusing is the calculation of the optimal time period. Unlike most tax credit claims, the medical expense tax credit can be claimed for qualifying expenses which were paid in any 12-month period ending during the tax year. While confusing, such rule is beneficial, in that it allows taxpayers to select the particular 12-month period during which medical expenses (and therefore the resulting credit claim) is highest. The only restrictions are that the selected 12-month period must end during the calendar year for which the return is being filed and, of course, any expenses which were claimed on a previous return cannot be claimed again. 

While only expenses which exceed the $2,759/3% threshold may be claimed, it’s also possible to aggregate expenses incurred within a family and make a single claim for those expenses on the return of one spouse. Specifically, the rules allow families to aggregate medical expenses incurred for each spouse and for each child who was under the age of 18 at the end of 2024. While medical expenses incurred by a single family member might not be enough to allow them to make a claim, aggregating those expenses is very likely (especially for a family that does not have private medical insurance coverage) to mean that total expenses will exceed the applicable threshold.

In determining who will make the medical expense tax credit claim for a family, there are two points to remember. Since total medical expenses claimable are those which exceed the 3% of net income/$2,759 threshold, whichever is less, the greatest benefit will be obtained if the spouse with the lower net income makes the claim for total family medical expenses. However, the medical expense credit is a non-refundable one, meaning that it can reduce tax otherwise payable, but cannot create (or increase) a refund. Therefore, it’s necessary that the spouse making the claim have tax payable for the year of at least as much as the credit to be obtained, in order to make full use of that credit.

Finally, the number and variety of medical expenses which an individual or family might have to pay for out of pocket are almost limitless, and the rules governing which can be claimed and in what circumstances are very specific and, often, not necessarily intuitive. In some cases, for instance, a doctor’s prescription will be required, while in others it will not. The very long list of medical expenses eligible for the credit, and any ancillary requirements, such as a prescription, can be found on the Canada Revenue Agency 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 the tax return form that Canadians prepare and file each spring might look identical to the form that was used the previous year, the reality is that our tax system is constantly changing, and that change is reflected in amendments made to each year’s tax return form, which in turn affect the tax situation of every Canadian taxpayer.

While the tax return form that Canadians prepare and file each spring might look identical to the form that was used the previous year, the reality is that our tax system is constantly changing, and that change is reflected in amendments made to each year’s tax return form, which in turn affect the tax situation of every Canadian taxpayer.

Some of the changes to the annual return happen “automatically”, as Canadian federal income tax brackets and tax credits are, by law, indexed to inflation. Consequently, each year, credit amounts and tax brackets increase to reflect changes in the Consumer Price Index. For 2024, those amounts have increased (by comparison to 2023) by 4.7%.

Other changes to the return arise for a variety of reasons. New tax credit or benefit programs are introduced, existing programs are tweaked or amended in some way, or temporary credit or benefit programs expire. As well, technical amendments are made every year to the Income Tax Act, which can affect how taxable income is determined or how tax payable is calculated.

Unusually, probably the most significant tax change for 2024 is a tax change which will not appear on the 2024 return. In its 2024-25 budget, the federal government announced that, effective as of June 25, 2024, the inclusion rate for capital gains (meaning the percentage of capital gains included in income) would be increased from one-half to two-thirds on all capital gains realized by corporations, and on capital gains over $250,000 realized by an individual in a single year. However, on January 31, 2025, Finance Canada announced that the implementation date for that change would be deferred to take effect, not on June 25, 2024, but on January 1, 2026.

Given that the change in the capital gains inclusion rate applies only to individuals who realize more than $250,000 in capital gains in a year, the deferral will impact a very small number of Canadian taxpayers. Nonetheless, for those individuals, the deferral of the increase in the capital gains inclusion rate will have a significant impact on their taxable income amount – and therefore their tax payable amount for 2024.

Another change, which does take effect for 2024 (and subsequent years), is likely to affect a far greater number of taxpayers – specifically, those who engage in e-commerce activities on any of the available digital platforms. Under Canadian tax law, the worldwide income of a Canadian resident, from any source, is income which must be reported on the annual tax return, and on which tax must be paid. However, until 2024, Canadian tax authorities seeking to ensure compliance with Canadian tax reporting and tax payment rules had very few means by which income earned through the digital economy could be tracked.

Beginning with the 2024 tax year, however, operators of e-commerce platforms are required to report to the CRA amounts earned by Canadian residents on those platforms, where the Canadian resident is a “reportable seller”. For these purposes, a reportable seller is someone who engages in 30 or more transactions during the year and receives more than $2,800 from those transactions. A copy of the information provided to the CRA (which can include the seller’s name, address, and social insurance number and their bank account numbers) was sent to each Canadian-resident reportable seller by the end of January 2025, and that information must be reported on the return for 2024. More information on how to do so can be found on the CRA website at https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/platform-economy.html.

Other changes in effect for the 2024 tax year will be welcome news to affected taxpayers. Those who are saving for the purchase of a first home through the Home Buyer’s Plan (HBP) will benefit in two ways. The HBP allows first-time homebuyers to withdraw funds (to a specified maximum) from their registered retirement savings plan (RRSP) on a tax-free basis, where those funds are used to make a down payment on a first home. All such funds withdrawn must then be repaid to the RRSP over a 15-year period, with the repayment period beginning two years after the withdrawal is made.

The budget provisions made two changes to the existing rules. First, the HBP withdrawal limit was increased from $35,000 to $60,000 for withdrawals made after April 16, 2024. In addition, temporary repayment relief will be provided, as the start of the required repayment period is deferred by an additional three years for participants making a first withdrawal between January 1, 2022 and December 31, 2025. Accordingly, the 15-year repayment period will start in the fifth year following the year that the first withdrawal was made.

Individuals who make contributions to the Canada Pension Plan or the Québec Pension Plan and who had income of more than $68,500 in 2024 will notice a change in their required contribution amounts for that year. Such individuals will be required to make “second tier” CPP/QPP contributions on that additional income, to a specified maximum contribution amount. Employees who are subject to the second tier contribution requirement will have had such additional contributions (to a maximum of $188) deducted from their wages or salary throughout the year. However, self-employed individuals, who pay their CPP/QPP contributions for the year when filing the annual tax return, and who pay both the employer and employee contributions, will notice an increase of up to $366 in such contribution amounts which must be paid for 2024.

Finally, Canadians who donate their time as volunteer firefighters or volunteer search and rescue personnel will see the amount of tax credit they can claim to offset expenses related to those activities doubled. Specifically, the Volunteers Firefighters Amount and the Search and Rescue Volunteers Amount have been increased from $3,000 to $6,000 for eligible individuals who performed at least 200 hours of combined eligible volunteer service during the year.

To alert Canadians to the changes which may affect their tax return preparation for the year, the Canada Revenue Agency provides a listing and explanation of such changes. That information is included in the Income Tax Guide for 2024 returns and can also 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/whats-new.html.

Each spring, Canadian individual taxpayers must turn their attention to the filing of an individual income tax return for the tax year which ended on the previous December 31. And, while it’s doubtful that many of them do so with any degree of enthusiasm, the rate of compliance with the requirement to file a tax return in Canada is in fact very high. Last year, more than 33 million individual income tax returns (for the 2023 tax year) were filed with the Canada Revenue Agency.

Each spring, Canadian individual taxpayers must turn their attention to the filing of an individual income tax return for the tax year which ended on the previous December 31. And, while it’s doubtful that many of them do so with any degree of enthusiasm, the rate of compliance with the requirement to file a tax return in Canada is in fact very high. Last year, more than 33 million individual income tax returns (for the 2023 tax year) were filed with the Canada Revenue Agency.

When it comes to filing their return for the 2024 tax year taxpayers have, generally, three choices in how to prepare and file their return. The vast majority will choose to prepare that return (or have it prepared for them) using tax preparation software and then file it using one of the CRA’s online filing methods. In 2024, more than 92% of the 33 million returns filed were prepared and submitted in this way.

Taxpayers who choose to file online have two options available to them. The first of those – NETFILE (used last year by just under 33% of tax filers) – involves preparing one’s return using software approved by the CRA and filing that return on the Agency’s website, using the Agency’s NETFILE service. The second method – E-FILE – involves having a third party file one’s return online. Almost always, the E-FILE service provider also prepares the return which they are filing. And it seems that most Canadians want to have little to do with the preparation of their own returns, as last year around 60% of all the individual income tax returns filed came in by E-FILE. 

The majority of Canadians who would rather have someone else deal with the intricacies of the Canadian tax system on their behalf can find information about E-FILE on the CRA website at https://www.canada.ca/en/revenue-agency/services/e-services/e-services-individuals/efile-individuals.html. That site will also provide a current listing (searchable by postal code) of authorized E-FILE service providers across Canada; that listing can be found at https://apps.cra-arc.gc.ca/ebci/efes/epcs/prot/ntr.action.

Those who are able and willing to prepare their own tax returns and file online can use the CRA’s NETFILE service (which was available as of Monday February 24, 2025); information on that service can be found at http://www.cra-arc.gc.ca/esrvc-srvce/tx/ndvdls/netfile-impotnet/menu-eng.html. While there are some kinds of returns which cannot be filed using NETFILE (for instance, a return for a non-resident of Canada, or for someone who went bankrupt in 2023 or 2024), the vast majority of Canadians who wish to do so will be able to NETFILE their return.

At one time, it was necessary to obtain and provide an access code in order to NETFILE. While such a code is no longer a requirement, the Canada Revenue Agency has provided tax filers with a taxpayer-specific code which can be included with the return for 2024. That eight-character alpha-numeric code is found (in very small type) in the top right hand corner of the first page of the 2023 Notice of Assessment, just under the “Date Issued” line for that Notice of Assessment. Including the code with your return is not mandatory; however, the taxpayer will be able to use information from the 2024 return when confirming their identity with the CRA only if the code was provided on the return for 2024.

A return can be filed using NETFILE only where it is prepared using tax return preparation software which has been approved by the CRA. While such software can be found for sale just about everywhere at this time of year, approved software which can be used free of charge, or for a nominal charge, is also available. A listing of free and commercial software products which are approved for use in preparing individual returns for 2024 is maintained on the CRA website at https://www.canada.ca/en/revenue-agency/services/e-services/e-services-individuals/netfile-overview/certified-software-netfile-program.html. That listing will continue to be updated by the CRA throughout the tax filing season.

The second filing option is to file a paper return with the CRA. And, while’s that’s not the choice of the majority of Canadian taxpayers anymore, last year about 2.5 million taxpayers did choose that option.

In order to file a paper return, of course, it’s necessary to obtain hard copies of both the return and the guide to completing that return. And doing so is harder than it used to be. At one time, a tax package (form and guide) could be picked up at a CRA office or Canada Post location. Until last year, the Agency would automatically mail a hard copy of the return (but not the guide) to any taxpayer who had paper-filed their return for the previous year. This year, however, the CRA website indicates only that “The CRA will mail the income tax package to certain vulnerable individuals that filed their 2023 income tax and benefit return on paper.” No additional information is provided on which individuals will automatically receive a tax package by mail.

That being the case, those who wish to receive a hard copy of the 2024 tax return have a few options. The first such option is to go onto the CRA website at  https://www.canada.ca/en/revenue-agency/services/forms-publications/tax-packages-years/general-income-tax-benefit-package.html, select the return for your province or territory of residence as of the end of 2024, and then download and print that document.

For those who do not wish to or cannot download or print, a hard copy of the return package can ordered online at Order the 2024 income tax package. That package will then be sent to the taxpayer by regular mail.

Finally, it’s still possible to order a hard copy of the return package by calling the CRA’s automated forms and publications line at 1-855-330-3305. That line is available from 6 a.m. to 3 a.m. Eastern Time, seven days a week.

There is a third option for some taxpayers – filing their return using a touch-tone telephone – but that option is available only to those who have received a specific invitation to do so from the CRA. Generally, invitations to file by telephone (called SimpleFile) are extended only to taxpayers whose returns are relatively simple and whose tax situation remains relatively unchanged from year to year. For such taxpayers, it is important to file, even if there is no income to report, so that they receive the benefits and credits to which they are entitled. Information on SimpleFile by Phone can be found on the CRA website at Ways to do your taxes - Personal income tax - Canada.ca.

Finally, taxpayers who are not comfortable preparing their own returns, but for whom the cost of engaging a third party to do so is a financial hardship, have another option. During tax filing season, there are a number of community tax clinics staffed by volunteers at which taxpayers can have their returns prepared free of charge. A searchable listing of the available clinics (which is updated regularly throughout the filing season) and their method of operation (walk-in, appointment, virtual, etc.) this tax season can be found on the CRA website at https://www.canada.ca/en/revenue-agency/campaigns/free-tax-help.html.

While there are a number of filing options available to Canadian taxpayers, there’s no element of choice when it comes to the filing and payment deadlines for tax returns for 2024. The deadline for payment of any balance of taxes owed for 2024 is Wednesday April 30, 2025. There are no exceptions to this deadline and, absent very unusual circumstances, no extensions are possible

For the majority of Canadians, the tax return for 2024 must also be filed on or before Wednesday April 30, 2025. Self-employed taxpayers and their spouses, however, have until Monday June 16, 2025 to file their returns for 2024. (While the filing deadline for self-employed taxpayers and their spouses is normally June 15, this year that date falls on a Sunday and so the filing deadline for self-employed taxpayers and their spouses is extended to Monday June 16, 2025.) It’s important to note that, regardless of the applicable tax return filing deadline, all Canadian individual taxpayers must pay any balance of tax owed for the 2024 tax year on or before Wednesday April 30 ,2025.

A summary of filing and payment due dates for returns for the 2024 tax year can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/important-dates-individuals.html.

For most taxpayers, the first few months of the year can seem to involve a seemingly unending series of bills and payment deadlines. During January and February, many Canadians are still trying to pay off the bills from holiday spending. The first income tax instalment payment of 2025 is due on March 17, and the need to pay any tax balance for the 2024 tax year comes just six weeks after that, on April 30. Added to all of that, the deadline for making an RRSP contribution for 2024 falls on March 3, 2025.

For most taxpayers, the first few months of the year can seem to involve a seemingly unending series of bills and payment deadlines. During January and February, many Canadians are still trying to pay off the bills from holiday spending. The first income tax instalment payment of 2025 is due on March 17, and the need to pay any tax balance for the 2024 tax year comes just six weeks after that, on April 30. Added to all of that, the deadline for making an RRSP contribution for 2024 falls on March 3, 2025.

If there is one invariable “rule” of financial and retirement planning of which most Canadians are aware, it is the unquestioned wisdom of making regular contributions to one’s registered retirement savings plan (RRSP). And it is true that for several decades the RRSP was the only tax-sheltered savings and investment vehicle available to most individual Canadians.

In 2009, however, that changed with the introduction of tax-free savings accounts (TFSAs). In 2023, yet another variable was added to that decision-making process with the introduction of the first home savings account (FHSA), which provides Canadians with the ability to save toward the purchase of a home on a tax-assisted basis.

There’s nothing wrong, and a lot right, with making the maximum allowable contribution to each of a TFSA, an RRSP, and an FHSA annually. However, doing all that assumes the availability of a level of discretionary income that just isn’t the financial reality in which most Canadians live and plan. In addition, there are circumstances in which making a contribution to one type of plan or the other is clearly the better choice – and sometimes the only choice. Some of those circumstances are as follows.

• For Canadians over the age of 71, there is no real choice. All individual Canadians must collapse their RRSPs by the end of the year in which they turn 71, and no RRSP contributions can be made after that time. Practically speaking, a TFSA is the only tax-sheltered savings vehicle to which taxpayers over age 71 can contribute. (While contributions to an FHSA can be made by taxpayers of any age, an FHSA is of benefit to individuals who are planning for the purchase of a first home – not a fact situation which applies to most Canadians over the age of 71).
   
  Many taxpayers over the age of 71, however, have transferred their RRSP savings to a registered retirement income fund (RRIF) and are required to withdraw a specified percentage of funds from that RRIF each year. For taxpayers who are in the fortunate position of having such income in excess of current cash flow needs, that excess can be contributed to a TFSA. While the RRIF withdrawals must still be included in income and taxed in the year of withdrawal, transferring the funds to a TFSA will allow them to continue compounding free of tax and no additional tax will be payable when and if the funds are withdrawn. And, unlike RRIF or RRSP withdrawals, monies withdrawn in the future from a TFSA will not affect the planholder’s eligibility for Old Age Security benefits or for the federal age credit.
• The minority of working taxpayers who are members of registered pension plans (RPPs) will also likely find saving through a TFSA or FHSA the better, or even the only, option. The maximum current year contribution which can be made to an RRSP in a given year is generally 18% of the previous year’s income, to a specified dollar amount ceiling. However, any allowable contribution is reduced, for members of RPPs, by the amount of benefits accrued during the year under their pension plan. Where the RPP is a particularly generous one, RRSP contribution room may be minimal, or even non-existent, and a TFSA or FHSA contribution the logical alternative.
• Where savings are being put aside for an expenditure that is likely to be made in the next five years (like a new car, a wedding, or a “bucket list” vacation), and that savings goal is something other than home ownership, saving through a TFSA is almost certainly the better option. Taxpayers in that situation are sometimes tempted to make an RRSP contribution instead, in order to get a tax refund, and then to withdraw the funds when the planned expenditure is to be made. However, while choosing that option will provide a deduction on this year’s return and probably generate a tax refund, tax will still have to be paid when the funds are withdrawn from the RRSP a year or two later (when income, and possibly the tax hit on the withdrawal, might be higher). And, more significantly from a long-term point of view, using an RRSP in this way will eventually erode one’s ability to save for retirement, as RRSP contributions which are withdrawn from the plan cannot be replaced. While the amounts involved may seem small, the loss of compounding on even a relatively small amount over 25 or 30 years can make a significant dent in one’s ability to save for retirement.

The greatest tax benefit of contributing to an RRSP is realized when contributions are made when income (and therefore tax payable) is high, and the intention is to withdraw those funds when both income and the rate of tax payable on that income are lower. Where that’s not the case, saving through a TFSA can make more sense, as in the following situations.

• Taxpayers who are expecting their income to rise significantly within a few years – for example, students in post-secondary or professional education or training programs – can save some tax by contributing to a TFSA while they are in school and their income (and therefore their tax rate) is low, allow the funds to compound on a tax-free basis, and then withdraw the funds tax-free once they’re working, when their tax rate will be higher. At that time, the withdrawn funds can be used to make an RRSP contribution, which will be deducted against income which would be taxed at the much higher rate, generating a tax savings. And, if a need for funds should arise in the meantime, a tax-free TFSA withdrawal can always be made.
• Lower income taxpayers, for whom there isn’t likely to be a great difference between pre- and post-retirement income, are likely better off saving through a TFSA. That’s especially the case where those taxpayers may be eligible in retirement for means-tested government benefits like the Guaranteed Income Supplement, or tax credits like the GST/HST credit or age credit. Withdrawals made from an RRSP or RRIF during retirement will be included in income for purposes of determining eligibility for such benefits or credits, and lower-income taxpayers could find that such withdrawals have pushed their income to a level which reduces or eliminates their eligibility. On the other hand, monies withdrawn from a TFSA are not included in income for the purpose of determining eligibility for any government benefits or tax credits, so saving through a TFSA will ensure that receipt of such benefits is not put at risk.
• For taxpayers who are saving toward the purchase of a first home, the FHSA is clearly the best choice. Contributions made to an FHSA are deductible from income, investment income of any kind earned by contributed funds is not taxed as earned, and where original contributions and investment gains are withdrawn, no tax is payable where the amounts withdrawn are used to purchase a first home. The result is a permanent tax savings that can’t be achieved through contributing to either an RRSP or a TFSA.

Taxpayers who are contemplating making a contribution to any of these tax-assisted plans must also keep in mind that each such type of plan has its own contribution deadline. A contribution to an TFSA can be made at any time of the year. Contributions to an RRSP must, in order to be deducted on the return for 2024, be made on or before Monday March 3, 2025. And, finally, contributions to an FHSA must be made by the end of the calendar year in order to be claimed as a tax deduction on the return for that year. In other words, in order to deduct a contribution made to an FHSA on the return for the 2024 tax year, that contribution must have been made on or before December 31, 2024. Any FHSA contribution made now would be deductible on the return for 2025.

Before making a contribution to any of the tax-deferred or tax-saving plans, it is of course necessary to determine what one’s available contribution room is for each such plan. It’s not an easy calculation, as determining available contribution room for a particular plan for an individual means determining the applicable statutory limits (which may differ, depending on income), the effect of any previous contributions or withdrawals made, and the timing of those contributions or withdrawals. Fortunately, the Canada Revenue Agency keeps track of all of those figures for each Canadian taxpayer. That information is available online at https://www.canada.ca/en/revenue-agency/services/e-services/cra-login-services.html for taxpayers who have registered for the CRA’s My Account Service. Those who prefer to deal with the Agency by telephone can call the CRA’s automated service line at 1-800-267-6999 to receive information about their current year RRSP or TFSA contribution limit.

As is the case with most tax and financial planning questions, there isn’t a universal right or wrong answer when it comes to decisions on contributing to a TFSA and/or an RRSP and/or an FHSA. What is certain, however, is that the best choice for any individual is the one which takes account of their particular tax and financial realities and prospects – both current and future.

