CRA – Good ideas, higher costs and alerts

Although we don’t prepare tax returns, we do keep up with what’s happening with Canada Revenue Agency and how that affects our clients. During the year, we take in continuing education sessions and spend time with tax preparers and accountants.  Here are a few hot topics: 

Eligibility to contribute to a TFSA – Alert! 

You must reside in Canada for more than 183 days during the calendar year. 

If you do not (i.e., spend more time at your place in Palm Springs), then you do not accrue TFSA contribution room that year. 

For many reasons, not the least of which may be your out-of-country health insurance coverage, it’s a good idea to keep a log of the days you are outside of Canada. 

Get started on a FHSA now – Good idea! 

If you don’t already own your principal residence, and have income above $53,359, consider the FHSA.   

Open the plan before the end of 2023 – even if you don’t make the full contribution of $8,000 in 2023. You earn the contribution room, which will carry forward. 

Although the plan has a “maturity” date 15 years since the plan was opened, if you don’t use this towards the purchase of a home, you can roll it into your RSP without tax consequences, or RSP contribution room.   

CPP Premiums are increasing in 2024 – Higher Costs 

Employee and employer CPP contribution rates for 2024 remain at 5.95%, and the maximum contribution will be $3,867.50 each—up from $3,754.45 in 2023. The self-employed CPP contribution rate remains at 11.90%, and the maximum contribution will be $7,735.00—up from $7,508.90 in 2023. 

However, commencing in 2024 is the new employee and employer “CPP2 contribution rate” of 4.00%.  This brings the additional maximum employee contribution to $188.00.  The self-employed “CPP2 contribution rate” will be 8.00%, and the maximum self-employed contribution will be $376.00.   

Maximum pensionable earnings in 2024 will be $68,500; second earnings ceiling of $73,200. It is anticipated that the 2025 maximum pensionable earnings will be $69,700; second earnings ceiling of $79,400.   

Applying for the Disability Tax Credit – Change of Process 

Applicants and medical practitioners can apply digitally or on paper.    CRA is recommending that the Disability Tax Credit is not filed with the tax return.  Specifically, “if you submit your application at the same time that you file the tax return, there may be a delay in your tax assessment.  We will review your DTC application before we assess your tax return.  To avoid a possible delay, submit your DTC application before you file your tax return.”    

So, CRA introduced a new process.  The applicant must fill out Part A of the application form.  They will be given a reference number.  That reference number must be given to the medical practitioner who will complete the form digitally.  And then it’s up to CRA.  Their goal is to review the application and mail a notice of determination within 8 weeks of receiving a properly completed form.  So – if the DTC applies to you, get your application enroute now.   

Anti-flipping Rule for Real Estate – Alert! 

Effective January 1, 2023, Canada introduced rules to combat the practice of buying and selling properties within a short period of time.  Relatively new homeowners feeling stressed with increased mortgage payments may be considering selling their home.  Particularly for those who put a downpayment on a pre-construction purchase, you may be getting nervous as you approach completion date.  If you sell the property within 365 days of owning it, then the increase will be deemed to be fully taxed and not subject to the principal residence exemption.   

Coordinating your tax preparer/accountant with your RGF advisor helps create alignment for actions in your best interest.