Government of Canada Wrapped 2024 - Part Three 🎁

Happy New Year! 🎉

We’ve got some new faces (we actually only have your email don’t worry) here since last time, welcome! You might want to check out Part 1 and Part 2, where we tackled the biggest tax changes of 2024, including the capital gains tax hike and how business owners can fight back.

If you’re not new here, well… then you already know I lied. Part 3 was supposed to arrive "tomorrow"—and yet, here we are, multiple days late. But don’t be mad—this was actually a stress test to prepare you for the agonizing wait you’ll endure while the CRA takes its sweet time processing your massive refunds (thanks to all the tax-saving gems you’re going to learn). Consider this your first win of tax season—you passed.

Changes Relevant to All Individuals

1. Federal Tax Bracket Adjustments

The federal tax brackets inched up for inflation, which is technically good news—but if your income has also jumped, you might still be handing more over to the CRA.

2024 Federal Tax Brackets (%s are the same, income thresholds are higher)

• 15%: Up to $55,867 (becomes 21-24% after provincial taxes)

• 20.5%: $55,867 – $111,733 (becomes 30-32% after provincial taxes)

• 26%: $111,733 – $173,205 (becomes 37-40% after provincial taxes)

• 29%: $173,205 – $246,752 (becomes 42-45% after provincial taxes)

• 33%: Over $246,752 (becomes 49-52% after provincial taxes)

Since you also pay provincial tax, your real tax rate is a combination of federal + provincial rates (exact rates depend on your province). So, if any of you earn over $60,000 year, just know some part of that is being taxed at 33%+. Seems high to me, I don’t know…

Example: How a Raise is Taxed - Let’s say you get a raise from $110,000 to $115,000.

• Only $3,267 is taxed at the higher 20.5% rate, adding about $670 to your federal tax bill.

• With provincial tax, the total increase is closer to $1,200 – $1,500.

So while a raise is great, expect the CRA to take their cut before you start spending.

The good: The inflation adjustment added $2,500 to the lowest tax bracket, meaning low-to-mid earners could see around $600 in tax savings this year. Small, but we’ll take it.

2. Higher Mandatory CPP Contributions

Well, 2024 came and went, and if you earned over $66,000, you probably noticed a little extra missing from your paycheques—thank the Canada Pension Plan (CPP) contribution increase for that.

What Changed?

• A new secondary contribution tier kicked in for income over $66,000.

• You paid an extra 4% CPP contribution on earnings between $66,000 and $100,000.

Example: If you earned $100,000, you forked over an additional $1,360 in CPP contributions compared to 2023.

The good: For retirees who started collecting CPP in 2024, the max monthly payout is now $1,306.57—partially thanks to these increases. So yes, you paid more, but in theory, you’ll get more later (assuming the system holds up… no promises).

3. TFSA Limit Increase

Finally, a tax change you’ll actually like: the Tax-Free Savings Account (TFSA) contribution limit is jumping to $7,000 in 2024. That means more room to grow your money tax-free—whether it’s for a down payment, retirement, or just to hedge against the price of eggs.

If you’ve been eligible (i.e. 18 years old and Canadian) since TFSAs launched in 2009 and haven’t contributed yet, your total contribution room has now ballooned to a ridiculous $103,500. That’s $103,500 of completely tax-free investing potential.

Example: Let’s say you max out your TFSA at $103,500 in 2024 and invest it in a diversified portfolio earning a relatively conservative 6% annually. In 15 years, your account could grow to $248,000—completely tax-free. In a regular taxable account, you’d be forking over tens of thousands to the CRA in this same exact scenario.

A tip: If you’re not using your TFSA, start. And if you need a ridiculously easy way to do it, Wealthsimple is a great option. (Full disclosure: I like them, and their app is really nice and user-friendly.) You may as well use my referral link to get started.

Wrapping It Up

That’s it—the final part of the tax season trilogy (for now). We’ve covered capital gains, business owner tax breaks, tax bracket shifts, savings boosts, and some sneaky new tax grabs.

There are other updates that could impact your wallet and more are likely on the way, and we’re going to cover those in future editions. Before tax season hits, you’ll be well-versed and ready.

Up Next: RRSP Decisions Before Feb 28

With the RRSP deadline fast approaching, the big question is: Should you contribute more before February 28? In the next issue, I’ll break down who should, who shouldn’t, and how to maximize your tax savings before the cutoff.

Need a Plan?

Whether you work a 9-to-5, run a business, invest, or just want to keep more of your hard-earned money, these tax changes impact you. Want to make sure you’re not leaving cash on the table? Reply to this email, and let’s get a game plan in place before tax season hits.

P.S. Know someone who needs to get up to speed before tax season chaos begins? Send this their way. You might just save them thousands—which, honestly, makes you a better friend than most.