The Canadian tax system casts a very wide net, in which each resident of Canada is taxable on all sources of income worldwide, with very few exceptions. In addition, Canada has what is known as a “self-assessing” system, in which Canadian residents voluntarily file an annual tax return on which they report all income earned during the previous year, claim any available deductions and credits, and pay any resulting amount of tax owing.

The Canadian tax system casts a very wide net, in which each resident of Canada is taxable on all sources of income worldwide, with very few exceptions. In addition, Canada has what is known as a “self-assessing” system, in which Canadian residents voluntarily file an annual tax return on which they report all income earned during the previous year, claim any available deductions and credits, and pay any resulting amount of tax owing.

It might seem that in a system in which each taxpayer is expected to voluntarily report all sources of worldwide income, and pay tax on that income, there will be many instances where taxpayers fail to comply with their tax reporting and payment obligations. And that might be the case, were it not for the system of income documentation which exists.

Under that system, nearly all payments made to a Canadian resident must be recorded on a prescribed form, known as a T-slip. Income from employment is documented on a T4 slip, interest income is documented on a T5 slip, income from a registered retirement income fund is documented on a T4RIF slip, etc. Within two months after the end of the taxation year, a copy of each such T-slip must be provided to the Canadian resident who received the income, and a second copy filed with the Canada Revenue Agency (CRA). Consequently, should the taxpayer fail to report one or more sources of income on the annual return for that year (or not file a return at all), it’s relatively easy for the CRA to flag that omission and follow up to ensure that the taxpayer meets their tax filing and reporting obligations. 

It's a system that works well but, until this year, there was a potentially significant income source which was not documented on any kind of T-slip and therefore not reported to the CRA. That source of income is income from online activities or, more broadly, income arising from the digital economy.

There are, of course, many possible sources of such income, including online marketplaces like Kijiji, Poshmark, Facebook Marketplace, AirBnB, etc., as well as online gig economy platforms like Uber or Doordash. Millions of Canadians earn income through such platforms or apps and, while it’s impossible to quantify, it’s likely that substantial amounts of such income are not reported as income for tax purposes. And, as the digital economy continues to grow, the failure to report such income means an ever-increasing loss of potential revenue for the federal government.

In response to that risk, the federal government announced, as part of the 2022 federal budget, that new rules would be introduced to require platform operators to document the amount of income earned by individual Canadians from online activities in a tax year and to provide both the individual and the federal government with that information. The first tax year for which that new rule was effective was 2024, and the deadline for platform operators to document income amounts for 2024, and to provide that information to both the taxpayer and the CRA, was January 31, 2025. And, of course, all taxpayers who have earned such income are expected to report that income on their individual income tax return for the 2024 tax year.

Platform operators are required to provide the CRA with identification and activity information for any Canadian resident who meets the definition of a “reportable seller”.  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, 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. (It’s important to remember, however, that taxpayers are required to report and pay tax on ALL income from online activities – the fact that such income is not subject to the new reporting requirement does not in any way exempt it from the usual tax filing and payment obligations.)

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 of goods per year for which they have earned no more than a total of $2,800. 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 have been reported to the CRA by January 31, 2025

Where reporting is required, the platform operator must provide the CRA with both identification and activity information with respect to each reportable seller. That information 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 (for example, 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.

Individuals who have earned income through the digital economy will not likely be familiar with how to report such income on the tax return for 2024. On that return, more “traditional” sources of income are identified on separate lines of the tax return form (employment income on line 10,100, interest income on line 12,100, Canada Pension Plan benefits on line 11,400, etc.). However, most individuals who earn income as part of the digital economy will be considered to have earned income from business, and the reporting of such income is more complex than is the case for other types of income. Such individuals must complete Form T2125 Statement of Business or Professional Activities. The good news for those who are reporting business income is that Canadian tax rules provide for the deduction of reasonable expenses incurred to earn such income. For participants in the digital economy, such expenses could include advertising costs, costs incurred to use a platform for sales, or costs for software licence and subscription fees. Those are not, however, the only costs which can be deducted in the computation of business income.

Take, for example, an individual who makes scented soaps and candles in their home and sells those products through a website and/or an online marketplace. The direct cost of expenditures incurred for supplies to make, sell, and deliver those products, including materials costs and shipping costs, are deductible from sales income earned, as is a portion of operating costs (mortgage interest, heat, hydro, property taxes) incurred for the home in which the business is based.

On the T2125, the full amount of online income earned (which, for reportable sellers, will be the amount documented on the information slips provided by the platform operator or operators) is reported, and deductions are claimed for all reasonable expenses that were incurred to earn that income. A detailed listing of the most common business expenses claimed, and how to calculate each, can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/business-expenses.html.

Once the taxpayer has calculated gross (total) business income and net business income (meaning business income minus deductions), those figures are transferred to page 2 of the T1 individual income tax return form. Gross business income is reported on line 13499 and net business income is reported on line 13500. (Of course, where tax software is being used to complete the return, the software will automatically carry figures over from the T2125 to the required lines on the T1.) Net business income is then added to any other kinds of income earned by the taxpayer during the year, to arrive at total income for 2024.

Taxpayers who are reporting business income for the first time may well find these reporting obligations onerous and probably a bit confusing. However, simply not reporting the income or not filing a return at all isn’t a good strategy. A failure by the taxpayer to report such income is likely to eventually come to light when the CRA reviews the detailed information filed with it by platform operators with respect to online sales and revenue by an individual taxpayer, and compares those income amounts to amounts reported on the return filed by that taxpayer. When that occurs, the delinquent taxpayer will be facing not only a bill for unpaid taxes, but interest charges and likely penalties as well. 

There is detailed information available online on how to comply with the requirement to report and pay income tax on income from online activities, and that information can be found on the CRA website at https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/platform-economy/understanding-tax-obligations.html.

While virtually every working Canadian pays income taxes, the process by which those taxes are collected throughout the year is largely invisible to the taxpayer. That’s certainly the case for employees, because income taxes (and other statutory deductions like Canada Pension Plan contributions and Employment Insurance premiums) are, as required by law, deducted by the employer from every dollar of salary or wages paid, and remitted to the federal government on the employee’s behalf.  The net amount remaining after such deductions is then paid to the taxpayer. Tax amounts withheld and remitted in this way are recorded on the employee’s T4 slip for the year, and credit for the total of tax amounts paid through such payroll deductions throughout the year is then claimed by the employee on their annual return.

While virtually every working Canadian pays income taxes, the process by which those taxes are collected throughout the year is largely invisible to the taxpayer. That’s certainly the case for employees, because income taxes (and other statutory deductions like Canada Pension Plan contributions and Employment Insurance premiums) are, as required by law, deducted by the employer from every dollar of salary or wages paid, and remitted to the federal government on the employee’s behalf.  The net amount remaining after such deductions is then paid to the taxpayer. Tax amounts withheld and remitted in this way are recorded on the employee’s T4 slip for the year, and credit for the total of tax amounts paid through such payroll deductions throughout the year is then claimed by the employee on their annual return.

While no one likes having to pay taxes, having those taxes paid “off the top” in such an automatic way is, relatively speaking, painless. Such is not the case, however, for the millions of Canadians who pay their income taxes, not through payroll deduction, but by instalment. Those Canadian taxpayers will be receiving an “Instalment Reminder” from the Canada Revenue Agency (CRA) sometime in the next few weeks. That Reminder will set out the amount of instalment payments of income tax to be paid by the recipient taxpayer by March 17 and June 16 of this year. (The actual deadlines are March 15 and June 15 but where, as is the case this year, those dates fall on a weekend, the deadline is extended to the first subsequent business day.)

Receiving an “Instalment Reminder” from the CRA won’t be a surprise for many recipients who have paid tax by instalments during previous tax years. For others, however, the need to make tax payments by instalment is a new and unfamiliar concept. Even the name of the form is potentially confusing, as receiving an “Instalment Reminder” rather than an “Instalment Requirement” or an “Instalment Amount Owing” may leave the taxpayer wondering just what their obligations and options are with respect to making those payments.

The CRA’s decision to send an Instalment Reminder to certain taxpayers isn’t an arbitrary one. Rather, an Instalment Reminder is generated when sufficient income tax has not been deducted from payments made to that taxpayer throughout the year. Put more technically, an instalment reminder will be issued by the CRA where the amount of tax which was or will be owed when filing the annual tax return is more than $3,000 in the current (2025) tax year and either of the two previous (2023 or 2024) tax years. Essentially, the requirement to pay by instalments in 2025 will be triggered where the amount of tax withheld from the taxpayer’s income throughout the year is at least $3,000 less than their total tax owed for 2025 and either 2023 or 2024. For residents of Québec, that threshold amount is $1,800.

Such obligation arises on a regular basis for those who are self-employed, of course, and generally for those whose income is largely derived from investments. The group of recipients of a tax Instalment Reminder often also includes retired Canadians, especially the newly retired, for two reasons. First, while most employees have income from only a single source – their paycheque – retirees often have multiple sources of income, including Canada Pension Plan (CPP) and Old Age Security (OAS) payments, private retirement savings, and, sometimes, employer-provided pensions. And while income tax is deducted automatically from one’s paycheque, that’s not the case for most sources of retirement income. Relatively few new retirees realize that it’s necessary to make arrangements to have tax deducted “at source” from either their government-source income (like CPP or OAS payments) or private retirement income, like pensions or optional registered retirement income fund withdrawals, and to make sure that the total amount of those deductions is sufficient to pay the total tax bill for the year. It is that group of individuals who may be surprised and puzzled by the arrival of an unfamiliar “Instalment Reminder” from the CRA. However, no matter what kind of income a taxpayer has received, or why sufficient tax has not been deducted at source, the options open to a taxpayer who receives such an Instalment Reminder are the same.

First, the taxpayer can pay the amounts specified on the Reminder, by the March and June payment due dates. Choosing this option will mean that the taxpayer will not face any interest or penalty charges, even if the amount paid by instalments throughout the year turns out to be less than the taxes actually payable for 2025. If the total of instalment payments made during 2025 turn out to be more than the taxpayer’s total tax liability for the year, they will of course receive a refund when the annual tax return is filed in the spring of 2026.

Second, the taxpayer can make instalment payments based on the amount of tax which was payable for the 2024 tax year (which will, of course, be known once the return for 2024 is completed). Where a taxpayer can make an accurate estimate of what their income will be during 2025, and neither that income amount nor their available deductions and credits has changed significantly between 2024 and 2025, the likelihood is that total tax liability for 2025 will be slightly less than it was in 2024, as the result of the indexation of both income tax brackets and tax credit amounts.

Third, the taxpayer can estimate the amount of tax which they will owe for 2025 and can pay instalments based on that estimate. Where a taxpayer’s income will decrease significantly from 2024 to 2025, such that their tax bill will also be substantially reduced, this option can make the most sense.

Taxpayers who wish to pursue the second or third options outlined above can find a detailed outline of the federal income tax rates, brackets, and tax credit amounts, and the provincial income tax rates and brackets which will apply for 2025, on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/adjustment-personal-income-tax-benefit-amounts.html and Income tax rates for individuals - Canada.ca.

No interest or penalty amounts will be assessed against a taxpayer who chooses to pay instalment amounts different than those listed on the Instalment Reminder, as long as those instalments are made by the required due dates and there is no additional tax payable when the return for the 2025 tax year is filed in the spring of 2026 – in other words, as long as their estimate of tax payable for the year is at least as much as, or more than, the actual amount payable, and such payments are made on time. However, should instalments paid have been late or insufficient, the CRA will impose interest charges, at rates which are higher than current commercial rates. (The rate charged for the first quarter of 2025 – until March 31, 2025 – is 8%.) As well, where interest charges are levied, such interest is compounded daily, meaning that on each successive day, interest is levied on the previous day’s interest. It’s also possible for the CRA to levy penalties for overdue or insufficient instalments, but that is done only where the amount of instalment interest charged for the year is more than $1,000.

Most Canadian taxpayers are understandably disinclined to pay their taxes any sooner than absolutely necessary. However, ignoring an Instalment Reminder is never in the taxpayer’s best interests. Those who don’t wish to involve themselves in the intricacies of tax calculations can simply pay the amounts specified in the Reminder. The more technical-minded (or those who want to ensure that they are paying no more than absolutely required and are willing to take the risk of having to pay interest on any shortfall) can avail themselves of the second or third options outlined above.

Detailed information on the instalment payment system for 2025, and the calculation and payment options available to taxpayers, can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/payments-cra/individual-payments/income-tax-instalments.html.

For most Canadian retirees, careful financial management is a necessity. Most live on an annual income which is less than that which they enjoyed during their working years, and opportunities to increase that income in any significant way are limited. As well, in recent years, inflation (especially with respect to food and shelter costs) has meant that more and more of that income must be allocated to necessities.

For most Canadian retirees, careful financial management is a necessity. Most live on an annual income which is less than that which they enjoyed during their working years, and opportunities to increase that income in any significant way are limited. As well, in recent years, inflation (especially with respect to food and shelter costs) has meant that more and more of that income must be allocated to necessities.

One of those necessities is, of course, paying one’s income tax. For many retirees, especially those who no longer have to pay a mortgage or rent costs, the annual income tax bill can be the largest single expense they face.

Canada’s tax system recognizes these realities by providing Canadians over the age of 65 with a number of targeted tax credits and deductions. Most such credits and deductions are easily claimed when completing the annual tax return; however, the benefits of one such deduction – pension income splitting – aren’t readily apparent from either the tax return form or the tax guide, and it’s likely that many Canadian retirees who could benefit from that strategy are simply not aware of it.

That’s a particularly unfortunate reality because pension income splitting has the potential to generate more tax savings among taxpayers over the age of 65 (and certainly those over the age of 71, for whom RRSP contributions are no longer possible) than just about any other tax planning strategy available to retirees. In addition, it’s one of the very few tax planning strategies which requires no expenditure of funds on the part of the taxpayer and which can be implemented after the end of the tax year, at the time the return for that tax year is filed.

When described in that way, pension income splitting can sound like one of those “too good to be true” tax scams, but that’s not the case. Essentially, what pension income splitting offers is a government-sanctioned opportunity for Canadian residents who are married (and, usually, where the spouse who receives the income is aged 65 or older) to make a notional reallocation of private pension income between them on their annual tax returns, and to benefit from a lower overall family tax bill as a result.

Pension income splitting, like all forms of income splitting, works because Canada has what is called a “progressive” tax system, in which the applicable tax rate goes up as income rises. For 2024, the federal tax rate applied to the first $55,867 of taxable income is 15%, while the federal rate applied to approximately the next $55,866 of such income is 20.5%. So, an individual who has $100,000 in taxable income would pay federal tax of about $17,427: if that $100,000 was divided equally between that individual and their spouse, each would have $50,000 in taxable income and the total federal tax bill for the family would be $15,000 – a federal tax savings of $2,427.  Pension income splitting in this way would also produce a lower overall bill for provincial income tax payable for the year; the actual amount of such savings depends on the applicable provincial tax rates and brackets, and those in turn are determined by the taxpayer’s province of residence.

The general rule with respect to pension income splitting is that a taxpayer who receives private pension income during the year (the transferring spouse) is entitled to allocate up to half that income (without any dollar limit) to their spouse for tax purposes. In this context, private pension income means a pension received from a former employer and, where the income recipient is age 65 or older, payments from an annuity, a registered retirement savings plan (RRSP), or a registered retirement income fund (RRIF). Government source pensions, like the Canada Pension Plan (CPP) or Old Age Security (OAS) payments do not qualify for pension income splitting, regardless of the age of the transferring spouse.

The mechanics of pension income splitting are relatively simple. There is no need to transfer funds between spouses or to make any change in the actual payment or receipt of qualifying pension amounts, and no need to notify a pension administrator. Taxpayers who wish to split eligible pension income received by either of them must each file Form T1032 E 2024, Joint Election to Split Pension Income, with their annual tax return. That form, which is not included in the annual tax return package, can be found on the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t1032.html.  Taxpayers can also arrange for a copy of the form to be mailed to them by calling the Agency’s automated ordering service at 1-855-330-3305.

On the T1032, the taxpayer receiving the private pension income and the spouse with whom that income is to be split must make a joint election to be filed with their respective tax returns for 2024. Since the splitting of pension income affects the income, and therefore the tax liability, of both spouses, the election must be made and the form filed by both spouses – an election filed by only one spouse or the other won’t suffice. In addition to filing the T1032, the spouse who is the actual recipient of the pension income to be split (the transferring spouse) must deduct from income the amount of pension income to be allocated to their spouse. That deduction is taken on Line 21000 of their 2024 return. And, conversely, the spouse to whom the pension income amount is being allocated is required to add that amount to their income on the 2024 return, this time on Line 11600. Essentially, to benefit from pension income splitting, all that’s needed is for each spouse to file a single form (the T1032) with the CRA and to make a single entry on their 2024 tax return.

By the end of February or early March, taxpayers will have received (or downloaded) the information slips which summarize the income received from various sources during 2024. At that time, couples who might benefit from this strategy can review those information slips and calculate the extent to which they can make a dent in their overall tax bill for the year by taking advantage of pension income splitting.

While there is relatively little information on pension income spitting included in the federal tax return or guide for 2024, the CRA does provide detailed information on that strategy on its website. Those wishing to obtain more information on pension income splitting can find that information at http://www.cra-arc.gc.ca/pensionsplitting/.

The Employment Insurance premium rate for 2025 is set at 1.64%.

The Employment Insurance premium rate for 2025 is set at 1.64%.

Yearly maximum insurable earnings are increased to $65,700, making the maximum employee premium $1,077.48.

As in previous years, employer premiums are 1.4 times the employee premium. The maximum employer premium for 2025 is therefore $1,508.47.

As of 2024, there are two contribution levels for the Québec Pension Plan (QPP). Income amounts and employee contribution percentages for 2025 for each contribution level are as follows.

As of 2024, there are two contribution levels for the Québec Pension Plan (QPP). Income amounts and employee contribution percentages for 2025 for each contribution level are as follows.

• First tier contributions for 2025 are set at 6.4% of pensionable earnings between $3,500 and $71,300.
• Second tier contributions for 2025 are set at 4.0% of pensionable earnings between $71,300 and $81,200.

The maximum employee QPP contribution in 2025 for employees making only first-tier contributions (those with pensionable earnings of $71,300 or less) will be $4,339.20. Employees making second tier contributions will be required to contribute up to an additional $396.00 in contributions for the year.

As of 2024, there are two contribution levels for the Canada Pension Plan (CPP). Income amounts and employee contribution percentages for 2025 for each contribution level are as follows.

As of 2024, there are two contribution levels for the Canada Pension Plan (CPP). Income amounts and employee contribution percentages for 2025 for each contribution level are as follows.

• First tier contributions for 2025 are set at 5.95% of pensionable earnings between $3,500 and $71,300.
• Second tier contributions for 2025 are set at 4.0% of pensionable earnings between $71,300 and $81,200.

The maximum employee CPP contribution in 2025 for employees making only first-tier contributions (those with pensionable earnings of $71,300 or less) will be $4034.10. Employees making second tier contributions will be required to contribute up to an additional $396.00 in contributions for the year.

Tax credit amounts on which individual non-refundable federal tax credits for 2025 are based, and the actual tax credit claimable, will be as follows:

Tax credit amounts on which individual non-refundable federal tax credits for 2025 are based, and the actual tax credit claimable, will be as follows:

                                                               Credit amount          Tax credit

Basic personal amount*                              $16,129                  $2,419

Spouse or common-law
partner amount*                                          $16,129                  $2,419

Eligible dependant amount*                        $16,129                  $2,419

Age amount                                                 $9,028                    $1,354

  net income threshold for erosion of
  age credit                                                   $45,522

Canada employment amount                       $1,471                    $221                        

Disability amount                                          $10,138                  $1,521

Adoption expenses credit                             $19,580                  $2,937

Medical expense tax credit (3% of
net income ceiling)                                        $2,834

*For taxpayers having net income for the year of more than $253,414, amounts claimable for the basic personal amount, the spousal amount, and the eligible dependant amount for 2025 may differ.

The indexing factor for federal tax credits and brackets for 2025 is 2.7%. The following federal tax rates and brackets will be in effect for individuals for the 2025 tax year.

The indexing factor for federal tax credits and brackets for 2025 is 2.7%. The following federal tax rates and brackets will be in effect for individuals for the 2025 tax year.

Income level                    Federal tax rate

$16,129 - $57,375                   15.0%

$57,376 - $114,750                  20.5%

$114,751 - $177,882                26.0%

$177,883 - $253,414                29.0%

Over $253,414                         33.0%

Each new tax year brings with it a schedule of tax payment and filing deadlines, as well as some changes with respect to tax saving and planning opportunities. Some of the more significant dates and changes for individual taxpayers for 2025 are listed below.

Each new tax year brings with it a schedule of tax payment and filing deadlines, as well as some changes with respect to tax saving and planning opportunities. Some of the more significant dates and changes for individual taxpayers for 2025 are listed below.

Registered retirement savings plan (RRSP) deduction limit and contribution deadline

The RRSP current year contribution limit for the 2024 tax year is $31,560. In order to make the maximum current year contribution for 2024 (for which the contribution deadline will be Monday March 3, 2025), it will be necessary to have earned income of $175,335 for the 2023 taxation year.

