So, What Do We Need to Worry About This Tax Season? (Pt. 1)

Government of Canada Wrapped 2024 🎁

I hope Santa was good to you this Christmas, leaving plenty of gifts under the tree and enough holiday cheer to carry you into the New Year. As the holidays wind down, I couldn’t help but notice: we’re all swimming in “Wrapped” recaps. Spotify Wrapped, LinkedIn Wrapped—every company has jumped on the bandwagon. So, I figured I’d do you a solid and deliver the most important Wrapped yet.

That’s right: Government Wrapped—a rundown of all the tax changes announced for 2025 in 2024. Thrilling stuff, I know. But trust me, this is the one “Wrapped” you won’t want to skip.

We’re diving into the usual suspects of tax season changes (the gov), but we’ll also cover some of the good updates—because believe it or not, there are some! We’ll break it all down into digestible parts, whether you’re an individual, a business owner, or whatever else in between.

Buckle up, my friends. This is the “Wrapped” that could save you some serious cash. Let’s get into it.

The Good News: What Might Save You Money

1. Bill C-78: The Sales Tax Holiday!

From December 14, 2024, to February 15, 2025, Canada is rolling out a federal sales tax holiday, waiving 5% GST on a variety of essential items. Check out the full list here.

Here’s the catch: the provincial portion of sales tax isn’t automatically included. Provinces had to decide if they wanted to join the holiday cheer. Thankfully, Ontario opted in, so if you’re in Ontario, you’re getting the full HST break—federal and provincial. That means real savings on your holiday haul.

If you’re in a province like Alberta, where only GST applies, no opt-in is needed because they don’t have a provincial sales tax. Congrats, Alberta—you’re automatically getting the full tax holiday on qualifying items.

What’s in it for you? For Ontario families, this could mean saving 13% on purchases, while Alberta families will save the full 5%. Either way, it’s a great excuse to stock up on the essentials.

Real Example: A $750 grocery trip could save you around $37.50 in Alberta or $97.50 in Ontario. These savings are actually not bad, and can add up meaningfully over the next weeks.

2. Home-Buyer’s Plan (HBP) Withdrawal Limit Increase

Buying your first home just got easier—not by much, but still. The Home Buyers’ Plan (HBP) now lets you withdraw up to $60,000 from your RRSP tax-free to put toward your down payment, up from $35,000 in the past. If you’re buying with a partner, you can each withdraw $60,000, giving you a combined $120,000—a huge help in today’s housing market.

Why this helps: Taking money from your RRSP means you can boost your down payment without taking on extra debt or paying taxes on the total taken out. A bigger down payment can help you avoid costly mortgage insurance and reduce your monthly mortgage payments to more manageable levels.

Repayment: You have 15 years to repay what you withdrew, starting two years after the withdrawal. Each year, you’ll pay back 1/15th of the total, and if you miss a payment, it gets added to your income for that year.

The Bad News: What Might Cost You More

1. Capital Gains Inclusion Increase

Brace yourself—this one’s rough, and it’s the one you’ve all heard of before. Starting in 2024, the capital gains inclusion rate rises to 66.67% for gains above $250,000. At the corporate level, the $250,000 distinction was left out as all gains are subject to the new inclusion rate. Translation: a bigger slice of your profits will now go to taxes when you sell an asset like an investment property, stocks, or even a family cottage.

Why this matters: This isn’t just a hit for the wealthy. It impacts anyone selling significant assets, from retirees cashing in their nest egg to families selling a second property or farmland that’s been in the family for decades.

Example: Let’s say you sell an investment property with a $500,000 gain. Under the old rules, only $250,000 was taxable. Now, $333,350 will be taxed. If your marginal tax rate is 30% (which is very low), that’s an extra $25,000 in taxes owed compared to last year. Ouch.

The Bigger Picture: Imagine a family inheriting a cottage that’s been in the family for generations, now worth $1 million with a $600,000 capital gain. Under the new rules, $400,020 of that gain is taxable. At a marginal tax rate of 35%, they’d owe $140,007 in taxes—an amount that could force them to sell the cottage just to cover the bill.

This change reduces post-tax profits on a $1 million gain by over $50,000. For many families, that’s money that could have funded retirement, education, or reinvestments. While this could sound insignificant to some, the reality is that your hard earned money is just that—yours. Why should you be penalized further for your own hard work?

That wraps up Part One of Government Wrapped, the most important “Wrapped” you’ll see this year. We’ve covered a mix of the good and the bad: from no sales tax and more flexibility for first-time homebuyers to the painful capital gains inclusion rate hike that’s hitting families and individuals across the board.

But there’s more to unpack. In Part Two, we’ll dive deeper into the remaining changes that could impact your wallet. Stay tuned—it’s dropping in just a couple days.

Got questions or need help navigating any of these changes? Hit reply and let me know.