Important tax changes Canadians should know about in 2024 (2024)

Some tax changes this year are increasing costs for Canadians, including one that a tax specialist says could be the "last winter storm of the season that really turns things upside down."

From higher income taxes to alcohol taxes, here are some important tax changes this year that Canadians should know about.

FEDERAL INCOME-BASED TAXES

The Canadian Taxpayers Federation highlighted someimportant tax measures in its report released in December 2023. It said almost all Canadians will pay higher federal income taxes this year because of changes to Canada Pension Plan contributions and Employment Insurance premiums. The Ottawa-based not-for-profit citizen's group says it's committed to lowering taxes and keeping the government accountable.

While workers making $30,000 will pay $9 more in 2024, people earning at least $80,000 will pay $347 more, the federation says.

EMPLOYMENT INSURANCE

The federal employment insurance rate and maximum annual insurable earnings have increased this year from 1.63 per cent for $61,500 in 2023 to 1.66 per cent for $63,200 in 2024 for employees. This means that employees must pay a maximum annual premium of $1,049.12.

For employers, the rate rose from 2.28 per cent in 2023 to 2.32 per cent this year, so they must now pay a maximum annual premium of $1,468.77.

For Quebec residents, the EI rate rose from 1.27 per cent for $61,500 to 1.32 per cent for $63,200. Quebec employees must pay a maximum annual premium of $834.24 in 2024. For Quebec employers, the rate grew from 1.78 per cent to 1.85 per cent, making their maximum annual contribution $1,167.94.

Since 2018, EI for employees and employers has risen by $191 and $267, respectively, according to the Canadian Taxpayers Federation.

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CARBON TAX SET TO CLIMB

The federal carbon tax will increase to $80 per tonne from $65 per tonne on April 1, 2024. The carbon tax applies to all taxpayers except those in Quebec. As a result, the price per litre of gas climbs to 17.6 cents from 14.3 cents. That will cost a family about $12.32 each time they fill a 70-litre minivan, the federation said.

Meanwhile, Canadians living in provinces using the federal carbon tax began receiving carbon pricing rebates Monday from the federal government's Climate Action Incentive payment. The rebates depend on the size of the household and are given every three months.

ALCOHOL TAXES

Starting April 1, 2024, the excise tax on beer, wine and spirits will be up 4.7 per cent because of the alcohol escalator tax. The increase will cost taxpayers about $100 million this year and next year, the federation said.

DIGITAL SERVICES TAX

The Canadian Taxpayers Federation says consumers can expect to pay higher prices because of a new three per cent digital services tax that aims to get tech giants such as Amazon, Uber and Facebook to pay their fair share of taxes. The tax would apply to businesses with annual worldwide revenues of at least 750 million euros and annual Canadian digital services revenue greater than $20 million.

The Deputy Prime Minister's Office wasn't able to confirm the timing of this change by publication, though the Liberals' spring budget confirmed they planned to implement it.

The federation suggested businesses would transfer the tax to consumers. It cited a Tax Foundation report that assessed the impact of the tax in France, predicting that about 55 per cent of the total tax burden will be passed on to consumers, 40 per cent to online vendors and only five per cent to digital companies.

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HIGHER INTEREST RATES FOR LATE TAXES

The interest rate charged on late taxes, Canada Pension Plan contributions and employment insurance premiums will rise to 10 per cent from nine per cent.

John Oakey, vice-president of taxation at the Chartered Professional Accountants of Canada in Toronto, said the interest rate applies to any personal income tax balance left unpaid after April 30.

"Paying tax instalments and income tax balance on time is very important to avoid the interest charge," Oakey said in an email to CTVNews.ca.

HOME OFFICE EXPENSES

For home office expenses, the Canada Revenue Agency's (CRA) flat rate of $2 per day throughout 2020 to 2022 is no longer active for the 2023 taxation year, Oakey said. He said the temporary flat rate method was initially meant to make it simpler to deduct home office expenses during the pandemic.

Employees must use the detailed method and obtain a completed Form T2200 signed by their employer to claim home office expenses for 2023, according to the CRA.

Employees who were required to work from home are generally eligible for home office expenses that were directly related to their work, the CRA said on its website. They must meet conditions, such as working from home more than 50 per cent of the time for at least four straight weeks in the year. Home office expenses reimbursed by the employer are excluded.

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WIDER TRUST REPORTING RULES

Caitlin Butler, a Vancouver-based tax specialist and director of tax education and publications at Video Tax News, noted the expansion of trust reporting rules is a big change that will affect many taxpayers.

"These changes will impact many individuals and businesses, many of whom may not even realize they should file a trust return," Butler said in an email to CTVNews.ca.

She said required reporting has been expanded to include situations where a trust acts as an agent for its beneficiaries, often referred to as a bare trust. "In plain English, this occurs when the person on title or holding the asset is not the true beneficial owner but rather holds the asset for the benefit of another party," she explained.

Examples include if a parent is on title of a child's home – without the parent having beneficial ownership – to help the child obtain a mortgage, or a corporate bank account is opened by the shareholders with the corporation being the beneficial owner of the funds.

Butler said people need to find out if they are on title or holding an asset for which they are not the true beneficial owner. For example, she said they should determine if they get the benefits of the asset – such as proceeds on the sale of the asset – and if they are liable for the costs or risks of the asset, including property taxes.

"If a person is on title but not the true beneficial owner, there is likely a bare trust arrangement, which may require a trust filing due April 2, 2024," Butler said. "This will be a massive exercise in compliance with the significant risk that many individuals and businesses will unknowingly not comply with the law. … This could end up being that last winter storm of the season that really turns things upside down."

Many affected by the rules won't owe more tax, but for the most part, they will have to pay compliance costs, such as paying a professional adviser to complete and file the trust return, she said.

If they don't comply, the penalty could be $25 per day every day that the returns are late, up to $2,500, she added.

With files from CTVNews.ca Writer Natasha O'Neill and The Canadian Press