Tax-free savings account (TFSA) contribution limit

The TFSA current year contribution limit for 2025 remains at $7,000. The actual amount which can be contributed by a particular individual in 2025 includes both the current year contribution limit and any carryover of uncontributed or re-contribution amounts from previous taxation years.

Taxpayers can find out their individual 2025 TFSA contribution limit by calling the Canada Revenue Agency’s automated Tax Information Phone Service (TIPS) at 1-800-267-6999, where that information will be available from mid-February to the end of December. Taxpayers who have registered for the CRA’s online tax service My Account can obtain that information by logging into My Account.

A TFSA contribution can be made at any time during the taxation year.

First home savings account (FHSA) contribution limit for 2024

The FHSA current year contribution limit for 2025 is $8,000. The actual amount which can be contributed by a particular individual includes both the current year contribution limit and any carryover of uncontributed amounts from previous years, to a maximum carryover limit of $8,000.

There is a lifetime per individual limit of $40,000 in contributions to an FHSA, and an FHSA contribution can be made at any time during the taxation year.

Individual tax instalment deadlines for 2025

Millions of individual taxpayers pay income tax by quarterly instalments, which are due on the 15^th days of March, June, September, and December 2025. Where the 15^th of the month falls on a weekend or a statutory holiday, the instalment payment deadline is extended to the next business day.

The actual tax instalment due dates for 2025 are as follows:

• Monday March 17, 2025
• Monday June 16, 2025
• Monday September 15, 2025
• Monday December 15, 2025

Old Age Security income clawback threshold

For 2025, the income level above which Old Age Security (OAS) benefits are clawed back is $93,454.

Individual tax payment and filing deadlines in 2025

For all individual taxpayers, including those who are self-employed, the deadline for payment of any balance of 2024 taxes owed is Wednesday April 30, 2025.

Taxpayers (other than self-employed individuals and their spouses) must file an income tax return for 2024 on or before Wednesday April 30, 2025.

Self-employed taxpayers and their spouses must file an income tax return for 2024 on or before Monday June 16, 2025.

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 year is $91,967 or less will be entitled to claim 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.

Take, for example, a taxpayer who has $60,000 in net income for 2024 and incurs $3,400 in eligible medical expenses during the year. The computation of the available METC claim for 2024 is as follows. Based on the 3% of net income rule, the taxpayer will be entitled to claim medical expenses incurred which are more than $1,800 (3% of net income for the year). That taxpayer will therefore be able to claim $1,600 ($3,400 minus $1,800) in medical expenses for purposes of the METC.

The other aspect of determining the total expenses which can be claimed for purposes of the medical expense tax credit is that it’s possible to claim medical expenses which were incurred prior to the current tax year but weren’t claimed on the return for the year that the expenditure was made. The actual rule is that the taxpayer can claim qualifying medical expenses incurred during any 12-month period which ends in the current tax year, meaning that each taxpayer must determine which 12-month period ending in 2024 will produce the greatest amount eligible for the credit. That determination will obviously depend on when medical expenses were incurred so there is, unfortunately, no universal rule of thumb which can be used.

Which spouse should make the claim for the medical expense tax credit?

Medical expenses incurred by family members – the taxpayer, their spouse, and children who are under the age of 18 at the end of 2024, as well as certain other dependent relatives – can be added together and claimed by either spouse. In most cases, it’s best to make that claim on the tax return of the lower-income spouse, in order to maximize the amount of claimable expenses (remembering that only expenses greater than 3% of net income can be claimed).

That said, it’s also necessary to ensure that the spouse making the claim has tax payable for the year. The reason for this is that the METC is a non-refundable credit, meaning that it can be used to reduce tax otherwise payable, but cannot create or increase a refund. So, in order to maximize the use of the METC in a year, it should be claimed by the spouse whose tax payable for the year is at least as much as the amount of the METC to be claimed.

As the end of the calendar year approaches, it’s a good idea to add up the medical expenses which have been incurred during 2024, as well as those paid during 2023 and not claimed on the 2023 return. Once those totals are known, it will be easier to determine whether to make a claim for 2024 or to wait and claim 2024 expenses on the return for 2025. And if the decision is to make a claim for 2024, knowing what medical expenses were paid, and when, will enable the taxpayer to determine the optimal 12-month period for that claim.

Finally, it’s a good idea to look into the timing of medical expenses which will have to be paid early in 2025. Where those are significant expenses (for instance, a particularly costly medication which must be taken on an ongoing basis, or some expensive dental work) it may make sense, where possible, to accelerate the payment of those expenses to November or December 2024, where that means they can be included in 2024 totals and claimed on the return for this year.

The federal government provides a number of non-refundable tax credits and benefits to Canadians under the umbrella term “child and family benefits”, but likely the most widely available and most generous of those programs is the Canada Child Benefit (CCB).

The federal government provides a number of non-refundable tax credits and benefits to Canadians under the umbrella term “child and family benefits”, but likely the most widely available and most generous of those programs is the Canada Child Benefit (CCB).

The CCB is paid as a non-taxable monthly benefit to Canadian residents who have and live with one or more children under the age of 18 for whom they are primarily responsible. The CCB program, which was first introduced in 1993, replaced the former Family Allowance program, and has since gone through a number of iterations and name changes. What follows is a summary of what is available to Canadian families under the CCB program in 2024.

The CCB program has two types of benefits – the basic Canada Child Benefit (CCB) and a Child Disability Benefit (CDB). The first, the basic CCB, is provided to eligible residents of Canada who have one or more children who are under the age of 18 and who live with that child or children. The child disability benefit (CDB) is an additional monthly benefit intended to provide financial assistance to families who are caring for children who have a severe and prolonged impairment in physical or mental functions. Generally, where a child is eligible for the federal disability tax credit, parents who live with that child will be eligible to receive the CDB.

The current benefit year for both the CCB and the CDB runs from July 2024 to June 2025. During this benefit year, maximum benefits payable under the basic CCB are as follows:

• $7,787 per year ($648.91 per month) for each eligible child under the age of 6; and
• $6,570 per year ($547.50 per month) for each eligible child aged 6to 17.

Benefit eligibility under the CCB program is affected by family net income earned during the previous tax year. In other words, the amount of benefit which can be received during the 2024-25 benefit year is determined, in part, by the amount of family net income for 2023. For the 2024-25 benefit year, families having 2023 net income of $36,502 or less will receive the maximum CCB. Where that 2023 net income is greater than $36,502, the amount of benefit receivable is reduced by specified percentages and amounts, which are based on family net income and the number of children in the family. The actual benefit reduction percentages and amounts are as follows.

• For families with one eligible child, benefits are reduced by 7% of family net income between $36,502 and $79,087. Where family net income is more than $79,087, the benefit reduction is $2,981 plus 3.2% of family net income over $79,087.
• For families with twoeligible children, benefits are reduced by 13.5% of family net income between $36,502 and $79,087. Where family net income is more than $79,087, the benefit reduction is $5,749 plus 5.7% of family net income over $79,087.
• For families with three eligible children, benefits are reduced by 19.0% of family net income between $36,502 and $79,087. Where family net income is more than $79,087, the benefit reduction is $8,091 plus 8.0% of family net income over $79,087.

The Canada Disability Benefit provides eligible families with both an additional benefit amount and higher income thresholds which determine eligibility for that additional benefit amount. For the 2024-25 benefit year, the CDB provides up to $3,322 per year ($276.83 per month) for each child eligible for the disability tax credit (DTC). The CDB starts being reduced when family net income is more than $79,087, with the reduction calculated as follows: for families with one child eligible for the DTC, the reduction is 3.2% of the amount of 2023 family net income over $79,087, and for families with two or more children eligible for the DTC, the reduction is 5.7% of the amount of 2023 family net income over $79,087.

The number of variables – age of children, number of children and family net income – can make it difficult to easily calculate the amount of CCB or CDB for which a family is eligible during the current benefit year. To assist in that calculation, the federal government provides an online calculator which will determine that amount, based on information provided by the taxpayer. That online calculator can be found on the federal government website at https://www.canada.ca/en/revenue-agency/services/child-family-benefits/child-family-benefits-calculator.html.

There are two significant ways in which the CCB program differs from other federal tax credit and benefit programs. The first is that the CCB and CDB are paid once per month, throughout the benefit year (most other such credits are paid on a quarterly basis). CCB and CDB are paid around the 20^th of each month – a listing of actual payment dates during 2024 can be found on the federal government website at https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-child-benefit-overview/canada-child-benefit-payment-dates.html.

The second difference between the CCB and other programs is more significant – unlike some other programs, CCB amounts are not paid automatically to eligible recipients. In order to receive the CCB and the CDB, it is necessary both to apply for the benefit(s) and to file an annual tax return in order to ensure that benefit payments continue. Information on how to apply is available at https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-child-benefit-overview/canada-child-benefit-apply.html.

The costs of raising children are many and varied, and the financial resources required have never been small. Over the past few years, increases in both interest rates and, especially, the rate of inflation have added to nearly every one of those costs to a significant degree. Receipt of a CCB payment each month can make a substantial contribution toward meeting those costs: a Canadian family which has two children, aged 5 and 7, and whose family net income for 2023 was $50,000 can receive just over $1,000 each month in tax-free benefits during the 2024-25 benefit year.

Finally, many (although not all) Canadian provinces and territories provide a benefit to families with children living in that province or territory, which is additional to any available federal CCB which a family can claim. Detailed information on both the federal and provincial/territorial child and family benefit programs can be found on the federal government website at https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-child-benefit-overview.html.

Canada’s tax system is a self-assessing one, meaning that the onus rests on individual taxpayers to file their annual return each spring and to pay any amounts owed. The compliance rate in Canada is high – most Canadian taxpayers comply with those tax obligations, filing returns and making any required payments on a consistent basis. Where such tax obligations aren’t met, however, the Canada Revenue Agency (CRA) has the authority to impose both penalties and interest charges.

Canada’s tax system is a self-assessing one, meaning that the onus rests on individual taxpayers to file their annual return each spring and to pay any amounts owed. The compliance rate in Canada is high – most Canadian taxpayers comply with those tax obligations, filing returns and making any required payments on a consistent basis. Where such tax obligations aren’t met, however, the Canada Revenue Agency (CRA) has the authority to impose both penalties and interest charges.

The types and amounts of penalties which can be assessed vary widely, depending on the nature of the non-compliance and, frequently, whether the taxpayer is a “repeat offender”. However, interest charges levied are always the same where taxes aren’t paid in full and on time, and those interest charges can be very substantial.

By law, the CRA charges interest at a rate which is four percentage points higher than commercial interest rates. For the third quarter of 2024, the CRA charges interest on outstanding tax amounts owed at a rate of 9.0%. More significantly, all such interest charges are compounded daily, meaning that each day the taxpayer is charged interest on both the tax amount owed and on the previous day’s interest charges. In such circumstances, interest charges can accumulate very quickly.

Where a failure to meet one’s tax obligations is simply the result of carelessness or negligence on the part of the taxpayer, it’s really not possible to avoid such charges. Sometimes, however, taxpayers fail to meet their tax obligations for reasons that are entirely outside their control. When that happens, the CRA may be willing to extend relief by forgiving interest and penalty charges, in whole or in part, through the Agency’s Taxpayer Relief Provisions.

It's important to note, at the outset, that while the CRA has issued guidelines on the circumstances in which interest and penalty relief may be provided, the decision to provide such relief is entirely discretionary on the Agency’s part – there is no right to interest and penalty relief. Second, while interest and penalty relief may be available to the taxpayer, no relief is provided with respect to actual tax amounts owed. No matter the circumstances, tax amounts owed must always be paid.

The guidelines issued by the CRA on when interest and penalty relief may be available fall into two general categories. The first addresses taxpayers who are unable to meet their tax obligations as the result of extraordinary circumstances. The first such circumstance is natural or man-made disasters which are, of course, becoming more and more common as each year increasing numbers of Canadians are forced to evacuate due to wildfires and floods. At such times, meeting one’s tax obligations is understandably a very low priority and, in the worst case scenario, the natural disaster which forced the evacuation may also result in the destruction of the taxpayer’s financial and tax records and supporting documentation, making it difficult or impossible to file returns or determine or pay amounts owed.

The other extraordinary circumstances in which the CRA is prepared to provide relief from penalty and interest charges are those which are specific to the taxpayer involved. As outlined on the CRA website, such circumstances generally involve either serious illness or accident, or serious emotional or mental distress, such as would result from a death in the taxpayer’s family.

Finally, the CRA is prepared to consider providing interest relief where the taxpayer is experiencing significant financial hardship. The CRA’s guidelines, as outlined on the Agency’s website, indicate that it would consider providing relief where paying interest amounts owed would make it difficult to provide basic necessities, such as food, medical help, transportation, or shelter, or where interest charges make up the majority of the amount owed and the taxpayer is unable to make a reasonable payment arrangement with the CRA.

In order to receive relief in situations of financial hardship, a taxpayer must be able to provide the CRA with detailed information on their current financial situation. That financial situation is outlined on a prescribed CRA form, which is available at Form RC376, Taxpayer Relief Request – Statement of Income and Expenses and Assets and Liabilities for Individuals. In addition to the information submitted on that form, the taxpayer must also provide supporting documentation, such as current mortgage statement(s), property assessment(s), rental agreement(s), loans and recurring bills, bank and credit card statements for the most recent three months, and current investment statements

Regardless of the reasons or circumstances which have led the taxpayer to submit an application for relief, the process of filing that application is the same. Taxpayers who have registered for the CRA online service My Account can file their application using that service. Those who are not registered for My Account, or would prefer filing a paper application, can find the required form on the CRA website at Form RC4288, Request for Taxpayer Relief – Cancel or Waive Penalties and Interest. The address to which the completed form should be sent can be found on the last page of Form RC4288.

Whatever the method by which an application for relief is filed, the CRA will review the information submitted and make a determination of whether to cancel interest and/or penalty amounts owed, in whole or in part, in order to allow the taxpayer to pay off their tax debt. The factors considered by the Agency in determining whether to grant relief will, of course, depend in part on the circumstances giving rise to the application. In general, however, the Agency will consider the taxpayer’s tax return filing and payment history, whether the taxpayer knowingly let a balance owing exist (resulting in additional interest charges), whether reasonable care was taken in the management of the taxpayer’s tax affairs, and, finally, whether the taxpayer acted quickly to correct any delay or omission.

The CRA’s goal is to make a decision on straightforward applications made under its Taxpayer Relief Provisions within six months (180 days) after the application is received. However, not surprisingly, the Agency is currently receiving a higher-than-usual number of applications, meaning that the timeline for making decisions on those applications is now closer to eight months (or longer, for complex applications).

Where the taxpayer’s request is denied, they can make on online request to have the decision reviewed. If that decision is also negative, the only recourse is to ask a judge to review the CRA’s decision. In the great majority of cases, however, the cost of taking that step is likely to be greater than the amount of interest and penalties at issue.

In all cases, the best course of action for the taxpayer is to be proactive – to contact the CRA as soon as the taxpayer is aware that filing of a required return, or full payment of taxes owed, will not be possible. Taking the initiative and moving quickly to resolve the problem will both minimize the amount of interest which will accrue on unpaid taxes and will count in the taxpayer’s favour when the CRA considers whether to allow an application for waiver of those interest and penalty charges.

Detailed information on the Taxpayer Relief Provisions is available on the CRA website at https://www.canada.ca/en/revenue-agency/services/about-canada-revenue-agency-cra/complaints-disputes/taxpayer-relief-provisions.html.

The past five years have been a tough financial slog for most Canadian families, as they struggled to cope with the pandemic, followed by inflation which tripled from under 2% in mid-2020 to over 6% by the end of 2022, and, finally, interest rate increases which saw the Bank Rate go from less than 1% in April of 2020 to over 5% in April of 2024.

The past five years have been a tough financial slog for most Canadian families, as they struggled to cope with the pandemic, followed by inflation which tripled from under 2% in mid-2020 to over 6% by the end of 2022, and, finally, interest rate increases which saw the Bank Rate go from less than 1% in April of 2020 to over 5% in April of 2024.

While the relentless upward climb in both the rate of inflation and interest rates are finally showing signs of slowing, it’s nonetheless a fact that the cost of two truly non-discretionary components of a family budget – food and shelter – are still much more expensive than they were five years ago, and nearly all Canadian families are feeling the pinch.

While there’s plenty of financial pain to go around, one group of Canadians that is especially likely to be dealing with bad financial news in the near future is those who are renewing a mortgage. Home buyers who purchased a home five years ago and took out a five-year mortgage (as the majority do) likely got that mortgage at an interest rate of around 4% – or even less. Those seeking to renew that mortgage this year are likely facing renewal at a rate of at least 6%. That’s about a 50% increase in the mortgage interest rate, which can be enough to make the difference between a mortgage payment that is affordable, and one that is not.

To see why that’s the case, it helps to understand how mortgage payments are calculated. All mortgage payments are determined by three figures. The first is the size of the mortgage – the “principal amount”, which is the cost of the property purchased minus any downpayment made. The second is the interest rate which is charged on that principal amount. And the third is the length of time over which the principal amount of the mortgage is to be repaid – known as the “amortization period”.

Under Canadian law, anyone purchasing a home must make a down payment, and the amount of that downpayment depends on the purchase price of the property, as follows:

Where any home purchaser makes a down payment of less than 20% of the purchase price of the property, they must obtain mortgage default insurance through the Canada Housing and Mortgage Corporation (CHMC) and must, as well, repay that mortgage within 25 years. In other words, the maximum amortization period on a mortgage principal amount which represents more than 80% of the purchase of the property is 25 years. (Finance Canada recently announced that a 30-year amortization period would be allowed on some insured mortgages; however, that measure applies only as of August 1, 2024 and only to a relatively small group – first-time home buyers purchasing a newly-built property.)

Where the home purchaser makes a down payment of more than 20% (which would likely be the case for those who are already homeowners and are purchasing as part of a move up the “property ladder”), the length of the amortization period – the time frame in which the mortgage must be repaid – is not subject to that 25-year restriction. Rather, the length of that amortization period is something which is determined by agreement between the borrower and the financial institution which provides the mortgage financing.

The impact on monthly mortgage payments of a 2% change in a mortgage interest rate can be seen in the following example.

Assume that in 2019 a property owner sold their first home and, using the proceeds of that sale, is able to put down a $200,000 deposit on a home costing $650,000. The remainder of $450,000 of the purchase price is financed through a five-year mortgage at 4.0%, amortized over 25 years. The monthly mortgage payments are $2,367.

In 2024 that mortgage comes up for renewal, but the interest rate is now 6.0%, and the amortization period is now down to 20 years. Payments made over the previous five years have reduced the mortgage principal amount from $450,000 to $392,000, but the increased interest rate means that monthly payments will now be $2,800 – an increase of almost $450 per month, or $5,400 per year.

It's important to remember, as well, that mortgage payments are made out of after-tax income. In other words, in order to come up with the $5,400 per year needed to meet the increased mortgage payment obligations, a homeowner will either have to reallocate that $5,400 from the payment of other household expenditures, or will have to generate additional pre-tax income of almost $8,000 annually, which is $5,600 in after-tax income, assuming a marginal tax rate of 30%. Neither is a realistic scenario for most Canadian households right now.

Homeowners facing a mortgage renewal which will result in monthly mortgage payment obligations which cannot be met out of current household resources are between the proverbial rock and a hard place. Realistically, the only component of a mortgage over which a homeowner who is renewing that mortgage has any element of choice is the amortization period. The principal amount of the mortgage is the amount which was originally borrowed, less any principal repayments made, and can only be reduced by making additional payments. The interest rates in effect at the time of renewal are set by the lender and, while subject to negotiation, are not likely to be significantly less than the lender’s posted rates. Where a homeowner is facing an increase in monthly mortgage payments which simply aren’t manageable, the options are limited. The first is a sale of the home and the purchase of a smaller, less expensive property, but that’s rarely a situation which any homeowner wants to be forced into. The second option (with the agreement of the lender) is to extend the amortization period of the mortgage, in order to reduce monthly mortgage payments.

Extending the amortization period of a mortgage can have a dramatic effect on the amount of monthly mortgage payments, but it’s a choice that also comes with a cost, in the form of increased total interest payments over the life of the mortgage.

Continuing with the above example, assume that the homeowner who is renewing the mortgage at 6.0% for a five-year term chooses to extend the amortization period on that mortgage from the current 20 years to 30 years. (Although there is no legal limit on an amortization period for an uninsured mortgage, most major Canadian lending institutions do not provide amortizations of more than 30 years.)

The change in the amortization period from 20 years to 30 years will result in a monthly mortgage payment of $2,332 on a principal amount of $392,000 at 6% interest, meaning that the new mortgage payment amount will be slightly less than it was over the previous five years since the home was purchased, making it a manageable amount for the homeowner.

The cost of making this choice lies in the amount of interest which is paid on the mortgage over that amortization period, and that cost can be very substantial. If the homeowner had renewed their mortgage based on a 20-year amortization and a monthly mortgage payment of $2,800, the amount of interest which would be paid over that 20-year period would be $278,000. If the amortization period is changed to 30 years, reducing the monthly mortgage payment to $2,332, the amount of interest that would be paid over that 30-year period will be $447,000. Choosing to extend an amortization is a very consequential financial decision.

