For Canadians, this year some tax changes are increasing costs, including one that a tax specialist says could be the last winter storm of the season which really turns things upside down.
From higher income taxes to alcohol taxes, here are some important tax changes this year which Canadians should be aware of.
FEDERAL INCOME-BASED TAXES
In December 2023, The Canadian Taxpayers Federation highlighted some important tax measures in its report said that this year, almost all Canadians will pay higher federal income taxes 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 reduce taxes and keep the government accountable.
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According to the federation, while workers making $30,000 will pay $9 more in 2024 and individuals earning at least $80,000 will pay $347 more.
EMPLOYMENT INSURANCE
This year the federal employment insurance rate and maximum annual insurable earnings have increased 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 increased from 2.28 per cent in 2023 to 2.32 per cent this year, so presently they must 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. In 2024 Quebec employees must pay a maximum annual premium of $834.24. For Quebec employers, the rate increased from 1.78 per cent to 1.85 per cent, making their maximum annual contribution $1,167.94.
CARBON TAX SET TO CLIMB
The federation said, the federal carbon tax will increase to $80 per ton from $65 per ton on April 1, 2024. To all tax payers, the carbon tax applies except those in Quebec. As a result, the price per liter of gas climbs to 17.6 cents from 14.3 cents. Which will cost a household about $12.32 each time they fill a 70-litre minivan.
In the meantime, Canadians living in provinces using the federal carbon tax began receiving carbon pricing rebates 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
The federation says, beginning from the 1st of April 2024, the excise tax on beer, wine and spirits will be up 4.7 per cent because of the alcohol escalator tax. The rise will cost taxpayers about $100 million this year and next year.
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 which 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 higher than $20 million.
The Deputy Prime Minister’s Office was not able to confirm the timing of this change by publication, even though the Liberals’ spring budget confirmed that they planned to implement it.
HIGHER INTEREST RATES FOR LATE TAXES
The interest rate charged on late taxes, Canada Pension Plan contributions and employment insurance premiums will increase 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.
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 originally meant to make it simpler to reduce home office expenses during the pandemic.
According to the CRA, Employees must use the detailed method and get a completed Form T2200 signed by their employer to claim home office expenses for 2023.
Employees who were asked to work from home are generally eligible for home office expenses that were directly related to their work. 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.
WIDER TRUST REPORTING RULES
Caitlin Butler, a Vancouver-based tax specialist and director of tax education and publications at Video Tax News, realized that the expansion of trust reporting rules is a big change, which will affect many taxpayers.
These changes will affect many individuals and businesses, many of whom may not even realize they should file a trust return.
She said certain 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 happens 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.
Butler said individuals 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 need a trust filing due April 2, 2024, says Butler. This will be a massive exercise in compliance with the significant risk that many people 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 the other way around.
Many affected by the rules won’t owe more tax, but for the most of them 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 obey, the penalty could be $25 per day every day that the returns are late, up to $2,500, she added.
For Canadians, this year some tax changes are increasing costs, including one that a tax specialist says could be the last winter storm of the season which really turns things upside down.
From higher income taxes to alcohol taxes, here are some important tax changes this year which Canadians should be aware of.
FEDERAL INCOME-BASED TAXES
In December 2023, The Canadian Taxpayers Federation highlighted some important tax measures in its report said that this year, almost all Canadians will pay higher federal income taxes 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 reduce taxes and keep the government accountable.
READ MORE ON:
According to the federation, while workers making $30,000 will pay $9 more in 2024 and individuals earning at least $80,000 will pay $347 more.
EMPLOYMENT INSURANCE
This year the federal employment insurance rate and maximum annual insurable earnings have increased 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 increased from 2.28 per cent in 2023 to 2.32 per cent this year, so presently they must 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. In 2024 Quebec employees must pay a maximum annual premium of $834.24. For Quebec employers, the rate increased from 1.78 per cent to 1.85 per cent, making their maximum annual contribution $1,167.94.
CARBON TAX SET TO CLIMB
The federation said, the federal carbon tax will increase to $80 per ton from $65 per ton on April 1, 2024. To all tax payers, the carbon tax applies except those in Quebec. As a result, the price per liter of gas climbs to 17.6 cents from 14.3 cents. Which will cost a household about $12.32 each time they fill a 70-litre minivan.
In the meantime, Canadians living in provinces using the federal carbon tax began receiving carbon pricing rebates 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
The federation says, beginning from the 1st of April 2024, the excise tax on beer, wine and spirits will be up 4.7 per cent because of the alcohol escalator tax. The rise will cost taxpayers about $100 million this year and next year.
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 which 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 higher than $20 million.
The Deputy Prime Minister’s Office was not able to confirm the timing of this change by publication, even though the Liberals’ spring budget confirmed that they planned to implement it.
HIGHER INTEREST RATES FOR LATE TAXES
The interest rate charged on late taxes, Canada Pension Plan contributions and employment insurance premiums will increase 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.
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 originally meant to make it simpler to reduce home office expenses during the pandemic.
According to the CRA, Employees must use the detailed method and get a completed Form T2200 signed by their employer to claim home office expenses for 2023.
Employees who were asked to work from home are generally eligible for home office expenses that were directly related to their work. 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.
WIDER TRUST REPORTING RULES
Caitlin Butler, a Vancouver-based tax specialist and director of tax education and publications at Video Tax News, realized that the expansion of trust reporting rules is a big change, which will affect many taxpayers.
These changes will affect many individuals and businesses, many of whom may not even realize they should file a trust return.
She said certain 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 happens 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.
Butler said individuals 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 need a trust filing due April 2, 2024, says Butler. This will be a massive exercise in compliance with the significant risk that many people 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 the other way around.
Many affected by the rules won’t owe more tax, but for the most of them 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 obey, the penalty could be $25 per day every day that the returns are late, up to $2,500, she added.
