did you know that if you're making $70,000 in Canada you're paying anywhere from $116,000 to $117,000 in taxes every single year that's almost a quarter of your income while taxes can seem boring and intimidating at times as Canadians I believe it's so important to be knowledgeable about the tax benefits out there so that you could keep more of your money in your pockets especially after a tough year of stubborn inflation and the highest interest rates we've seen in two decades it's vital that we know what the important tax changes are for 2024 so that you can plan ahead and make the most of the New Year hi I'm Gabrielle a CPA and tax expert in today's video I'll be covering some shocking new changes released by the government first then jump into the new contribution limits for tfsa R RSP the recently released fhsa CPP and the new pension enhancement as well as changes in the tax brackets so let's jump right into it first I want to highlight some drastic changes that were made by the Canadian government starting in 2024 if you are living in cities with housing shortages like Vancouver Toronto and Montreal and has short-term rentals like Airbnb there are major restrictions to short-term rentals taking place in 2024 in fact the federal government intends to deny income tax deductions for expenses incurred to earn short-term rental income including interest expenses in provinces and municipalities where short-term rental restrictions are in place and these measures would apply to deny all expenses incurred on or after January 1st of 2024 in fact in cities like Montreal Toronto and Vancouver in 2020 there were almost 19,000 homes being operated as short-term rentals that could have been used for permanent housing the aim of this new legislation is to put back thousands of units back into the long-term rental market the Canadian government means serious business when cracking down on short-term rentals with the aim to alleviate the housing CR prices specifically in BC starting in May of 2024 there are going to be restrictions where you will only be limited to short-term rentals pertaining to a principal residence and a secondary dwelling so if you own multiple properties for the purpose of short-term rentals like Airbnb this will no longer be allowed and will actually become illegal to operate in BC and if you are planning to do short-term rentals with your principal residents you will be required to register with the pro provin if this is applicable to you make sure to check out the rules in your municipality about the short-term rental restrictions another update is relevant for those who see psychotherapists and counseling therapists you can expect to see a reduction in your bill as the federal government announced it will be taking gstd and hsd off of these Professional Services to help ensure Canadians could afford the care they need according to the Parliamentary budget officer the measure will cost $64 million in loss revenue or over a 5year period so if you're in Ontario and having been paying a 13% hsd on a $200 session then you will essentially be saving $26 every session now that we got those two updates out of the way let's jump into the new contribution limits tax-free savings account tfsa the taxfree savings account is a tax sheltered investing account that was first released in 2009 that is flexible and can be used towards any savings school that you have in a tfsa you invest your money in earn income like interests dividends and capital gains taxfree typically if you invest in a taxable account you are subject to tax on your earnings every year so the compounding tax savings on your investments in your tfsa can be significant over time the great thing about tfsas is that you can withdraw from it any time without any penalties the only catch is that withdrawals made will be added back to your tfsa room the following year how much you can contribute to your tfsa is determined by your contribution room which grows every year by the tfsa annual room limit make sure that you know your limit because any over contributions are subject to pretty hefty penalties as you can see here the 2024 tfsa annual room is indexed to inflation and increased by $500 from $6,500 last year to $7,000 this year your tfsa contribution limit accumulates over time and any unused room is carried forward so it doesn't just disappear for example if you are born in years 1991 or earlier which means that you were 18 or older in 2009 your cumulative tfsa room is $95,000 registered retirement Savings Plan rrsp the rrsp is a registered account with the Canadian government with the purpose to save towards your retirement in RSP you invest your money in earn income like interest dividends and capital gains on a tax defer basis this means that income does grow in your rrsb tax-free but you are are eventually taxed on the income when you withdraw from your RSP ideally when you retire typically if you invest in a taxable account you are subject to tax on your earnings every single year but in an RSP your investment income doesn't get taxed and can grow taxfree the greatest tax advantage with an RSP is that contributions you make are tax deductible which reduces your taxes and potentially put you in a refund position however since you receive the benefit of a tax deduction any withdrawals from from your RSP will be subject to withholding tax you'll also need to include the withdrawn amount in your income and be taxed on it it's important to note that you can only contribute to your RSP based on your rrsp deduction limit which should be on your notice of assessment from the prior year any over contributions are subject to penalty and can be quite a pain to undo so make sure to always check your RSP limit before making a contribution the rrsb deduction limit is generally the lower of either 1 18% % of your earned income from the prior or to the rrsb dollar limit in 2024 the rrsb dollar limit is $31,500 which is indexed for inflation every year if you don't contribute to your RSP or you haven't maxed out your RSP room your RSB limit does get carried forward and accumulates so that you could contribute anytime in the