As is almost always the case in financial planning, there isn’t a “right” answer – the right course of action depends almost entirely on the individual circumstances involved. For homeowners who are faced with a choice between extending an amortization period or being forced into either defaulting on the mortgage or selling the house, the decision to extend an amortization period may well be justified in the circumstances. However, where the choice made is to extend an amortization period, it’s important to treat that decision as a short-term measure taken solely to gain some temporary financial relief. A homeowner who extends the amortization period on a mortgage for the upcoming mortgage term can (and should, if at all possible) plan to reduce that mortgage amortization period at the next mortgage renewal date. As well, if and when household finances improve over the next five years, any available funds should be used to make additional payments on the mortgage or, where such additional payments aren’t allowed, to set such funds aside to make a lump-sum payment at the time of the next renewal. Both measures will work to reduce the amount of interest which must be paid over the life of the mortgage.

Being unable to afford one’s mortgage payments and facing the prospect of going into default on the mortgage is a situation that most homeowners would do almost anything to avoid. Those are undeniably stressful circumstances, but in most cases solutions are possible. The federal government, through the Financial Consumer Agency of Canada, provides an extremely useful webpage (at https://www.canada.ca/en/financial-consumer-agency/services/mortgages.html) which contains a wealth of information on mortgages and mortgage financing. That webpage includes a Mortgage Calculator (found at https://itools-ioutils.fcac-acfc.gc.ca/MC-CH/MC-CH-eng.aspx) which can be used to calculate the effect that different interest rates and amortization periods will have on both the amount of monthly mortgage payments and total interest costs which will be paid over the life of the mortgage. Taking the time to do so will enable a homeowner facing a mortgage renewal to make the most informed choice in their particular circumstances.

Members of the baby boom generation who were born between 1946 and 1965 are now between 59 and 78 years of age, and make up about a quarter of the Canadian population. Many, if not most, are now retired, and the older members of that generation are likely experiencing the changes to physical health, strength, and agility that come with age. The process of aging is an extremely variable one – some individuals are healthier and more active at age 80 than others are at 60, but the physical changes that accompany aging come, inevitably, to everyone. And when those changes take place, it’s necessary to make some hard decisions about a number of things.

Members of the baby boom generation who were born between 1946 and 1965 are now between 59 and 78 years of age, and make up about a quarter of the Canadian population. Many, if not most, are now retired, and the older members of that generation are likely experiencing the changes to physical health, strength, and agility that come with age. The process of aging is an extremely variable one – some individuals are healthier and more active at age 80 than others are at 60, but the physical changes that accompany aging come, inevitably, to everyone. And when those changes take place, it’s necessary to make some hard decisions about a number of things.

One of the most consequential decisions to be made when age-related physical changes become a factor in decision-making is whether one’s current living arrangements are still suitable. The overwhelming choice of older Canadians is to “age in place” – that is, to remain in the homes they already occupy, living independently in a familiar community and close to family and friends. While that’s the ideal, existing living arrangements can, in some cases, no longer meet the needs of the individual, or can even be unsafe.

Almost always, changes can be made to an existing home to make it both more convenient and safer to live in for an older resident. Those changes can range from something as small as the installation of a grab bar in a shower or bath to something as extensive as renovations which will allow for one-floor living. All such changes, however, come with a price tag. Fortunately, the federal government (and some provincial governments) offer programs to help mitigate that cost.

The federal program – the Home Accessibility Tax Credit (HATC) – allows individuals who own and live in their own homes to claim a non-refundable tax credit equal to 15% of the cost of making permanent changes to their home which will make it more accessible or safer for them to live in.

The HATC is in many ways an unusually flexible and generous tax credit. First, the criteria which determine whether a particular expenditure does or does not qualify for the credit are extremely broad, covering both safety and convenience. Specifically, changes made which meet either of the following criteria can qualify for the HATC. Changes made must:

• allow the individual to gain access to, or be mobile or functional within, the dwelling; or
• reduce the risk of harm to the individual within the dwelling or in gaining access to the dwelling.

Second, there is no requirement for any kind of assessment or certification by a medical professional that a particular kind of change to the home is needed, or is justified by the homeowner’s state of physical ability or disability – such determination is made solely by the owner/resident of the home. Where a homeowner decides that the installation of a railing along a hallway in their home, or a change to a non-slip floor in the bathroom, are necessary for their mobility or safety within the home, then the cost of making those changes can qualify for the credit.

Third, expenses incurred for purposes of the HATC can also be claimed as medical expenses for purposes of the medical expense tax credit. In other words, two different tax credits can be claimed for the same expenditure.

Finally, the credit can be claimed by all “qualifying individuals” meaning anyone who is age 65 or older by the end of the year in which the expenditure is made, or who is eligible for the disability tax credit. There are no income thresholds imposed – the full credit is claimable by any qualifying individual who incurs an eligible expenditure, regardless of their income.

While the eligibility criteria for expenditures under the HATC are very broad, the credit is intended to assist with the cost of changes which become a permanent part of the dwelling, and not those that represent regular maintenance costs or charges for household services. The following types of expenses are specifically not eligible for the HATC:

• amounts paid to acquire a property that can be used independently of the qualifying renovation;
• the cost of annual, recurring, or routine repairs or maintenance;
• amounts paid to buy household appliances;
• amounts paid to buy electronic home-entertainment devices;
• the cost of housekeeping, security monitoring, gardening, outdoor maintenance, or similar services;
• financing costs for the qualifying renovation; or
• the cost of renovation incurred mainly to increase or maintain the value of the dwelling.

In order to qualify for the credit, eligible expenditures must be made to a “housing unit” which is owned and occupied by the person making the claim. That housing unit could be a detached or semi-detached or row house, or a condominium or co-op unit.

Where a qualifying individual (that is, someone who is age 65 or older, or who is eligible for the disability tax credit) lives with and is dependent on another family member (generally, a parent, grandparent, child, grandchild, sibling, aunt, uncle, nephew, or niece) who owns the home in which they both live, that family member can also make a claim for the HATC for changes made to the home to assist their older or disabled relative. For this purpose, such family members are characterized as “eligible individuals”.

Finally, there is a limit on the amount of expenditures which can be claimed for purposes of the HATC, and that limit is $20,000 per year for a particular dwelling. The tax credit claimable is 15% of the eligible expenditure, such that the maximum tax credit which can be claimed is $3,000 per year. The HATC is a non-refundable tax credit, meaning that it can reduce or eliminate federal tax payable, but cannot create or increase a refund. Where the amount of the credit exceeds the tax payable by the qualifying individual and so cannot be fully utilized, the claim can be split between that qualifying individual and any family member who qualifies as an “eligible individual”, as outlined above.

The federal HATC can be claimed by qualifying individuals and eligible individuals who are resident in any province or territory in Canada. Several of those provinces and territories provide similar programs to help offset the cost of incurring such home accessibility changes, but there is unfortunately no uniformity among those programs. Both eligibility criteria (age, income, etc.) and the type of assistance provided (loan, forgiveable loan, refundable or non-refundable tax credits) are different in each province or territory which offers such assistance. However, information on those programs is available on the particular provincial government website, and can usually be found by searching "seniors' home renovations” on those websites.

Detailed information on the federal HATC is available on the federal government 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-31285-home-accessibility-expenses.html.

In most cases, the need to seek out and obtain legal services (and to pay for them) is associated with life’s more unwelcome occurrences and experiences – a divorce, a dispute over a family estate, or a job loss. About the only thing that mitigates the pain of paying legal fees (apart, hopefully, from a successful resolution of the problem that created the need for legal advice) would be being able to claim a tax credit or deduction for the fees paid.

In most cases, the need to seek out and obtain legal services (and to pay for them) is associated with life’s more unwelcome occurrences and experiences – a divorce, a dispute over a family estate, or a job loss. About the only thing that mitigates the pain of paying legal fees (apart, hopefully, from a successful resolution of the problem that created the need for legal advice) would be being able to claim a tax credit or deduction for the fees paid.

Unfortunately, while there are some circumstances in which such a deduction can be claimed, those circumstances don’t usually include the routine reasons – purchasing a home, getting a divorce, establishing custody rights, or seeking legal advice about making a will or managing a family estate – for which most Canadians incur legal fees. Generally, personal (as distinct from business-related) legal fees become deductible for most Canadian taxpayers only where they are seeking to recover amounts which they believe are owed to them, particularly where those amounts involved employment or employment-related income or, in some cases, family support obligations.

The first situation in which legal fees paid may be deductible is that of an employee seeking to collect (or to establish a right to collect) salary or wages. In all Canadian provinces and territories, employment standards laws provide that an employee who is about to lose his or her job (for reasons not involving fault on the part of the employee) is entitled to receive a specified amount of notice, or salary or wages equivalent to such notice. In many cases, however, the employee can establish a right to a period of notice (or payment in lieu) greater than the statutory minimum. The amount of notice or payment in lieu of notice which is payable can then become a matter of negotiation between the employer and its former employee, and such negotiations usually involve legal representation and consequently, legal fees. In that situation, legal fees incurred by the employee to establish a right to amounts allegedly owed by the employer are deductible by that former employee. If a court action is necessary and the Court requires the employer to reimburse its former employee for some or all of the legal fees incurred, the amount of that reimbursement must be subtracted from any deduction claimed. In other words, the former employee can claim a deduction only for legal fees which they were personally required to pay in order to collect wages or salary owed and for which they were not reimbursed.

In some situations, an employee or former employee seeks legal help in order to collect or to establish a right to collect a retiring allowance or pension benefits. In such situations, the legal fees incurred can be deducted, up to the total amount of the retiring allowance or pension income actually received for that year (but not including any amounts received which were transferred to the individual’s registered pension plan or registered retirement savings plan). Where the amount of legal fees incurred is greater than the total retiring allowance or pension amount received in the year, the excess can be carried forward and claimed in any of the subsequent seven tax years.

The rules covering the deduction of legal fees incurred where an employee claims amounts from an employer or former employer are relatively straightforward. The same, unfortunately, cannot be said for the rules governing the deductibility of legal fees paid in connection with family support obligations. Those rules have evolved over the years in a somewhat piecemeal fashion – the current rules are as follows.

Legal fees incurred by either party in the course of negotiating a separation agreement or obtaining a divorce are not deductible. Such fees paid to establish child custody or visitation rights are similarly not deductible by either parent. 

Where, however, one former spouse has the right to receive support payments from the other, there are circumstances in which legal fees paid in connection with that right are deductible. Specifically, legal fees paid for the following purposes will be deductible by the person receiving those support payments:

• to collect overdue support payments owing;
• to establish the amount of support payments from a current or former spouse or common-law partner;
• to establish the amount of support payments from the legal parent of one’s child (who is not a current or former spouse or common-law partner), but only where that support is payable under the terms of a court order; or
• to try to get an increase in support payments.

As well, the recipient of support payments can deduct legal fees incurred to try to make child support payments non-taxable.

On the payment side of the support payment/receipt equation, the situation is not nearly so favourable, as a deduction for legal fees incurred will not generally not be allowed to a person paying support. More specifically, as outlined on the Canada Revenue Agency (CRA) website, a payer of support cannot claim legal fees incurred to establish, negotiate, or contest the amount of support payments.

Finally, where the Canada Revenue Agency reviews or challenges income amounts, deductions, or credits reported or claimed by a taxpayer for a tax year, any fees paid for advice or assistance in dealing with the CRA’s review, assessment, or reassessment, or in objecting to that assessment or reassessment, can be deducted by the taxpayer.  A deduction can similarly be claimed where the taxpayer incurs such fees in relation to a dispute involving employment insurance, the Canada Pension Plan, or the Québec Pension Plan.

Detailed information on the rules which govern the deduction of legal fees incurred is available on the Canada Revenue Agency 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-23200-other-deductions.html#toc2. The specific rules which govern the deductibility of legal fees relating to support obligations are outlined in the CRA publication P102 Support Payments, which can be found on the Agency’s website at https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/p102.html.

By the middle of August, most students who are beginning post-secondary education this fall have hopefully received an offer of admission from their college or university of choice and are in the final stages of planning the move away from the family home for the first time. While deciding where to live and choosing courses for the upcoming fall semester is undoubtedly exciting, the hard reality is that all such choices come with a price tag – sometimes a very steep one. Regardless of geographic location, housing arrangements, or program choices, post-secondary learning is expensive. There will be tuition bills, of course, but also the need to find housing and pay rent in what is, in most college or university locations, a very tight and very expensive rental market. Those who choose to live in a university residence and are able to secure a place will also face bills for accommodation and, usually, a meal plan.

By the middle of August, most students who are beginning post-secondary education this fall have hopefully received an offer of admission from their college or university of choice and are in the final stages of planning the move away from the family home for the first time. While deciding where to live and choosing courses for the upcoming fall semester is undoubtedly exciting, the hard reality is that all such choices come with a price tag – sometimes a very steep one. Regardless of geographic location, housing arrangements, or program choices, post-secondary learning is expensive. There will be tuition bills, of course, but also the need to find housing and pay rent in what is, in most college or university locations, a very tight and very expensive rental market. Those who choose to live in a university residence and are able to secure a place will also face bills for accommodation and, usually, a meal plan.

Fortunately for students (and the parents who are likely footing much of the bill), there are tax credits and benefits which can be claimed to offset such costs: the credits and benefits which can be claimed by post-secondary students (or their spouses, parents, or grandparents) in relation to the upcoming 2024-25 academic year are summarized below.

Tuition fees

A federal tax credit continues to be available for the single largest cost associated with post-secondary education – the cost of tuition. Any student who incurs more than $100 in tuition costs at an eligible post-secondary institution (which would include most Canadian universities and colleges) can claim a non-refundable federal tax credit equal to 15% of such tuition costs. Many of the provinces and territories (excepting Alberta, Ontario, and Saskatchewan) also provide students with an equivalent provincial or territorial credit, with the rate of such credit differing by jurisdiction.

The charges imposed on post-secondary students under the heading of “tuition” include a myriad of costs which may differ, depending on the particular program or institution, and not all of those costs will qualify as “tuition” for purposes of the tuition tax credit. The following specific amounts do, however, constitute eligible tuition fees for purposes of the tuition tax credit:

• Admission fees;
• Charges for use of library or laboratory facilities;
• Exemption fees;
• Examination fees (including re-reading charges);
• Application fees (but only if the student subsequently enrolls in the institution);
• Confirmation fees;
• Charges for a certificate, diploma, or degree;
• Membership or seminar fees that are specifically related to an academic program and its administration;
• Mandatory computer service fees; and
• Academic fees.

The following charges, however, do not constitute tuition fees for purposes of the credit:

• Extracurricular student social activities;
• Medical expenses;
• Transportation and parking;
• Board and lodging;
• Goods of enduring value that are to be retained by students (such as a microscope, uniform, gown, or computer);
• Initiation fees or entrance fees to professional organizations, including examination fees or other fees;
• Administrative penalties incurred when a student withdraws from a program or an institution;
• The cost of books (other than books, compact disks, or similar material included in the cost of a correspondence course); and
• Courses taken for purposes of academic upgrading to allow entry into a university or college program. These courses would usually not qualify for the tuition tax credit as they are not considered to be at the post-secondary school level.

Certain ancillary fees and charges, such as health services fees and athletic fees, may also be eligible tuition fees. However, such fees and charges are limited to $250 unless the fees are required to be paid by all full-time students or by all part-time students.

At both the federal and provincial levels, the credit is a non-refundable one, meaning that it can reduce or eliminate tax otherwise payable, but cannot create or increase a tax refund. Where, as is often the case, a student doesn’t have tax payable for the year because their income isn’t high enough, credits earned can be carried forward and claimed by the student in any future tax year or transferred (within limits) in the current year to be claimed by a spouse, parent, or grandparent.

Rent, food, and other personal and living expenses

Unfortunately, although housing and food costs will take up a very big chunk of each student’s budget, there is not (and never has been) a tax deduction or credit which is claimable for such costs. In all cases, living costs incurred by a post-secondary student (whether on campus or off) are characterized as personal and living expenses, for which no tax deduction or credit is allowed.

Student debt

Most post-secondary students in Canada must incur some amount of debt in order to complete their education, and repayment of that debt is typically not required until after graduation. Once repayment starts, a 15% federal tax credit can be claimed for the amount of interest being paid on such debt, in some circumstances. And, while other types of credits related to post-secondary education (like the tuition tax credit) can be transferred to and claimed by other family members, the student loan interest tax credit can be claimed only by the student – no transfer of the credit is allowed.

Students who are still in school and arranging for loans to finance their education should be mindful of the rules which govern that student loan interest tax credit, since decisions made while still in school with respect to how post-secondary education will be financed can have tax repercussions down the road, after graduation. That’s because while interest paid on a qualifying student loan is eligible for the credit, only some types of student borrowing will qualify for that credit. Specifically, only interest paid on government-sponsored (federal or provincial) student loans will be eligible for the credit. Interest paid on loans of any kind from any financial institution will not.

It’s not uncommon for students (especially students in professional programs, like law or medicine) to be offered lines of credit by a financial institution, often at advantageous or preferential interest rates. As well, financial institutions sometimes offer, once a student has graduated and begun to repay a government-sponsored student loan, to consolidate that student loan with other kinds of debt, also at advantageous interest rates. However, it should be kept in mind that interest paid on that line of credit (or any other kind of borrowing from a financial institution which is used to finance education costs) will never be eligible for the student loan interest tax credit.

As explained in the Canada Revenue Agency publication on the subject: “[I]f you renegotiated your student loan with a bank or another financial institution, or included it in an arrangement to consolidate your loans, you cannot claim this interest amount”. In other words, where a government student loan is combined with other debt and consolidated into a borrowing of any kind from a financial institution, the interest on that government student loan is no longer eligible for the student loan interest tax credit.

Students who are contemplating borrowing from a financial institution rather than getting a government student loan (or considering a consolidation loan which incorporates that government student loan amount) must remember, in evaluating the benefit of any preferential interest rate offered by a financial institution, to take into account the loss of the student loan interest tax credit on that borrowing in future years.

Finally, the federal government announced, in 2023, that interest would no longer be charged on Canada Student Loans, effective as of April 1, 2023 (although graduates are still responsible for any interest which was levied and accumulated prior to that date). Provincial and territorial student loan programs are not affected by the federal announcement and such loans may still be subject to interest charges, depending on the province. Where interest is levied on a loan provided under a government (federal or provincial) student loan program, that interest will be eligible for the student loan interest tax credit, as outlined above.

Other credits and deductions

While the available student-specific deductions and credits are more limited than they were in previous taxation years, there are nonetheless a number of credits and deductions which, while not specifically education-related, are frequently claimed by post-secondary student (for instance, deductions for moving costs). The Canada Revenue Agency publishes a very useful guide which summarizes most of the rules around income and deductions which may apply to post-secondary students. The current version of that guide (which was last updated in May 2024), entitled Students and Income Tax, is available on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/p105.html.

During the 2024 calendar year, hundreds of thousands of Canadians will reach their 71^st birthday, and a significant percentage of that group are likely to have saved money for retirement through a registered retirement savings plan (RRSP). Every one of those individuals, whether they are retired, partly retired, or still in the work force, and regardless of the amount of savings accumulated in their RRSPs, will be required, by the end of the calendar year, to make a decision on how to structure and invest their retirement income for the remainder of their lives.

During the 2024 calendar year, hundreds of thousands of Canadians will reach their 71^st birthday, and a significant percentage of that group are likely to have saved money for retirement through a registered retirement savings plan (RRSP). Every one of those individuals, whether they are retired, partly retired, or still in the work force, and regardless of the amount of savings accumulated in their RRSPs, will be required, by the end of the calendar year, to make a decision on how to structure and invest their retirement income for the remainder of their lives.

The need to make that decision arises from the rule that all taxpayers who hold funds within an RRSP are required to collapse that RRSP by the end of the calendar year in which they turn 71 years of age – no exceptions and no extensions. It’s a very significant decision, as the course of action chosen will affect the individual’s income for the remainder of their life and, in some cases, actions taken cannot be undone.

While the actual decision is a complex one, the options available to a taxpayer who must collapse an RRSP are actually quite few in number – three, to be exact. They are as follows:

1. Collapse the RRSP and include all of the proceeds in income for that year;
2. Collapse the RRSP and transfer all proceeds to a registered retirement income fund (RRIF); and/or
3. Collapse the RRSP and purchase an annuity with the proceeds.

It’s not hard to see that the first option doesn’t have much to recommend it. Collapsing an RRSP without transferring the balance to a RRIF or using that amount to purchase an annuity means that every dollar in the RRSP will be treated as taxable income for that year. In some cases, where a substantial six figure amount has been saved in the RRSP, that can mean losing nearly half of the RRSP proceeds to income tax.  And, while any balance of proceeds left can then be invested, tax will be payable on all investment income subsequently earned.

As a practical matter, then, the choices come down to two: an RRIF or an annuity. And, as is the case with most tax and financial planning decisions, the best choice will be driven by one’s personal financial and family circumstances, risk tolerance, cost of living, and the availability of other sources of income to meet such living costs.

The annuity route has the great advantages of simplicity and reliability. In exchange for a lump-sum amount paid by the taxpayer, the issuer of the annuity agrees to pay the taxpayer a specific sum of money, usually once a month, for the remainder of their life. Annuities can also provide a guarantee period, in which the annuity payments continue for a specified time period (five years, 10 years), even if the taxpayer dies during that time. Finally, annuities can be set up as joint annuities, in which annuity payments will continue until the death of the last annuitant – such joint annuities are most often purchased by spouses. Regardless of how the annuity is structured, the amount of monthly income which can be received is determined by the amount used to purchase the annuity, and also by the gender and, especially, the age of the annuity purchaser(s).

The other factor influencing the amount of income which can be received from an annuity is the interest rates which prevail at the time the annuity is purchased. Between 2009 and 2022, interest rates were so low that an annuity purchase had very little to recommend it. Beginning in early 2022, however, the Bank of Canada increased its benchmark rate several times, and annuity payment rates increased as a result. Currently (as of July 2, 2024) annuity rates for each $100,000 paid to the annuity issuer by a taxpayer who is 70 years of age range from $630 to $662 per month for a male taxpayer and from $574 to $613 for a female taxpayer (the actual rate is set by the company which issues the annuity, and will differ slightly from company to company). Those rates do not include any guarantee period.

For taxpayers whose primary objective is to obtain a guaranteed life-long income stream without the responsibility of making any investment decisions or the need to take any investment risk, an annuity can be an attractive option. There are, however, some potential downsides to be considered. First, an annuity can never be reversed. Once the taxpayer has signed the annuity contract and transferred the funds, they are locked into that annuity arrangement for the remainder of their life, regardless of any change in circumstances that might mean an annuity is no longer suitable. Second, unless the annuity contract includes a guarantee period or is structured as a joint annuity, there is no way of knowing how many payments the taxpayer will receive. If they die within a short period of time after the annuity is put in place, there is usually no refund of amounts invested – once the initial transfer is made at the time the annuity is purchased, all funds transferred belong to the annuity company. Third, most annuity payment schedules do not keep up with inflation – while it is possible to obtain an annuity in which payments are indexed, having that feature will mean a substantially lower monthly payout amount. Finally, where the amount paid to obtain the annuity represents most or all of the taxpayer’s assets, entering into the annuity arrangement means that the taxpayer will not be leaving an estate for his or heirs.

The second option open to taxpayers is to collapse the RRSP and transfer the entire balance to a registered retirement income fund, or RRIF. An RRIF operates in much the same way as an RRSP, with two major differences. First, it’s not possible to contribute funds to an RRIF. Second, the taxpayer is required to withdraw an amount from their RRIF (and to pay tax on that amount) each year. That minimum withdrawal amount is a percentage of the outstanding balance, with that percentage figure determined by the taxpayer’s age at the beginning of the year. While the taxpayer can always withdraw more in a year (and pay tax on that withdrawal), they cannot withdraw less than the minimum required withdrawal for their age group.

Where a taxpayer holds savings in an RRIF, they can invest those funds in the same investment vehicles that were used while the funds were held in an RRSP. And, as with an RRSP, investment income earned by funds held inside an RRIF are not taxed as they are earned. While the ability to continue holding investments that can grow on a tax-sheltered basis provides the taxpayer with a lot of flexibility, that flexibility has a price in the form of investment risk. As is the case with all investments, investments held within an RRIF can increase in value – or decrease – and the taxpayer carries the entire investment risk. When things go the way every investor wants them to, investment income is earned while the taxpayer’s underlying capital is maintained, but that result is never guaranteed.

On the death of an RRIF annuitant, any funds remaining in the RRIF can pass to the RRSP or RRIF of the annuitant’s spouse on a tax-free basis. Where there is no spouse, the balance of funds in the RRIF will be treated, for tax purposes, as income to the RRIF annuitant in the year of death, and must be reported as income on the tax return for the year of death.

While the above discussion of RRIFs versus annuities focuses on the benefits and downsides of each, it’s not necessary – and in most cases not advisable – to limit the options to an either/or choice. It is possible to achieve, to a degree, the seemingly irreconcilable goals of lifetime income security and capital (and estate) growth. Combining the two alternatives – annuity and RRIF – either now or in the future can go a long way toward satisfying both objectives.

For everyone, whether in retirement or not, spending is a combination of non-discretionary and discretionary items. The first category is made up mostly of expenditures for income tax, housing (whether rent or the cost of maintaining a house), food, insurance costs, and (especially for older Canadians) the cost of out-of-pocket medical expenses. The second category of discretionary expenses includes entertainment, travel, and the cost of any hobbies or interests pursued. A strategy which utilizes a portion of RRSP savings to create a secure lifelong income stream to cover non-discretionary costs can remove the worry of outliving one’s money, while the balance of savings can be invested for growth and to provide the income for non-discretionary spending.

Such a secure income stream to cover non-discretionary expenses can, of course, be created by purchasing an annuity. As well, although most taxpayers don’t think of them in that way, the Canada Pension Plan (CPP) and Old Age Security (OAS) have many of the attributes of an annuity, with the added benefit that both are indexed to inflation. By age 71, all taxpayers who are eligible for CPP and OAS will have begun receiving those monthly benefits. Consequently, in making the RRIF/annuity decision at that age, taxpayers should include in their calculations the extent to which CPP and OAS benefits will pay for their non-discretionary living costs.

As of July 2024, the maximum OAS benefit for most Canadians (specifically, those who have lived in Canada for 40 years after the age of 18) is about $718 ($790 for those aged 75 and older) per month. The amount of CPP benefits receivable by the taxpayer will vary, depending on their work history, but the maximum current benefit which can be received at age 65 is about $1,365. As a result, a single taxpayer who receives the maximum CPP and OAS benefits at age 65 will have $25,000 in annual income ($2,083 per month). And, for a married couple, of course, the total annual income received from CPP and OAS can be about $50,000 annually, or $4,166 per month. While $25,000 a year isn’t usually enough to provide a comfortable retirement, for those who go into retirement in good financial shape – meaning, generally, without any debt – it can go a long way toward meeting non-discretionary living costs. In other words, most Canadians who are facing the annuity versus RRIF decision already have a source of income which is effectively guaranteed for their lifetime and which is indexed to inflation. Taxpayers who are considering the purchase of an annuity to create the income stream required to cover non-discretionary expenses should first determine how much of those expenses can already be met by the combination of their (and their spouse’s) CPP and OAS benefits. The amount of any needed annuity purchase can then be set to cover off any shortfall.

While the options available to a taxpayer at age 71 with respect to the structuring of future retirement income are relatively straightforward, the number of factors to be considered in assessing those factors and making that decision are not. All of that makes for a situation in which consulting with an independent financial advisor on the right mix of choices and investments isn’t just a good idea, it’s a necessary one.

Most Canadians contemplate retirement with a mixture of anticipation and trepidation. While the benefits of an end to the day-to-day grind of work and commuting (while also having more free time to spend with family and friends) are undeniable, giving up a regular paycheque also means experiencing a degree of financial anxiety. For the majority of Canadians who are not members of a defined benefit pension plan, the overriding concern is how to manage retirement savings in a way that will generate sufficient income to provide a comfortable retirement, while still ensuring that accrued savings will last the remainder of one’s life. How, in other words, to avoid the dismal prospect of outliving one’s savings, or spending too much early in retirement and being left with insufficient income to meet one’s expenses late in life? And, of course, it’s impossible to find a definitive answer to that question, since none of us knows what the future holds, in terms of either health or longevity.

Most Canadians contemplate retirement with a mixture of anticipation and trepidation. While the benefits of an end to the day-to-day grind of work and commuting (while also having more free time to spend with family and friends) are undeniable, giving up a regular paycheque also means experiencing a degree of financial anxiety. For the majority of Canadians who are not members of a defined benefit pension plan, the overriding concern is how to manage retirement savings in a way that will generate sufficient income to provide a comfortable retirement, while still ensuring that accrued savings will last the remainder of one’s life. How, in other words, to avoid the dismal prospect of outliving one’s savings, or spending too much early in retirement and being left with insufficient income to meet one’s expenses late in life? And, of course, it’s impossible to find a definitive answer to that question, since none of us knows what the future holds, in terms of either health or longevity.

Typically, expenses are higher early in retirement, when retirees are likely to be healthier and more active, and retirement plans may include travel and the pursuit of hobbies and interests. However, while such activities and their associated costs likely dwindle as retirees age, other types of expenses come into play – especially expenses related to the need to pay for medical costs, household and personal services, and, ultimately, the prospect of paying for personal and/or medical care in an assisted living facility. The prospect of such future costs can make retirees reluctant to spend accrued savings (or annuity income), out of concern that such funds will be needed in the future to pay for care.

The worry about reaching an age where some degree of care is required (and must be paid for) is an entirely realistic one for retirees. According to Statistics Canada’s figures, the average Canadian who has reached the age of 75 has a life expectancy of another 12 years. And, since that figure represents an average, a significant number of 75-year-olds can expect to live longer than that. Again, according to StatsCan figures, in 2023 there were over 896,000 Canadians aged 85 or older.

With all of these demographic and financial realities in mind, a new kind of annuity – the advanced life deferred annuity, or ALDA – was created in 2019 and is now available to Canadians in the annuities marketplace. As is the case with all annuities, the issuer of an ALDA agrees, in exchange for receiving a specified lump sum amount, to provide an annual income of a specified amount to the annuitant. The difference, however, is while an ALDA can be taken out at any time, payments under the ALDA can be deferred to as late as the end of the year in which the annuitant turns 85.

For example, a retiree who turns 71 in 2024 and who has accumulated $500,000 in retirement savings could transfer $400,000 from his or her RRSP to an RRIF, and use the remaining $100,000 to purchase an ALDA, under which payments would begin at age 85. The retiree now has the security of knowing that the $400,000 held in the RRIF (plus any additional amounts earned from investment returns) doesn’t need to last for the unknown number of years remaining in their life, but instead for a specified period of time (in this case, 14 years), at which time the income stream from the ALDA will begin, to augment or replace the income from the RRIF.

There is a limit on the amount which can be used to purchase an ALDA. That limit is 25% of the amount held in an individual’s RRSP or RRIF, to a lifetime maximum. That lifetime maximum is indexed to inflation and stands at $170,000 for 2024. Taking the example outlined above, the retiree who has accumulated $500,000 in RRSP savings would be using 20% of that amount (or $100,000) to purchase the ALDA, and would be safely under the $170,000 lifetime limit.

While the security provided by such a retirement income structure would certainly be welcome to most retirees, the obvious concern where payments under an annuity are deferred is the possibility that the annuitant won’t live long enough to collect those payments, and that the funds expended to purchase the ALDA will effectively be wasted. There are two options to address that (legitimate) concern. First, an ALDA can be structured as a “joint-life” contract, under which payments will be made to the surviving annuitant (most often the spouse of the ALDA purchaser) for the remainder of their life. It’s also possible to structure the ALDA to provide for a lump sum death benefit to be paid to a beneficiary or beneficiaries (for example, the annuitant’s children) on the death of the annuitant. That death benefit can be any amount up to the amount of the original ALDA purchase, minus any amounts already paid out to the original annuitant. So if the original ALDA purchase was for $100,000 and $25,000 in benefits under the ALDA were paid out prior to the death of the original annuitant, the maximum death benefit amount would be $75,000.

Being able to have certainty of income for one’s very old age is a major benefit of purchasing an ALDA. There is, however, another benefit to be obtained, and that is income and tax deferral.

All Canadians who hold savings in an RRSP must collapse that RRSP by the end of the year in which they turn 71 and, in most instances, such individuals open an RRIF and transfer funds held in the RRSP to that RRIF. Once funds are held in an RRIF, a specified percentage of those funds must be paid out in each year to the RRIF holder. All such withdrawals constitute taxable income to the holder of the RRIF, and that taxable income can affect the RRIF holder’s eligibility for certain tax credits and benefits, like the age credit, Old Age Security benefits, and the GST/HST tax credit. Even if the RRIF holder does not actually need the total amount which must be withdrawn, there is no option to withdraw a lesser amount, and all funds withdrawn are treated as taxable income which can affect eligibility for tax credits and benefit – with no exceptions.

Where an RRIF holder purchases an ALDA, the amount used for that purchase is no longer included in the total balance on which the calculation of required RRIF withdrawals is based. Continuing the above example, if the RRIF holder used $100,000 of their retirement savings to purchase the ALDA, the amount which they would subsequently be required to withdraw from the RRIF each year would be calculated as a percentage of the remaining $400,000 – not the $500,000 which was held in the RRIF prior to the purchase of the ALDA.  Both the RRIF holder’s required income and their tax payable for the year will therefore be lower, and the loss of partial or full eligibility for tax credits and benefits will be less likely.

As is the case with most annuities, the terms of an ALDA (purchase amount, single vs. joint annuity, existence of a death benefit, age at which the income stream begins) are up to the ALDA purchaser and the issuer, as long as the basic tax rules governing such plans are adhered to. Everyone’s financial, health, and tax circumstances are different and, as is the case with any retirement income plan, those particular circumstances will drive the decisions made on the best retirement income structure for that individual. Purchasing an ALDA may be the right approach for some retirees, but not for others – but for everyone, having that option adds another element of flexibility to retirement income planning.

More information on ALDAs can be found on the federal government website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/alda.html.

By the time summer arrives, nearly all Canadians have filed their income tax returns for the previous year, have received a Notice of Assessment from the tax authorities with respect to that return, and have either received their tax refund or, more grudgingly, paid any balance of tax owing.

By the time summer arrives, nearly all Canadians have filed their income tax returns for the previous year, have received a Notice of Assessment from the tax authorities with respect to that return, and have either received their tax refund or, more grudgingly, paid any balance of tax owing.

It’s a surprise, therefore, when unexpected mail arrives from the Canada Revenue Agency (usually in mid- to late July), and the information in that mail will likely be both unfamiliar and unwelcome. Specifically, the enclosed Instalment Reminder form will advise the recipient that, in the view of the CRA, they should make instalment payments of income tax on September 15 and December 15 of 2024 – and will helpfully identify the amounts which should be paid on each date.

No one particularly likes receiving unexpected mail from the tax authorities, and correspondence which suggests that the recipient should be making payments of income tax for 2024 to the CRA during the year (instead of when they file the return for 2024 in April 2025) is likely to be both perplexing and somewhat alarming. It’s fair to say that most Canadians aren’t familiar with the payment of income tax by instalments, and are therefore at a loss to know how to proceed the first time they receive an Instalment Reminder.

The reason that the instalment payment system is unfamiliar to most Canadians is that most of us pay income taxes during our working lives through a different system. Every Canadian employee has tax automatically deducted from their paycheque (“at source”), before that paycheque is issued, and that tax is remitted by the employer to the CRA on the employee’s behalf. Such deductions and remittances accrue to the employee’s benefit, and they are credited with those remittances when filing the annual tax return for that year. It’s an efficient system, but it’s also one which is largely invisible to the employee, and certainly one which operates without the need for the employee to take any steps on their own.

Where an individual is no longer an employee – for instance, they start a business and become self-employed, or retire and begin to receive retirement income from various government and non-government sources – such deductions and remittances are no longer automatically made. However, Canadian tax rules provide that, where the amount of tax owed when a return is filed by the taxpayer is more than $3,000 ($1,800 for Québec residents) in the current (2024) year and either of the two previous (2022 and 2023) years, that taxpayer may be subject to the requirement to pay income tax by instalments.

The reason that first instalment reminders are issued in August has to do with the schedule on which Canadians file their tax returns. The amount of tax payable on filing for the immediately preceding year can’t be known until the tax return for that year has been filed and assessed, and the tax return filing deadline for individuals is April 30 (or June 15 for self-employed taxpayers and their spouses). Consequently, by the middle of July, the CRA will have the information needed to determine whether a particular taxpayer should receive a first instalment reminder for the current year.

Taxpayers who receive that first Instalment Reminder in July may also be puzzled by the fact that it is a “Reminder” and not a “Requirement” to pay. The reason for that is that those who receive it are not actually required by law to make instalment payments of tax. There are, in fact, three options open to the taxpayer who receives an Instalment Reminder.

First, the taxpayer can pay the amounts specified on the Reminder, by the respective due dates of September 15 and December 15. A taxpayer who does so can be certain that they will not have to pay any interest or penalty charges even if they have to pay an additional amount on filing in the spring of 2024. If the instalments paid turn out to be more than the taxpayer’s tax liability for 2024, they will of course receive a refund on filing.

Second, the taxpayer can make instalment payments based on the total amount of tax which was owed and paid for the 2023 tax year (including any balance that was owed on filing). If a taxpayer’s income has not changed between 2023 and 2024 and their available deductions and credits remain the same, the likelihood is that total tax liability for 2024 will be slightly less than it was in 2023, owing to the indexation of tax brackets and tax credit amounts.

Third, the taxpayer can estimate the amount of tax which they will actually owe for 2024 and can pay instalments based on that estimate. Where a taxpayer’s income has dropped from 2023 to 2024 and there will consequently be a reduction in tax payable, this option may be worth considering. Taxpayers who wish to pursue this approach can obtain the information needed to estimate current year taxes (federal and provincial tax brackets and rates) on the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html#federal.

All of this may seem like a lot of research and calculation effort, especially when one considers that many Canadians don’t even prepare their own tax returns. And those who don’t want to be bothered with the intricacies of tax calculations can pay the amounts set out in the Instalment Reminder, secure in the knowledge that they will not incur any penalty or interest charges and that, should those amounts ultimately represent an overpayment of taxes, that overpayment will be recovered and refunded when the return for 2024 is filed next spring.

Once they have resigned themselves to the realities of the tax instalment system, the next question that most taxpayers have is how such payments can be made. The options open to taxpayers in that regard, as well as general information on the tax instalment system, are outlined on the Canada Revenue Agency website at Required tax instalments for individuals - Payments for individuals - Canada.ca.

By this time of the year, virtually all Canadian residents have filed their income tax return for 2023 and have received the Notice of Assessment issued by the Canada Revenue Agency (CRA) with respect to that tax filing. Most taxpayers, therefore, would consider that their annual filing and payment obligations are done and behind them for another year.

By this time of the year, virtually all Canadian residents have filed their income tax return for 2023 and have received the Notice of Assessment issued by the Canada Revenue Agency (CRA) with respect to that tax filing. Most taxpayers, therefore, would consider that their annual filing and payment obligations are done and behind them for another year.

It can, therefore, be a little surprising to receive a communication from the CRA in mid-summer and more than a little unsettling to find out that the Agency has some further questions about the tax return that the taxpayer thought was already completed. Notwithstanding, that’s an experience that millions of taxpayers will have over the next few weeks and months.

Between February 5 and June 24 of this year, the Canada Revenue Agency received and processed more than 30 million individual income tax returns filed for the 2023 tax year, and issued a Notice of Assessment in respect of each one of those returns. The sheer volume of returns and the processing turnaround timelines mean that the CRA does not (and could not possibly) do a manual review of the information provided in a return prior to issuing the Notice of Assessment. Rather, returns are scanned by the Agency’s computer system and a Notice of Assessment is then issued.

In addition, the CRA has, for many years, been successful in encouraging taxpayers to fulfill their filing obligations online, through one of the Agency’s electronic filing services. This year, just under 29 million (or 93%) of individual returns for 2023 were filed by electronic means. While e-filing means that the turnaround for processing of returns is much quicker, there is, by definition, no paper involved.

The Canadian tax system has always been what is termed a “self-assessing” system, in which taxpayers report income earned and claim deductions and credits to which they believe they are entitled. Prior to the advent of e-filing there were means by which the CRA could easily verify claims made by taxpayers. Where returns were paper-filed, taxpayers were usually required to include receipts or other documentation to prove their claims, whatever those claims were for. For the 93% of returns which were filed this year by electronic means, no such paper trail exists. Consequently, the potential exists for misrepresentation of such claims (or simple reporting errors) on a large scale.

The CRA’s response to that risk is to conduct a wide range of review programs, some of them carried out before a Notice of Assessment is issued for the taxpayer’s return, and others after that Notice of Assessment has been issued and sent to the taxpayer. Regardless of the timing, in all cases the purpose of the review is to obtain from the taxpayer the information or documentation needed to support claims for deductions or credits made by the taxpayer on the return. The CRA also administers a Matching Program, in which information reported on the taxpayer’s return (both income and deductions) is compared to information provided to the CRA by third-party sources (like T4s filed by employers or T5s filed by banks or other financial institutions).

Being selected for review under either program means, for the individual taxpayer, the possibility of receiving unexpected correspondence, or a telephone call, from the CRA. Receiving such correspondence or such a call from the tax authorities is almost guaranteed to unsettle the recipient taxpayer, who may immediately conclude that he or she has done something very wrong and is facing a big tax bill. However, in the vast majority of cases, the contact is just a routine part of the Agency’s processing review mandate.

Where the initial contact from the CRA to the taxpayer is done by telephone, it’s important that the taxpayer verify the identity of the person claiming to be a representative of the Agency. As virtually everyone knows by now, fraudulent or “scam” calls purporting to be from the CRA have become commonplace. To assist taxpayers in confirming that any telephone contact received is a legitimate one, the CRA has provided information on how to respond to such a call; that information can be found on the CRA website at Verify it's the CRA calling - Scams and fraud - CRA - Canada.ca.