future first Home Savings Account fhsa the federal government released a new type of savings plan last year in 2023 which aims to help Canadian save for their first home perhaps the most exciting feature of the fhsa is that it combines the best parts of the tfsa in which you can withdraw from it taxfree and the rrsp in which you can get a tax deduction for your contributions though do note that you can only withdraw from fhsa tax-free if it's used towards a qualifying home purchase the contribution limit is maxed out at $40,000 over your lifetime and up to $88,000 in any given year this means that you can max out your FHS a by contributing $88,000 per year over a 5-year period in order to reach the $40,000 limit once you open your fhsa you can also carry for the unused contributions to use in a later year so if you open your fhsa in 2023 but didn't contribute the $88,000 you can carry for that amount to 2024 and contribute a total of $116,000 the main difference between the fhsa and the home buyers plan which is under the rrsp is that your withdrawal is is $40,000 versus $35,000 this means that you can withdraw $5,000 more taxfree under the fhsa in addition you are not required to pay back the $40,000 under the fhsa whereas under the home buyer plan HBP you would need to pay back the withdrawn funds within a 15-year period otherwise that amount gets included in your income and if you have enough savings you can also take advantage of both the fhsa and the HBP so that you can make a combined original contribution of $75,000 taxfree towards your first home Canada pension plan CPP CPP is a pension available to Canadians when they retire that pays out a monthly taxable benefit you can start receiving CPP when you are at least 60 years old until the rest of your life for 2024 the maximum monthly amount that you can receive if you start your pension at age 65 is $1,364 60 however the average monthly amount paid for a new retirement pension at age 65 in October of 2023 was $758 32 your situation will determine how much you'll receive up to the maximum in order to receive this benefit when you retire every person over the age of 18 who works in Canada and earns a minimum of $3,500 per year must contribute to the CPP how much you contribute depends on your employment income you may have noticed CPP as one of your deductions from your paycheck and while it may feel like like another tax technically it's money that you will see back when you retire in fact your employer also contributes towards your CPP as well in 2024 the CPP contribution rate stay the same at 5.95% of your earnings the same rate as 20123 however the 5.95% applies to a new maximum annual pensionable earnings of $68,500 up from $66,667 annual pension earnings you're capped at Max CPP contributions of $3,867 as an employee up from $3,754 45 last year which is an increase of $135 and your employer will also have to match that amount if you're self-employed you need to pay both contributions as an employee and an employer up to a maximum of $773 but that's not all the changes to CPP in 2024 there is now a second additional CPP contribution that began on January 1st of 2024 for workers who earn higher wages it's important to understand the first earning ceiling which is $68,500 as mentioned previously and the new second earning ceiling which is $273,200 for 2024 this means that you need to take the difference of the two and apply a contribution rate of 4% so the maximum that you would need to pay if you earn $73 ,200 or more is a maximum additional CPP contribution of $188 extra which also needs to be matched by your employer as well just to bring everything together if you earn $73,700 or more you expect to pay total $31 more in CPP than in the previous year tax brackets lastly we will be going over the tax brackets and any changes to the tax rates as a Canadian resident you will be subject to two separate tax rates the Federal and the provincial or territorial you can see here that the federal rate on the first $55,850 of taxable income is 15% and the BC Provincial rate on the first $ 47,9 37 is 5.06% this is confusing for two reasons first the taxable income brackets are different for federal and provincial second you're working with two rates the federal and the provincial rate which you would actually need to combine to get your applicable rate so what I like to do is use a combin Federal and BC provision rates to get a better idea of the tax rate that will actually impact me in this table you can see that the first $ 47,9 37 of taxable income is subject to a combined tax rate of 20.6% another thing that you need to understand is that we have a progressive or graduated tax system meaning that your income is taxed incrementally based on the tax bracket you fall under so if you earn $70,000 you get taxed at 20.0 0 6% on the first $ 47,9 37 and 22.7% on income between $7,997 up to $55,850 and then 28.2% on income over $ 55,8 up to $95,500 it does not mean that if you earn $70,000 only the last appliable rate of 28.2% applies to your entire income so that is not the case now going over the tax rates in general there is good news with the tax brackets being more favorable to Canadians you can see that the tax rates itself haven't changed but the tax brackets have increased and this means that higher income is actually being taxed at lower rates you can especially notice this in the highest tax bracket in which the highest taxable income in 2023 was $240,745 2, 752 this means that $2,036 is getting taxed at the lower rate of 49.8% instead of the 53.5% that's our at for 2024 tax changes if you want to learn more about the details about the various plans that we went over today I go into more detail about eligibility and withdrawal rules in my last 2023 tax update which I will link over here for you to see and if you are a service-based business in Canada like a content creator consultant or coach and you're looking for a tax accountant in BC or Ontario feel free to contact us to learn more about how we can help all links will be in the description box down below thanks so much for watching today and I'll see you guys in my next video bye