A taxpayer whose return is selected as part of a processing review program will be asked to provide verification or proof of deductions or credits claimed on the return –usually by way of receipts or similar documentation. Or, where figures which appear on an information slip – for instance, the amount of interest income earned – don’t match up with the amount of such interest income reported by the taxpayer, they will be contacted to provide an explanation of the discrepancy.

Of course, most taxpayers are not concerned so much with the kind of program or programs under which they are contacted as they are with why their return was singled out for review or follow-up. Many taxpayers assume that it’s because there is something wrong on their return, or that the letter is the start of a tax audit process, but that’s not necessarily the case. Returns are selected by the CRA for pre- or post-assessment review for a number of reasons. Canada’s tax laws are complex and, over the years, there are areas in which the CRA has determined that taxpayers are more likely to make errors on their return. Consequently, a return which includes claims in those areas (like dependant tax credit claims, or claims for medical expenses, moving expenses, or tuition tax credits) may have an increased chance of being reviewed. Where there are deductions or credits claimed by the taxpayer which are significantly different or greater than those claimed in previous returns, that could flag the return for review. And, if the taxpayer’s return has been reviewed in previous years, and especially if an adjustment was made following that review, subsequent reviews may be more likely. Finally, many returns are picked for the processing review programs simply on the basis of random selection.  

Regardless of the reason for the follow-up, the process is the same. Taxpayers whose returns are selected for review will be contacted by the CRA, usually by letter, identifying the deduction or credit for which the CRA wants documentation or the income or deduction amount about which a discrepancy seems to exist. The taxpayer will be given a reasonable period of time – usually a few weeks from the date of the letter – in which to respond to the CRA’s request. That response should be in writing, attaching, if needed, the receipts or other documentation which the CRA has requested. All correspondence from the CRA under its review programs will include a reference number, which is usually found in the top right-hand corner of the CRA’s letter. That number is the means by which the CRA tracks the particular inquiry, and should be included in the response sent to the Agency. It’s important to remember, as well, that it’s the taxpayer’s responsibility to provide proof, where requested, of any claims made on a return. Where a taxpayer does not respond to a CRA request or does not provide such proof, the Agency will proceed on the basis that the requested verification or proof does not exist and will assess or reassess accordingly.

Taxpayers who have registered for the CRA’s online tax program My Account (or whose representative is similarly registered for the Agency’s Represent a Client online service) can usually submit required documentation electronically. More information on how to do so can be found on the CRA website at Submitting documents online – Pre-assessment Review, Processing Review and Request Verification Programs - Canada.ca.

Whatever the reason a particular return was selected for review by the CRA, one thing is certain: a prompt response to the CRA’s enquiry, providing the Agency with the information or documentation requested, will, in the vast majority of cases, bring the matter to a speedy conclusion, to the satisfaction of both the Agency and the taxpayer. The CRA website also includes more detailed information on the return review process, which is available at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/review-your-tax-return-cra.html.

Most Canadians, understandably, think of our income tax system as a government “program” that takes money out of their paycheques and out of their pockets. And, while it’s certainly true that virtually every Canadian who earns an income must allocate a portion of that income to paying federal and provincial personal income taxes, that’s not the whole picture. Our tax system does, in fact, provide Canadians with a number of direct benefits, through a variety of tax credit and benefit programs which actually put money into the hands of Canadians. And when that money can be obtained with minimal effort (and be received tax-free) it’s a win-win for the recipient.

Most Canadians, understandably, think of our income tax system as a government “program” that takes money out of their paycheques and out of their pockets. And, while it’s certainly true that virtually every Canadian who earns an income must allocate a portion of that income to paying federal and provincial personal income taxes, that’s not the whole picture. Our tax system does, in fact, provide Canadians with a number of direct benefits, through a variety of tax credit and benefit programs which actually put money into the hands of Canadians. And when that money can be obtained with minimal effort (and be received tax-free) it’s a win-win for the recipient.

Those attributes describe the basic child and family benefits paid by the federal government to eligible Canadians every month of the year. However, a substantial number of eligible recipients don’t receive benefits to which they are entitled, simply because they haven’t claimed them, leaving potentially hundreds or thousands of dollars in tax-free income “on the table” each year. As well, many Canadians who do receive such benefits but who then fail to claim them annually can see their benefit payments stop, even though they remain eligible to receive those benefits.

While there are quite a number of such benefits, the process of “claiming” each of them is the same – simply filing a tax return each year. Eligibility for some (but not all) of the obtainable benefits and/or the amount of benefit obtainable is based, in part, on the income of the recipient. When each Canadian files a tax return, the Canada Revenue Agency determines, based on the information provided in that return, the benefits to which the taxpayer is entitled and in what amounts. Where the amount of a taxpayer’s income is relevant to the determination of eligibility, the income figure used is that from the previous year. In other words, a taxpayer’s eligibility for benefits during the 2024-25 benefit year is based on their income for 2023. And that information was provided to the Canada Revenue Agency on the tax returns for 2023 which were filed by taxpayers earlier this year.

Once the CRA receives the needed income information (usually by April 30, 2024) and determines a taxpayer’s benefit eligibility, those benefits are paid to eligible recipients throughout the 2024-25 benefit year, which starts on July 1, 2024 and ends on June 30, 2025.

It should be noted, as well, that while the federal government refers to these benefits under the umbrella term “child and family benefits”, it’s wrong to conclude that benefits are only available to parents and/or married individuals. Of the four benefit programs outlined below which will be in place during the upcoming benefit year, only the Canada Child Benefit program requires that a taxpayer be a parent, and none of the benefit programs require that a taxpayer be married or in a common-law relationship.

GST/HST Credit

The GST/HST credit is a non-taxable amount paid four times a year (on the 5^th of July, October, January, and April) to lower and middle-income individuals and families, to help offset the goods and services tax/harmonized sales tax (GST/HST) that they pay. Generally, the credit is available to Canadian residents who meet any one of the following criteria:

• aged 19 yearsof age or older;
• have or had a spouse or common law partner; or
• are or were a parent and live (or lived) with their child.

The amount of benefit which may be received is determined by both family size and income level. For the upcoming (July 2024 to June 2025) benefit year, the maximum annual GST/HST benefit is as follows:

• $519 if you are single;
• $680 if you are married or have a common-law partner; and
• $179 for each child under the age of 19.

The CRA website includes a chart showing the amount of GST/HST benefit which is provided at different income levels, to individuals and to families of different sizes and compositions. That chart can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/child-family-benefits/goods-services-tax-harmonized-sales-tax-gst-hst-credit/goods-services-tax-harmonised-sales-tax-credit-payments-chart.html.

Eligibility for the GST/HST credit for the 2024-25 benefit year is determined automatically by the CRA for each taxpayer who filed a return for 2023. There is, therefore, no need to indicate on the return that the taxpayer is applying for the GST/HST credit.

Canada Carbon Rebate

Unlike the other three credits which are based, at least in part, on household income, the Canada Carbon Rebate, or CCR (formerly known as the Climate Action Incentive Payment), is a flat rate, non-taxable credit paid to eligible residents living in Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, or Saskatchewan. The purpose of the CCR is to help offset the financial impact of the federal carbon tax, with the amount of the annual benefit determined by the taxpayer’s province of residence and family composition. An online tool allowing taxpayers to estimate the amount of CCR they may receive can be found on the CRA website at How much you can get - Canada Carbon Rebate (CCR) for individuals - Canada.ca.

In addition to living in one of these provinces, recipients must also satisfy the same eligibility criteria as for the GST/HST credit, in that they must be Canadian residents who are at least 19 years of age, or have or had a spouse or common-law partner, or are or were a parent and lives or lived with their child.

The CCR (for all provinces) includes a rural supplement of the base amount for residents of small and rural communities. That supplement, which was set at 10% of the base amount in previous years, has been increased to 20% for the 2024-25 benefit year. While there is no need to apply for the CCR when filing a tax return, individuals who believe they are eligible for the rural supplement need to ensure that they tick the applicable box on page 2 of the return to indicate their eligibility. That requirement does not apply to residents of Prince Edward Island, where all CCR recipients are eligible for the rural supplement.

The CCR is paid in quarterly instalments, meaning that during the 2024-25 benefit year, payments will be made to eligible Canadians on the 15^th day of April, July, October, and January.

More information on the CCR can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/child-family-benefits/cai-payment.html.

Canada Workers Benefit

The Canada Workers Benefit (CWB) is a refundable tax credit paid to lower-income Canadian residents who are aged 19 or older or are married or have a common-law spouse or a child with whom they live, and who have “working income” earned from employment or self-employment.

The amount of CWB which an individual or family can receive depends on marital status and net income. The basic amounts payable, and the net income levels at which eligibility for that basic benefit is eroded, are as follows.

• $1,518 for single individuals
  The single individual benefit is reduced if adjusted net income is more than $24,975. No basic amount is payable if the applicant’s adjusted net income is more than $35,095.
• $2,616 for families 
  The family benefit amount is reduced if adjusted family net income is more than $28,494. No basic amount is payable where adjusted family net income is more than $45,934.

In order to apply for the CWB, a recipient must file their tax return electronically and follow the software instructions for applying or, if filing a paper return, must complete and file a Schedule 6 with that tax return.

More detailed information on the CWB can be found at https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-workers-benefit.html.

Canada Child Benefit

The Canada child benefit (CCB) is a tax-free monthly payment made to eligible families to help with the cost of raising children under 18 years of age. The CCB is paid to the parent who is primarily responsible for the care and upbringing of the child or children, and the amount varies with the age and number of children.

The CCB is also a means-tested benefit, with the benefit amount being reduced as family net income increases. CCB amounts paid during the 2024-25 benefit year are based on family net income for 2023.

The maximum amounts payable for the benefit year running from July 2024 to June 2025 are as follows.

For each child:

• under 6 years of age: $7,787 per year ($648.91 per month)
• 6 to 17 years of age: $6,570 per year ($547.50 per month)

Where family net income for 2023 is less than $36,502, recipients will receive the maximum amount outlined above for 2024-25, with no reductions.

Individuals and families who may be eligible for the CCB will have their eligibility automatically assessed when they file their tax return for 2023: there is no requirement to file a particular schedule or other application. More information on the CCB is available on the federal government website at https://www.canada.ca/en/revenue-agency/services/child-family-benefits/canada-child-benefit-overview.html.

While the number and variety of federal child and family benefits and the varying eligibility criteria for each can be confusing, the necessary determinations and calculations are done by the federal government. The only step which need be taken by an individual is the filing of an annual tax return. Taxpayers who wish to find information on the benefits for which they may be eligible can refer to the Canada Revenue Agency website at https://www.canada.ca/en/revenue-agency/services/child-family-benefits.html, where detailed information on each such benefit, the eligibility criteria, and amounts which may be received are summarized.

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 #68 Corporate

Personal:

Issue #68 Personal

The Canadian tax system is a “self-assessing” one, in which taxpayers are expected (and, in most cases, required) to file an individual income tax return each spring. On that return the taxpayer provides a summary of income earned during the previous calendar year and claims available deductions and credits. Those calculations determine the amount of tax owed for the year and any amount owed must then, of course, be paid on or before April 30.

The Canadian tax system is a “self-assessing” one, in which taxpayers are expected (and, in most cases, required) to file an individual income tax return each spring. On that return the taxpayer provides a summary of income earned during the previous calendar year and claims available deductions and credits. Those calculations determine the amount of tax owed for the year and any amount owed must then, of course, be paid on or before April 30.

Although the percentage of taxpayers who are required to file a return but do not do so is relatively small, a percentage as low as 1% of non-filers in a population of 40 million can still amount to nearly 400,000 required returns not filed. There are a number of reasons why taxpayers don’t file a return – sometimes it’s just procrastination, or a lack of knowledge of how and when to get the return filed. In other cases, taxpayers don’t believe that they are required to file a return – for instance, where they have little or no income for the year.

However, in the majority of instances in which taxpayers don’t file a return, it’s likely because taxes are owed and they are unable to pay those taxes on time or in full – or at all. In such situations, it’s tempting to conclude that it’s better not to file in the hope, perhaps, that the CRA will overlook or somehow not notice the delinquency. That’s not, however, a realistic conclusion. Where a Canadian resident earns income, the payor of that income must file an income slip (T4 for employment income, T5 for interest income, etc.) with the Canada Revenue Agency, on which the recipient of that income is identified by name, address, and social insurance number. Where those slips don’t match up with income reported on a return for the year by the taxpayer, the omission will probably come to light.

Although each such instance of non-compliance represents lost revenue to the Canadian government, the resources needed to track down each and every instance of non-compliance simply aren’t available, especially since in many cases the amount recovered may be less than the costs which must be incurred to recover that amount.

With all of that in mind, the Canada Revenue Agency instituted a program – the Voluntary Disclosures Program (VDP) – intended to encourage non-compliant taxpayers to come forward and put their tax affairs in order. The incentive to do so arises from the fact that in most cases, while taxpayers who participate in the VDP program have to pay outstanding tax amounts owed, plus some interest, they can avoid both other interest charges, some penalties which would normally be imposed, and the risk of criminal prosecution.

To qualify for such relief under the VDP, an application made with respect to non-compliance with income tax filing and payment obligations must:

• be voluntary (meaning that it is done before the CRA initiates any enforcement action related to the information to be disclosed);
• be complete (that is, includes all relevant information and documentation);
• involve the application or potential application of a penalty;
• include information that is at least one year or one reporting period past due; and
• include payment of the estimated tax owing (taxpayers who are unable to do so can request a payment arrangement).

The VDP program includes two separate “tracks” for income tax disclosures – the Limited Program and the General Program – and the kind and extent of relief available depends on the track to which a particular application is assigned.

While the Canada Revenue Agency will ultimately make the determination of whether an application should proceed under the Limited or the General Program on a case-by-case basis, there are guidelines in place. The CRA’s intention is to restrict the Limited Program to instances in which taxpayers intentionally avoided their tax obligations (as distinct from inadvertence), or there is conduct on the part of the taxpayer which amounts to gross negligence. In making its determination of the appropriate track for a disclosure, the factors which the CRA will consider include the following:

• the dollar amounts involved;
• the number of years of non-compliance;
• the sophistication of the taxpayer;
• how quickly the taxpayer acted to correct their non-compliance after becoming aware of it;
• whether the disclosure was made after the taxpayer became aware of the CRA’s intended specific focus on that particular area of taxpayer compliance; and
• whether efforts were made to avoid detection through the use of offshore vehicles or other means.

Those whose applications are accepted under the Limited Program will be required to pay outstanding tax balances owed, plus interest, and will be subject to penalties. They will not, however, be subject to criminal prosecution and will be exempted from the more stringent penalties which usually apply in cases of gross negligence on the part of the taxpayer.

Taxpayers whose conduct does not consign them to the Limited Program will instead be considered under the General Program. Under that Program, no penalties will be charged and no criminal prosecutions will take place. As well, the CRA will provide partial interest relief, specifically for the years preceding the three most recent years of non-compliance. For example, a taxpayer who makes an application to the VDP and who has failed to file returns for the 2017 through 2022 taxation years may be provided with interest relief with respect to tax arrears owed for the 2017, 2018, and 2019 taxation years. Such relief is generally equal to 50% of interest normally owed – in other words, the taxpayer will be required to pay only half of the interest charges which would otherwise be levied for those years. No interest relief will, however, be provided on tax amounts owed for the three most recent (2020, 2021, and 2022) taxation years. Since interest charges levied by the CRA are, by law, higher than current commercial rates (for instance, the rate levied for July, August, and September of 2024 is 9%) and interest charged is compounded daily, having interest amounts forgiven, even in part, can make a significant difference to the overall tax bill faced by the taxpayer.

In order to benefit from the VDP, taxpayers must first make an application to the Program. That application must include payment of the estimated taxes owing, as a condition of participation in the VDP. Where a taxpayer is financially unable to make that tax payment, he or she can request that the CRA consider a payment arrangement.

The decision to apply to the VDP and to “come clean” about all previous tax transgressions is something that most taxpayers will likely consider with considerable trepidation. Those who are unsure about whether they want to move forward with a VDP application have the option of using the CRA’s “pre-disclosure discussion service”. As the name implies, that service allows taxpayers to participate in preliminary discussions with a CRA official, on an anonymous basis, to gain some knowledge about the VDP program, the process involved, and the potential relief available.

Taxpayers who decide to move forward with an application to the VDP can complete and file Form RC199 Voluntary Disclosures Program Application, which is available on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/rc199.html. Once the application is received, the CRA will check to make certain that the applicant meets all the criteria required for a valid application, and that all of the required information, documentation, and payment have been sent. The next step is for the CRA to determine the program (Limited or General) to which the application should be assigned, and the taxation year(s) for which relief is being considered. At each step the taxpayer will be provided with written notice of the CRA’s decisions.

If the decision made is that the application is not eligible for the VDP, the taxpayer will also be advised in writing, with reasons, of the CRA’s decision to deny the application.

Where the decision made by the Agency is one with which the taxpayer does not agree, they are entitled to ask for a second review of the application. It is also possible for a taxpayer to ask the Federal Court to review the decision and to direct the CRA to re-consider the VDP application. However, a taxpayer who wishes to pursue their application to the extent of filing such a Federal Court application is well advised to obtain legal advice before doing so.

Finally, taxpayers should recognize that the VDP Program can’t be used as a kind of “get out of jail free card” with respect to repeated failures to meet tax filing and payment obligations. The CRA’s expectations are that taxpayers who have benefitted from the VDP will thereafter meet their tax obligations, and a second review will be provided for the same taxpayer only in situations where the second application relates to a different matter than the first, and where the circumstances giving rise to the second application were beyond the taxpayer’s control.

Detailed information on the VDP can be found on the CRA website at https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/voluntary-disclosures-program-overview.html. Additional details with respect to the  Program are also outlined in the CRA’s Information Circular IC00-1R6 – Voluntary Disclosures Program, which is available on the same website at IC00-1R6 - Voluntary Disclosures Program - Canada.ca.

As the school year draws to a close, the thoughts of millions of Canadian parents turn to the question of how to find – and pay for – child care throughout the summer months. While many Canadians are still able to work from home for some portion of the work week, few (if any) have the kind of work arrangement which allows them to dispense entirely with child care arrangements during the summer months.

As the school year draws to a close, the thoughts of millions of Canadian parents turn to the question of how to find – and pay for – child care throughout the summer months. While many Canadians are still able to work from home for some portion of the work week, few (if any) have the kind of work arrangement which allows them to dispense entirely with child care arrangements during the summer months.

Parents needing to arrange such care don’t lack for options. There is an almost limitless number of choices, but what each of those choices has in common is a price tag – sometimes a steep one. Some options, like playground supervisors or day camps provided by the local recreation authority or municipality, can be relatively inexpensive, while the cost of others, like residential camps that provide room, board, and a range of sports and arts activities can run to thousands of dollars per week.

The good news for families which incur such expenditures is that in many cases a deduction for part or all of the costs incurred can be claimed on the tax return for the year. And, since eligible expenditures can be deducted from income on a dollar-for-dollar basis, that means that income used to pay eligible child care expenses is income which is not taxed. That tax savings is obtained by claiming the Child Care Expense Deduction, which is not specific to summer child care or summer camp costs, but is available for qualifying child care expenses incurred at any time during the year. As well, the rule determining whether child care costs incurred are deductible is fairly straightforward – parents who incur eligible child care costs in order to work (whether in employment or self-employment), or in some cases to attend school, can deduct those costs from income, within specified limits.

The amount of any available child care deduction is calculated on Form T778, and that calculation can seem forbiddingly complex. However, at the end of the day, the amount of child care expenses which can be deducted is simply the least of three figures, and only one of those figures requires a calculation. The steps involved in determining the amount of available child care expense deduction are as follows.

First, the amount of any deduction for child care expenses is limited to two-thirds of the taxpayer’s net income for the year. The income figure used to calculate the two-thirds figure is, generally, the amount shown on Line 23600 of the annual tax return. Where the family incurring child care expenses is a two-income family, it is the spouse with the lower net income who must make the claim and consequently it is their net income which is used to provide that two-thirds of income figure.

The second figure to be determined is the amount actually paid for eligible child care costs during the year. While virtually any licenced child care arrangement will qualify for purposes of the deduction, some more informal arrangements may not. Specifically, no deduction is available for amounts paid to most family members to provide child care. Consequently, it’s not possible for a working spouse to pay the stay-at-home parent to provide child care, nor is it possible to pay an older sibling who is under the age of 18 to provide such services, and to claim a deduction for those expenses incurred. As well, where a claim is made for a deduction for child care expenses on the annual return, the claimant must obtain (and be prepared to provide to the tax authorities) the social insurance number of the individual providing the care as well as a receipt showing the amounts paid, whether to an individual or an organization.

The third figure to be determined is the one which requires some calculation. Basically, the rules governing the deduction of child care expense impose a maximum deduction per child per year (referred to as the “basic limit”), with that basic limit dependent on the age and health of the particular child. As well, where expenses are incurred for overnight camps or boarding schools, the amount deductible for such costs is similarly capped.

For 2024, the following overall limits apply:

• $5,000 in costs per year for a child who was born in 2008 to 2017;
• $8,000 in costs per year for a child who was born after 2017;
• $11,000 in costs per year for a child who was born in 2024 or earlier, but for whom the disability amount can be claimed.

Similar restrictions are placed on the amount of costs which can be deducted for overnight camp or boarding school fees, and those are as follows:

• $125 per week for a child who was born in 2008 to 2017;
• $200 per week for a child who was born after 2017; and
• $275 per week for a child who was born in 2024 or earlier, but for whom the disability amount can be claimed.

Taking all of these figures into account, the computation of a deduction for summer day camp expenses for a typical Canadian family would look like this.

A two-income family has two children and both parents are employed. One spouse earns $70,000 per year, while the other earns $55,000. In 2023, one child is age 9 and the other is age 5. Neither child is disabled. During July and August, both of the children attend a local full-day summer camp, for which the cost is $400 per week per child.

• The first step is to determine the two-thirds of income figure. Since it is the lower-income spouse who must make the deduction claim, that figure is two-thirds of $55,000, or $36,663. Consequently, any deduction for child care expenses for the year cannot exceed $36,663.
• The second calculation is the total amount of child care expenses paid for each child:
  $400 per week for eight weeks of summer camp, or $3,200.
  Total child care expenses for each child are therefore $3,200.
• The last step is to determine the basic limit for child care expenses for each child, as follows:
  • the basic limit for the 5-year-old (who was born after 2017) is $8,000, and so the entire $3,200 in summer day camp costs incurred can be deducted.
  • the basic limit for the 9-year-old (who was born between 2008 and 2017) is $5,000, and so once again the entire $3,200 incurred for summer day camp costs can be deducted.

As well, since the camp is a day camp, the dollar amount cost limitations which apply with respect to overnight camps do not apply to limit the amount of expenses claimed by the family.

The total deduction available for child care expenses incurred for the 2024 tax year will therefore be $6,400. That deduction is claimed on Line 21400 of the tax return filed by the lower-income spouse for the year, reducing their taxable income from $55,000 to $48,600, and resulting in a federal tax savings of about $960. A similar tax deduction is claimed as well for provincial tax purposes; the amount of provincial tax saved will depend on the tax rates imposed by the province in which the family lives.

When parents are choosing summer activities/care for their children, that decision involves a number of factors, including the child’s interests and abilities, the availability of programs which match those interests and abilities, the work schedules of one or both parents, and, of course, the cost of the program or activity. While the availability of a “subsidy” through the tax system should never be the sole determinant of what activity or camp is the best choice, there’s no denying that being able to claim a deduction for the costs involved can tip the balance toward one or choice or another, or can bring a formerly unavailable option within a family’s financial reach.

Parents wishing to find out more about the child care expense deduction, and perhaps to calculate the maximum deduction which will be available to them for the 2024 tax year, should consult Form T778 E (23). The form which is currently on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t778.html is from the 2023 tax year, and consequently the age limits must be adjusted by one year for child care expense claims for 2024. (The actual form for 2024 will be posted on the CRA website early in 2025). The currently available form does, however, provide a detailed explanation of the rules governing the child care expense deduction, and those rules (as well as the applicable dollar limits, which are not indexed to inflation) will continue to apply for the 2024 tax year.

Each spring and summer, tens of thousands of Canadian families sell their homes and move – sometimes to a bigger and better property in the same town or city, and sometimes to a new city or even another province. At the same time, university students make the annual move from their university residences or apartments back to the family home for the summer. And, whatever the reason for the move or the distance to the new location, all moves have two things in common – stress and cost. Even where the move is a desired one, moving inevitably means upheaval of one’s life and the costs involved can be very significant. There is not much that can diminish the stress of moving, but the associated costs can be offset somewhat by a tax deduction which may be claimed for many of those costs.

Each spring and summer, tens of thousands of Canadian families sell their homes and move – sometimes to a bigger and better property in the same town or city, and sometimes to a new city or even another province. At the same time, university students make the annual move from their university residences or apartments back to the family home for the summer. And, whatever the reason for the move or the distance to the new location, all moves have two things in common – stress and cost. Even where the move is a desired one, moving inevitably means upheaval of one’s life and the costs involved can be very significant. There is not much that can diminish the stress of moving, but the associated costs can be offset somewhat by a tax deduction which may be claimed for many of those costs.

While it’s common to the refer to the “moving expense deduction” as though it were available to all taxpayers in all circumstances, the fact is that there is actually no universally available deduction claimable for moving costs – in order to be tax deductible, such moving costs must meet specific criteria. Our tax system allows taxpayers to claim a deduction only where the move is made to get the taxpayer closer to their new place of work, whether that work is a transfer within the same company, a change in employers, or moving to run a business at a new location. Specifically, moving expenses can be deducted where the move is made to bring the taxpayer at least 40 kilometres closer to their new place of work. That requirement is satisfied where, for instance, a taxpayer moves from Toronto to Calgary to take that new job. It’s also met where a taxpayer is transferred by their employer to another job in a different location and the taxpayer’s move will bring them at least 40 kilometres closer to the new work location. It’s not met where an individual or family move up the property ladder by selling and purchasing a new home in the same town or city.

As well, it’s not actually necessary to be a homeowner in order to claim moving expenses. The list of moving related expenses which may be deducted is basically the same for everyone – homeowner or tenant – who meets the 40 kilometre requirement. Students who move to take a summer job (even if that move is back to the family home) can also make a claim for moving expenses incurred where the overriding 40-kilometre requirement is met.

It's important to remember, however, that even where the 40-kilometre requirement is met, moving costs can be deducted only from income earned from employment or self-employment (business) – such costs cannot be deducted from other types of income, like investment income or employment insurance benefits.

The general rule is that a taxpayer can claim reasonable amounts that were paid for moving themself, family members, and household effects. In all cases, the moving expenses can only be deducted from employment or self-employment income earned at the new location. Where the move takes place later in the year, and moving costs are significant, it’s possible that the amount of income earned at the new location in the year of the move will be less than deductible moving expenses incurred. In such instances, those expenses can be carried over and deducted from income earned at the new location in any future year.

Within the general rule, there are a number of specific inclusions, exclusions, and limitations. The following is a list of expenses which can be claimed by the taxpayer without specific dollar figure restrictions (but subject, as always, to the overriding requirement of “reasonableness”).

• Travel expenses, including vehicle expenses, meals, and accommodation, to move the taxpayer and members of their household to their new residence (note that not all members of the household have to travel together or at the same time);
• Transportation and storage costs (such as packing, hauling, movers, in-transit storage, and insurance) for household effects, including such items as boats and trailers;
• Costs for up to 15 days for meals and temporary accommodation near the old and the new residences for the taxpayer and members of their household;
• Lease cancellation charges (but not rent) on the old residence;
• Legal or notary fees incurred for the purchase of the new residence, together with any taxes paid for the transfer or registration of title to the new residence (excluding GST or HST); 
• The cost of selling the old residence, including advertising, notary or legal fees, real estate commissions, and any mortgage penalties paid when a mortgage is paid off before maturity; and
• The cost of changing an address on legal documents, replacing driving licences and non-commercial vehicle permits (not including insurance), and costs related to utility hook-ups and disconnections.

At some times and in some places, houses sell almost as soon as they are put on the market, while at other times or in other places it can take weeks or even months to find a buyer. When the latter is the case, the homeowner might have to move to start that new job before the “old” house has sold. In those circumstances, the taxpayer is entitled to deduct up to $5,000 in costs incurred for the maintenance of the old residence while it is vacant and on the market. Specifically, costs including interest, property taxes, insurance premiums, and heat and utilities expenses paid to maintain the old residence while it is vacant and efforts are being made to sell it may be deducted. If any family members are still living at the old residence, or it is being rented, no such deduction is available.

It may seem from the forgoing that virtually all moving-related costs will be deductible – however, there are some costs for which the Canada Revenue Agency (CRA) will not permit a deduction to be claimed, as follows:

• Expenses for work done to make the old residence more saleable;
• Any loss incurred on the sale of the old residence;
• Expenses for job-hunting or house-hunting trips to another city (for example, costs to travel to job interviews or meet with real estate agents);
• Expenses incurred to clean or repair a rental residence to meet the landlord’s standards;
• Costs to replace such personal-use items as drapery and carpets;
• Mail forwarding costs; and
• Mortgage default insurance.

To claim a deduction for any eligible costs incurred, supporting receipts must be obtained. While the receipts do not have to be filed with the return on which the related deduction is claimed, they must be kept in case the CRA wants to review them.

Anyone who has ever moved knows that there are a seemingly endless number of details to be dealt with. For some types of costs, the administrative burden of keeping track of (and retaining receipts for) such moving-related expenses can be minimized by choosing instead to claim a standardized amount. Specifically, the CRA allows taxpayers to claim a fixed amount, without the need for detailed receipts, for travel and meal expenses related to a move. Using that standardized, or flat-rate method, taxpayers may claim up to $23 per meal, to a maximum of $69 per day, for each person in the household. Similarly, the taxpayer can claim a set per-kilometre amount for kilometres driven in connection with the move; that per kilometre amount ranges from 53.0 cents for Alberta to 70.5 cents for the Yukon. In all cases, it is the province or territory in which the travel begins which determines the applicable rate.

These standardized travel and meal expense rates are those which were in effect for the 2023 taxation year – the CRA will be posting the rates for 2024 on its website early in 2025, in time for the tax filing season.

Once eligibility for the moving expense deduction is established, the rules which govern the calculation of the available deduction are not complex, but they are very detailed. The best summary of those rules is found on the form used to claim such expenses – the T1-M. The current version of that form can be found on the CRA’s website at T1-M Moving Expenses Deduction - Canada.ca, and more information (including a link to rates for standardized meal and travel cost claims) is available at Line 21900 – Moving expenses - Canada.ca.

Many (if not most) taxpayers think of tax planning as a year-end exercise, one to be carried out in the last few weeks of the year, in order to take the steps needed to minimize the tax bill for that year. And it’s true that almost all strategies needed to both minimize the tax hit for the current year and to ensure that there won’t be a big tax bill come next April must be put in place by December 31 (the making of registered retirement savings plan (RRSP) contributions being the notable exception). Nonetheless, there’s a lot to recommend carrying out a mid-year review of one’s tax situation for the current year. Doing that review mid-year, instead of waiting until December, gives the taxpayer the chance to make sure that everything is on track and, especially, to put into place any adjustments needed to help ensure that there are no unpleasant tax surprises when the return for 2024 is filed next spring. And, while the deadline for implementing most tax saving strategies may be December 31, it’s also the case that opportunities to make a significant difference to one’s current-year tax situation diminish as the calendar year progresses.

Many (if not most) taxpayers think of tax planning as a year-end exercise, one to be carried out in the last few weeks of the year, in order to take the steps needed to minimize the tax bill for that year. And it’s true that almost all strategies needed to both minimize the tax hit for the current year and to ensure that there won’t be a big tax bill come next April must be put in place by December 31 (the making of registered retirement savings plan (RRSP) contributions being the notable exception). Nonetheless, there’s a lot to recommend carrying out a mid-year review of one’s tax situation for the current year. Doing that review mid-year, instead of waiting until December, gives the taxpayer the chance to make sure that everything is on track and, especially, to put into place any adjustments needed to help ensure that there are no unpleasant tax surprises when the return for 2024 is filed next spring. And, while the deadline for implementing most tax saving strategies may be December 31, it’s also the case that opportunities to make a significant difference to one’s current-year tax situation diminish as the calendar year progresses.

Mid-year is also a good time to check up on current year taxes because nearly all of the information needed to do so is readily available to the taxpayer. By the beginning of June, most Canadians have filed their individual income tax return for the 2023 tax year and received a Notice of Assessment outlining their tax position for that year. Those who receive a refund will celebrate that fact or, less happily, those who receive a tax bill will pay up the amount owed. And, although the taxpayer’s reaction to one or the other of these outcomes will be very different, the fact is that a large tax bill owing or a large tax refund arise from the same cause – and that is that the amount of tax paid throughout the year was incorrect. While most taxpayers are delighted to receive a tax refund (often viewing it, incorrectly, as “free” money from the government), the fact is that a large refund means that the taxpayer has overpaid their taxes for the previous year and has essentially provided the Canada Revenue Agency with an interest-free loan of funds that could have been put to better use in the taxpayer’s hands. The other outcome – a large bill – means that taxes have been underpaid for the previous year and that could mean paying interest charges to the CRA. Either way, it’s in the taxpayer’s best interests to ensure that tax paid throughout the year is sufficient to cover their taxes, without overpaying or underpaying. The best-case scenario, from a tax and personal finance perspective, is to file a tax return and receive a Notice of Assessment which indicates that there is neither a substantial refund payable nor any significant amount owing.

For most Canadians, income and available deductions and credits don’t vary significantly from one year to the next. Where that’s the case, the amount of tax owed by the taxpayer for 2023 (a figure that can be found on Line 43500 of the Notice of Assessment) is likely to be very close to one’s tax liability for 2024.

After finding out how much tax was paid for 2023, the next step in doing a review is to get a sense of how much income tax has already been paid for the 2024 tax year. There are two ways of paying income taxes throughout the year. The majority of Canadians (including all employees) have income taxes deducted from their paycheques and remitted to the federal government on their behalf – a process known as source deductions. Taxpayers who do not have income tax deducted at source – which would include self-employed individuals and, frequently, retired taxpayers – make tax payments directly to the federal government (four times a year, in March, June, September, and December) through the tax instalment system.

Using the tax payable figure for 2023 as a guide, it’s necessary to figure out whether income tax payments made to date, either through deductions made from the taxpayer’s paycheque, or through instalment payments of tax, match up with that tax liability figure, recognizing that by this point in the year, approximately one-half of taxes for 2024 should already have been paid. If they haven’t, and particularly if there is a significant shortfall which would mean a large balance owing when the tax return for 2024 is filed next spring, the taxpayer will need to take steps to remedy that.

Where the individual involved pays tax by instalments, the solution is simple. They can simply increase or decrease the amount of remaining instalment payments made in 2024 so that the total instalment payments made over the course of this year accurately reflect the total tax payable for the year. The only caveat in that situation is that the individual should err on the side of caution to ensure that there isn’t a shortfall in instalment payments, which could result in interest charges being levied by the CRA.

The situation is a little more complex for employees, or anyone who has tax deducted at source. Often when such individuals discover that they are overpaying taxes through source deductions, it’s because deductions which they claim on their return for the year – for expenditures like deductible support payments, child care expenses, or contributions to a registered retirement savings plan (RRSP) or first home savings account (FHSA) – aren’t taken into account in calculating the amount of tax to deduct at source. The solution for employees who find themselves in that situation is to file a FormT1213 – Request to Reduce Tax Deductions at Source with the CRA. That form is available on the CRA website at T1213 Request to Reduce Tax Deductions at Source - Canada.ca. On the T1213, the taxpayer identifies the amounts which will be deducted on the return for the year and, once the CRA verifies that those deductible expenditures (like child care expense costs or RRSP contributions) are being made, it will authorize the taxpayer’s employer to reduce the amount of tax which is being withheld at source to take account of that deduction.

Where it’s the opposite situation and a taxpayer finds that source deductions being made will not be sufficient to cover their tax liability for the year (meaning a tax bill to be paid next spring), the solution is to have those source deductions increased. No one likes paying more taxes, but where taxes are owed, the only choice involved is to pay them now or pay them later. Spreading out that payment over the rest of the tax year is much less painful than being hit with a large tax bill (as well as interest charges when that tax bill can’t be paid in full and on time) when the return for the year is filed next spring.

Take, for example, an employee who found out, after filing the return for 2023, that an additional $2,000 in taxes was owed. Assuming that their income and the amount of tax deducted from their paycheque doesn’t change, it’s likely that a similar amount will be owed when the return for 2024 is filed. If that taxpayer is paid biweekly, there will be about 13 paycheques between the end of June and the end of the year. Increasing the amount of tax deducted from those paycheques by about $75 per paycheque will mean that the $2,000 in taxes owing is paid to the Canada Revenue Agency by the end of the year – thereby avoiding a large tax bill when the return for 2024 is filed in the spring of 2025.

To increase the amount of tax deducted from their paycheque, the employee needs to obtain a TD1A form for their province of residence for 2024. That form can be found on the CRA 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. On the reverse side of that Form TD1, there is a section entitled “Additional tax to be deducted”, in which the employee can direct their employer to deduct additional amounts at source for income tax, and can specify the dollar amount which is to be deducted from each paycheque on a go-forward basis.

No one particularly likes thinking about taxes, at any time of year, but ignoring the issue definitely won’t make it go away. The investment of a few hours of time now, and putting in place any needed adjustments, can mean avoiding a nasty surprise in the form of a large tax bill which must be paid when the return for 2024 is completed and filed next spring.

Most retired Canadians receive income from two government-sponsored retirement income programs – the Canada Pension Plan (CPP) and the Old Age Security (OAS) program. While benefits from both are paid to recipients by the federal government on a monthly basis, there are significant differences in how the two plans are funded, the amounts which can be received, and, most significantly for retirees, in how entitlement to benefits is determined each year.

Most retired Canadians receive income from two government-sponsored retirement income programs – the Canada Pension Plan (CPP) and the Old Age Security (OAS) program. While benefits from both are paid to recipients by the federal government on a monthly basis, there are significant differences in how the two plans are funded, the amounts which can be received, and, most significantly for retirees, in how entitlement to benefits is determined each year.

Canadians who participated in the paid work force during their adult life will have contributed to the Canada Pension Plan (contributions are mandatory, and are deducted from the individual’s paycheque and remitted to the federal government on their behalf) and will be able to receive CPP retirement benefits as early as age 60. The amount of monthly benefit received depends on the amount of contributions made by the benefit recipient made during their working life.

The Old Age Security program differs from the Canada Pension Plan in a number of ways. The OAS program is funded entirely from general government revenues, with no direct contribution made by individual Canadians. Entitlement to OAS is based solely on the number of years of Canadian residence, and individuals who were resident in Canada for 40 years after the age of 18 can receive full OAS benefits. As of the second quarter (April to June of 2024), the full OAS benefit for individuals under the age of 75 is $713.34 per month.

The OAS program is distinct from other sources of retirement income in another, less welcome, way, in that it is the only government retirement income program under which the federal government can require the recipient of benefits to repay those benefits, in whole or in part. That repayment requirement comes about through the OAS “Recovery Tax”, which is universally known as the OAS “clawback”.

While the rules governing the administration of the clawback can be confusing, the concept is a (relatively) simple one. Anyone who received OAS benefits during 2023 and had income for that year of more than $86,912 must repay a portion of OAS benefits received. That repayment, or clawback, is administered by reducing the amount of OAS benefits which the individual receives during the following benefit year, which runs from July 1, 2024 to June 30, 2025.

For example, an individual who receives full OAS during 2023 and has net income for the year of $96,000 will be subject to the clawback. They must repay OAS amounts received at a rate of 15 cents (or 15%) of every dollar of income over the clawback income threshold, as in the following simplified example.

The OAS clawback threshold for 2023 is $86,912.

If your income in 2023 was $96,000, then your repayment would be 15% of the difference between $96,000 and $86,912:

$96,000 - $86,912 = $9,088

$9,088 x 0.15 = $1,363.20

You would have to repay $1,363.20 ($113.60 per month) for the July 2024 – June 2025 period.

The OAS clawback affects only individuals who have an annual income of at least $86,912 (for 2023), and it’s arguable that at such income levels, the clawback requirement does not impose any real financial hardship. Nonetheless, the OAS clawback is a perpetual irritant to those affected by it, perhaps because of the sense that they are being penalized for being disciplined savers, or good managers of their finances during their working years, in order to ensure a financially comfortable retirement.

While any sense of grievance can’t alter the reality of the OAS clawback, there are strategies which can be put in place to either minimize or, in some cases, entirely eliminate one’s exposure to that clawback. Some of those planning considerations are better addressed earlier in life, prior to retirement, However, it’s not too late, once one is already receiving OAS, to make arrangements to avoid or minimize the clawback.

In all cases, no matter what strategy is employed, the goal, as with much of individual tax planning, is to “smooth” one’s income from year to year, so that net income for each year comes in under the OAS clawback threshold and, not incidentally, minimizes exposure to the higher federal and provincial income tax rates which apply once taxable income exceeds $100,000.

The starting point, for taxpayers who are approaching retirement, is to determine how much income will be received from all sources during retirement, based on CPP and OAS entitlement, any savings accrued through an RRSP, and any amounts which may be received from a private pension plan.

Anyone who has an RRSP must begin receiving income from those RRSP funds in the year after that person turns 71. However, it’s possible to begin receiving income from an RRSP at any time. Similarly, an individual who is eligible for CPP retirement benefits can begin receiving those benefits anytime between age 60 and age 70, with the amount of monthly benefit receivable increasing with each month receipt is deferred. The same calculation applies to OAS benefits, which can be received as early as age 65 or deferred up until age 70.

Once the amount of annual income is determined, strategies to smooth out that income can be put in place. Those strategies can include receiving income from an RRSP prior to age 71, so as to reduce the total amount within the RRSP and so thereby reduce the likelihood of having a large “bump” in income when required withdrawals kick in at that time.

Taxpayers are sometimes understandably reluctant to take steps which they view as depleting their RRSP savings, but receiving income from an RRSP doesn’t necessarily mean spending that income. While tax has to be paid on any withdrawals (no matter what the taxpayer’s age), the after-tax amounts that aren’t currently needed as income can be contributed to the taxpayer’s tax-free savings account (TFSA), where they can be invested in the same manner as they were in the RRSP and can continue to compound free of current tax. And, when the taxpayer has need of those funds in retirement, they can be withdrawn free of tax and they won’t count as income for purposes of the OAS clawback – or for purposes of any other income-tested tax credit or benefit.

Taxpayers who are married can also “even out” their income by using pension income splitting, so that neither of them has sufficient income to be affected by the clawback.  Using pension income splitting, the spouse who has income over the OAS clawback threshold re-allocates the “excess” income to their spouse on the annual return, and that income is then considered to be income of the recipient spouse, for purposes of both income tax and the OAS clawback. To be eligible for pension income splitting, the income to be reallocated must be private pension income, which is generally income from an RRSP or registered retirement income fund (RRIF), or from an employer-sponsored pension plan.

There are two reasons why pension income splitting is a particularly attractive strategy for avoiding or minimizing the OAS clawback. First, there is no need to actually change the source or amount of income received by each spouse, as the reallocation of income is “notional”, existing only on the return for the year. Second, no decision has to be made on pension income splitting until it’s time to file the return for the previous year, meaning that spouses can easily calculate exactly how much income has to be reallocated in order to avoid the clawback, and to reduce tax liability generally. More information on the kinds of income eligible for pension income splitting, and the mechanics of the process, can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/pension-income-splitting.html.

Detailed information on the OAS clawback  is available at https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/repayment.html.

This year, the Canada Revenue Agency (CRA) will receive and process more than 30 million individual income tax returns for the 2023 tax year. No two of those returns will be identical, as each such return will have its own particular combination of amounts and sources of income reported, and deductions and credits claimed. There is, however, one thing which every one of those returns has in common: for each and every one, the CRA will review the return filed, determine whether it is in agreement with the information contained therein, and, finally, issue a Notice of Assessment (NOA) to the taxpayer summarizing the Agency’s conclusions with respect to the taxpayer’s tax situation for the 2023 tax year.

This year, the Canada Revenue Agency (CRA) will receive and process more than 30 million individual income tax returns for the 2023 tax year. No two of those returns will be identical, as each such return will have its own particular combination of amounts and sources of income reported, and deductions and credits claimed. There is, however, one thing which every one of those returns has in common: for each and every one, the CRA will review the return filed, determine whether it is in agreement with the information contained therein, and, finally, issue a Notice of Assessment (NOA) to the taxpayer summarizing the Agency’s conclusions with respect to the taxpayer’s tax situation for the 2023 tax year.

When all goes as it should, the information – and the tax result – outlined in the Notice of Assessment is the same as that provided by the taxpayer in their return. In a minority of cases, however, the information presented in the Notice of Assessment will differ from that provided by the taxpayer in the 2023 tax return. Where that difference means an unanticipated refund, or a refund larger than the one expected, it’s a good day for the taxpayer. In some cases, however, the Notice of Assessment will inform the taxpayer that additional amounts are owed to the CRA. When that happens, the taxpayer has to figure out why, and to decide whether or not to dispute the CRA’s conclusions.

Many such discrepancies are the result of an error made by the taxpayer in completing the return. A lot of information from a variety of sources is reported on even the most straightforward of returns and it’s easy to overlook some of that information. Especially where the taxpayer has multiple sources of income – for instance, where individuals are working in the gig economy they may work under a succession of contracts during the year, or have multiple sources of income at any given time – it can be easy to overlook one or more small amounts of income. Equally, newly retired individuals who are used to having only one source of income – their paycheques – may now be receiving Canada Pension Plan benefits, Old Age Security amounts, private pension income, and, possibly, withdrawals from a registered retirement savings plan or registered retirement income fund, making it difficult to keep track of everything.

As well, most Canadian taxpayers now use tax return preparation software to complete and file their returns. While using such software essentially eliminates the risk of arithmetical error, inputting errors can still occur.

Where there is additional tax owing because of an error or omission made by the taxpayer in completing the return, and the CRA’s figures are correct, disputing the assessment doesn’t really make sense. There is as well a persistent tax myth which says that if a taxpayer doesn’t receive an information slip (T4 or T5, as the case might be) for income received during the year, that income doesn’t have to be reported and therefore isn’t taxable. That is not the case, and never has been. All taxpayers are responsible for reporting all income received and paying tax on that income, and the fact that an information slip was lost, mislaid, or never received doesn’t change anything. The CRA receives a copy of all information slips issued to Canadian taxpayers, and its systems will cross-check to ensure that all income stated on those information slips is accurately reported in the tax return.

There are, however, instances in which the CRA and the taxpayer are in disagreement over substantive issues, and those issues most often involve claims for deductions or credits. For instance, the CRA may have disallowed an individual’s claim for a medical expense, or for a deduction claimed for a business expenditure, and the taxpayer believes in good faith that the credit or deduction claim is a legitimate one. 

Whatever the nature of the dispute, the first step is always to contact the CRA for an explanation of the reasons why the change was made. While the information provided in the NOA is a good summary of the taxpayer’s tax situation for the year, it may not always be clear on precisely how and why the taxpayer and the Agency disagree on the actual amount of income tax which the taxpayer must pay for the year. The first step to be taken would be a call to the Individual Income Tax Enquiries line at 1-800-959-8281, where client services agents who have access to the taxpayer’s return can explain any changes which were made during the assessment process. A real-time notification of the hours of service and current telephone wait times for that service is available on the CRA website at Contact the Canada Revenue Agency - Canada.ca. If that call doesn’t resolve the taxpayer’s questions, or there is still a disagreement, the taxpayer has to decide whether to take the next step of filing a Notice of Objection to the Notice of Assessment.

Filing a Notice of Objection formally advises the CRA that the taxpayer is disputing the Agency’s determination of their tax liability for the taxation year in question. Not incidentally, the filing of an Objection also brings to a halt most efforts undertaken by the CRA to collect taxes which it considers owing for the taxation year under dispute (although, if the taxpayer is eventually found to owe an amount in dispute, interest on that amount will have accumulated in the interim). Where the taxpayer files an Objection, the CRA’s collection efforts are, in most cases, suspended until 90 days after the date the CRA’s decision on that Objection is sent to the taxpayer.

There is a time limit by which any Objection must be filed, albeit a reasonably generous one. Individual taxpayers must file an Objection by the later of 90 days from the mailing date of the Notice of Assessment (the date found at the top of page 1) or one year from the due date of the return which is being disputed. So, for tax returns for the 2023 tax year, the one-year deadline (which is usually, but not always, the later of those two dates) would be April 30, 2025 (or June 17, 2025 for self-employed taxpayers and their spouses). As with most things related to taxes, it’s best not to put it off. At the very least, if the taxpayer is ultimately found to owe some or all of the taxes assessed by the CRA, interest will have accrued on those taxes for the entire period since the filing due date and, if the filing of the Objection is delayed, the CRA may well have already commenced its collection efforts.

Taxpayers who have registered with the CRA’s online services feature My Account can file their Notice of Objection online at https://www.canada.ca/en/revenue-agency/services/e-services/e-services-individuals/account-individuals.html. The taxpayer provides information with respect to the assessment being disputed and the reasons why the assessment is being disputed and submits those reasons by clicking on the Submit button at the bottom of the "File a formal dispute” page. Taxpayers who are disputing their tax assessment online can also scan and send supporting documents relating to that dispute to the Agency.

While filing a dispute through My Account is certainly faster than mailing (or faxing) a hard copy of the Notice of Objection, not all taxpayers want to use that option. Taxpayers who choose instead to file their objection using a hard copy of a Notice of Objection form can find the most current version of the CRA’s standardized T400A Objection (which was updated and re-issued in the fall of 2023) on the Agency’s website at T400A Notice of Objection - Income Tax Act - Canada.ca.

Taxpayers aren’t obligated to use the CRA’s official Notice of Objection form – any communication which makes it clear that the taxpayer is objecting to his or her Notice of Assessment will do. Nonetheless, there’s no reason not to use the standardized form, and there are benefits to doing so. Using the T400A form will make it clear to the CRA that a formal objection is being filed, will present the necessary information in a format with which the Agency is familiar, and will also mean that no required information is inadvertently omitted. It’s also helpful to include a copy of the Notice of Assessment which is being disputed. Taxpayers should also consider ensuring proof of both delivery and time of delivery by sending the form or letter to the Appeals Intake Center in a way which provides for tracking and proof of delivery.

There is a single Appeals Intake Centre, and the mailing address for that Centre can be found on the CRA’s Notice of Objection form. A Notice of Objection can also be faxed to the Appeals Intake Centre, and the fax numbers for that Centre are available on the CRA website at File an objection – Income tax – Canada.ca. Finally, taxpayers can contact the CRA at its objection enquires phone line in order to get information about the status of their appeal. The toll-free telephone number for calls from within Canada to that line is 1-800-959-5513.

In the course of making its decision, the Agency may or may not contact the taxpayer for further discussion of the issues in dispute. Should the taxpayer be contacted, they may be asked to provide representations outlining their position, in writing or at a meeting. Through such representations and meetings, it may be possible for the taxpayer and the CRA to come to an agreement on the taxpayer’s tax liability. In either case, the CRA will either confirm its original assessment or change it. If the original assessment is changed, the CRA will issue a Notice of Reassessment outlining the changes. If the taxpayer continues to disagree with the CRA’s position, the next step is an appeal to the Tax Court of Canada. It’s generally a good idea, if an appeal is being considered, to consult legal counsel before filing that appeal.

Detailed information on the objection process is available on the CRA website at File an objection – Income tax – Canada.ca The Agency also publishes a useful pamphlet entitled Resolving Your Dispute: Objection and Appeal Rights under the Income Tax Act, and the most recent release of that publication can be found on the CRA website at P148 Resolving your dispute: Objection rights under the Income Tax Act - Canada.ca.

For the majority of Canadians, the due date for filing of an individual tax return for the 2023 tax year was Tuesday April 30, 2024. (Self-employed Canadians and their spouses have until Monday June 17, 2024 to get that return filed.) When things go entirely as planned and hoped, the taxpayer will have prepared a return that is complete and correct, and filed it on time, and the Canada Revenue Agency (CRA) will issue a Notice of Assessment indicating that the return is “assessed as filed”, meaning that the CRA agrees with the information filed and the amount of tax payable determined by the taxpayer. While that’s the outcome everyone is hoping for, it’s a result which can be derailed in any number of ways.

For the majority of Canadians, the due date for filing of an individual tax return for the 2023 tax year was Tuesday April 30, 2024. (Self-employed Canadians and their spouses have until Monday June 17, 2024 to get that return filed.) When things go entirely as planned and hoped, the taxpayer will have prepared a return that is complete and correct, and filed it on time, and the Canada Revenue Agency (CRA) will issue a Notice of Assessment indicating that the return is “assessed as filed”, meaning that the CRA agrees with the information filed and the amount of tax payable determined by the taxpayer. While that’s the outcome everyone is hoping for, it’s a result which can be derailed in any number of ways.

By April 22, 2024, almost 21 million individual income tax returns for the 2023 tax year had been filed with the CRA. And, inevitably, some of those returns contain errors or omissions that must be corrected.

Nearly 95% of the returns which have already been filed for the 2023 tax year were filed through electronic filing methods, meaning that they were prepared using tax return preparation software. The use of such software significantly reduces the chance of making a clerical or arithmetical error, like entering an amount on the wrong line or adding a column of figures incorrectly. However, no matter how good the software, it can work only with the information that is provided to it. Sometimes taxpayers prepare and file a return, only to later receive a tax information slip that should have been included on that return (or, more frequently, locate a tax information slip that had been received but was overlooked). It’s also easy to make an inputting error when transposing figures from an information slip (a T4 from one’s employer, for instance) into the software, such that $76,326 in income becomes $73,626 or $66,326. Whatever the cause, where the figures input are incorrect or information is missing, those errors or omissions will be reflected in the final (incorrect) tax payable figure produced by the software.

When the error or omission is discovered in a return which has already been filed, the question which immediately arises is how to make things right. The first impulse of many taxpayers is to file another return, in which the complete and correct information is provided, but that’s not the right answer. There are, however, several ways in which a mistake or omission on an already filed tax return can be corrected, including online options.

For several years now, taxpayers who file their tax returns online, whether through NETFILE or EFILE, have been able to notify the CRA of an error or omission in an already-filed return electronically by using the Agency’s ReFILE service. That service, which can be found at https://www.canada.ca/en/revenue-agency/services/e-services/e-services-businesses/refile-online-t1-adjustments-efile-service-providers.html, allows taxpayers to very easily make corrections to an already filed return online, on the CRA website. Those taxpayers who used NETFILE to file their return can file an adjustment to a return filed for any of the 2020, 2021, 2022 and 2023 tax years.

While the majority of changes which a taxpayer is likely to want to make on his or her return can be made through electronic means, there are limitations to the service. ReFILE cannot be used to make changes to personal information, like the taxpayer’s address or direct deposit details. There are also some types of tax matters which cannot be handled through ReFILE, like applying for a disability tax credit or child and family benefits.

Taxpayers who have registered for the CRA’s “My Account” service have the option of making a change or correction to a return online through My Account, using the “Change My Return” feature. At one time, the process of becoming registered for My Account was somewhat cumbersome, as the taxpayer had to wait to receive a CRA-issued security code, which was sent by regular mail. That process has been streamlined, and registration for My Account can now be done in real time through what the CRA terms “document verification”. That document verification process requires a user to take a smartphone picture of their government-issued photo identification and of themself in order to verify identity. For purposes of this process, the only acceptable photo identification documents are a Canadian passport, Canadian drivers’ licence, or provincial/territorial photo ID card. More information on how to register for My Account using the document verification method can be found on the CRA website at My Account – What’s new - Canada.ca.

While using the CRA’s online services, whether through My Account or ReFILE, is certainly the fastest way to make a change or correction to an already-filed return, taxpayers who don’t wish to use any online method do still have a paper option. The paper form to be used is Form T1-ADJ E (23), which can be found on the CRA website at T1 Adjustment Request (canada.ca). Those who are unable to print the form off the website can order a copy to be sent to them by mail by calling the CRA’s individual income tax enquiries line at 1-800-959-8281.

Hard copy of a T1-ADJ E (23) is filed by sending the completed document to the appropriate Tax Center, meaning the one with which the tax return was originally filed. A listing of Tax Centres and their addresses can be found on the reverse of the TD-ADJ E (23) form. A taxpayer who isn’t sure any more which Tax Centre their return was filed with can go to https://www.canada.ca/en/revenue-agency/corporate/contact-information/tax-services-offices-tax-centres.html on the CRA website and select their location from the drop-down menu found there. The address for the correct Tax Centre will then be provided. 

Where a taxpayer discovers an error or omission in a return already filed, the impulse is to correct that mistake as soon as possible. However, no matter which method is used to make the correction – ReFILE, My Account or the filing of a T1-ADJ (23) in hard copy – it’s necessary to wait until the Notice of Assessment for the (incorrect) return already filed is received. Corrections to a return which are submitted prior to the time that return is assessed simply can’t be processed by the Agency.

Once the Notice of Assessment is received, and an adjustment request is made, it will take at least a few weeks before the CRA responds by issuing a Notice of Reassessment based on the new information provided by the taxpayer. Not surprisingly, requests which are submitted during the CRA’s peak return processing period between March and July will likely take longer.

Sometimes the CRA will contact the taxpayer, even before a return is assessed (or reassessed), to request further information, clarification, or documentation of deductions or credits claimed (for example, receipts documenting medical expenses claimed, or child care costs). Whatever the nature of the request, the best course of action is to respond promptly, and to provide the requested documents or information. The CRA can assess only on the basis of the information with which it is provided, and it is the taxpayer’s responsibility to provide support for any deduction or credit claims made. Where a request for information or supporting documentation for a claimed deduction or credit is ignored by the taxpayer, the assessment will proceed on the basis that such support does not exist. Providing the requested information or supporting documentation can usually resolve the question to the CRA’s satisfaction, and its assessment of the taxpayer’s return can then be completed.

As everyone knows, buying one’s first home – achieving that elusive first step on to the “property ladder” – has always presented a challenge, and that challenge has rarely been greater than it is now. The two unavoidable hurdles which must be cleared by first time home buyers are putting together sufficient funds for a down payment, and qualifying for mortgage financing under mortgage lending requirements which have become increasingly stringent in recent years. Soaring house prices and mortgage interest rates which have steadily increased over the past two years combine to make it difficult to clear either or both of those hurdles.

As everyone knows, buying one’s first home – achieving that elusive first step on to the “property ladder” – has always presented a challenge, and that challenge has rarely been greater than it is now. The two unavoidable hurdles which must be cleared by first time home buyers are putting together sufficient funds for a down payment, and qualifying for mortgage financing under mortgage lending requirements which have become increasingly stringent in recent years. Soaring house prices and mortgage interest rates which have steadily increased over the past two years combine to make it difficult to clear either or both of those hurdles.

Help is provided to first time home buyers through a number of federal and provincial tax credit or tax deferral programs, and three new measures recently announced by the federal government as part of the 2024-25 Federal Budget are intended to provide further assistance with putting together a down payment, qualifying for mortgage financing, and repaying amounts borrowed to purchase a first home.

Changes to the Home Buyers’ Plan

The first two measures relate to changes to the federal Home Buyers’ Plan, or HBP. The HBP allows first-time buyers who have money saved in a registered retirement savings plan (RRSP) to withdraw the funds held in that RRSP (to a prescribed limit) on a tax-free basis, as long as those funds are used toward the purchase of a first home. Under current rules, a first-time home buyer can withdraw up to $35,000 from his or her RRSP to use toward the purchase of a first home.

This year’s Federal Budget included a proposal to increase the amount which each individual can withdraw on a tax-free basis from their RRSP for the purchase of a first home from $35,000 to $60,000. The change is effective for RRSP withdrawals made by HBP participants after the federal budget date of April 16, 2024.

While the HBP rules allow first-time home buyers to withdraw funds on a tax-free basis from their RRSPs, those rules also require that the funds be repaid to the RRSP. That repayment takes place on a prescribed schedule – repayments in a specified amount must start in the second year after the withdrawal was made and must be completed within 15 years. In any year(s) in which a required repayment is not made in full, the amount of any repayment not made is included in the income of the RRSP holder for the year and is fully taxed as income.

The first few years of home ownership are often the most challenging from a financial perspective, as new homeowners adjust to the need to make regular mortgage payments and property tax payments and to meet all of the varied (and often unanticipated) expenses that home ownership entails. Having to also make repayments to one’s RRSP at the same time undoubtedly adds to the financial stress.

In this year’s budget, the federal government proposed a change in the repayment rules for the HBP. As a temporary measure, HBP participants who make a first withdrawal from their RRSP between January 1, 2022 and December 31, 2025 will not be required to begin repaying those amounts to their RRSP until the fifth year after the year in which the withdrawal was made. Full repayment will still have to be made in prescribed amounts and within the required 15-year repayment period.

Extended amortization on new build purchases by first-time buyers

For all but the most fortunate first-time home buyers, purchasing a home means borrowing money to cover the difference between the down payment amount and the total purchase price of the home. For most, that means taking out a mortgage which must be repaid in specified amounts over a specified period of time (known as the “amortization period”).

The “standard” repayment or amortization period for residential mortgages is 25 years. Opting for a shorter amortization period means higher mortgage payments and, conversely, where the amortization period is longer than 25 years, the amount of monthly mortgage payments goes down. The recent federal government announcement allows qualifying first-time home buyers, as of August 1, 2024, to extend the amortization (repayment) period for their mortgage to 30 years. Significantly, however, that extended amortization period will be available only to first-time buyers who purchase newly-built homes.

Having the ability to extend the amortization period in this way will have two benefits. First, of course, having lower mortgage payments will ease the financial stress of first-time home ownership. As well, first-time home buyers who opt for a 30-year amortization period and therefore have smaller monthly mortgage payments will likely also find it easier to qualify for more mortgage financing. When assessing the creditworthiness of a mortgage financing applicant, one of the metrics used by a lender is the percentage of income required to meet monthly mortgage payments, along with other debt repayment obligations (car payments, credit card debt, etc.). Where monthly mortgage payment amounts are reduced by an extended amortization period, the percentage of income which the prospective home buyer must allocate to debt repayment goes down, meaning that their creditworthiness, and the amount of mortgage financing for which they qualify, may increase. 

Each of these measures is intended to help qualifying first-time home buyers get into the housing market, and each will undoubtedly have that effect. However, as with nearly all financial and tax planning strategies, there are potential downsides which have to be considered. Withdrawing funds from an RRSP inevitably reduces the amount of investment income which those funds can earn, and ultimately means reduced retirement savings over the long term. Extending an amortization period reduces monthly mortgage payments but will mean that, over the long run, the total amount of interest paid will be much higher. Each prospective homeowner will have to determine what the “right” course of action is, based on their individual circumstances. Some help with that determination can be found on the website of the Financial Consumer Agency of Canada at https://www.canada.ca/en/financial-consumer-agency/services/mortgages.html, where detailed information on the ins and outs of financing a home purchase (including online calculators) is provided.