2025 Canadian Tax Season Updates: Essential Changes Every Canadian Must Know to Maximize Refunds

As we approach the 2025 tax season, it is essential for Canadians to understand the detailed updates and changes introduced for the 2024 tax year. This guide provides a comprehensive breakdown of the adjustments to tax brackets, benefits, contribution limits, and new policies, as well as a comparison with previous years.

Filing Personal Taxes

• Filing Start Date: Late February 2025
• Filing Deadline for Most Individuals: April 30, 2025
• Filing Deadline for Self-Employed Individuals: June 15, 2025 (extended to June 17, 2025, as June 15 falls on a weekend)
• Payment Deadline: All balances owing must be paid by April 30, 2025, to avoid interest.

1. 2024 and 2025 Federal Tax Bracket Adjustments

The federal tax brackets for 2024, adjusted for inflation, are as follows:

2. Combined 2024 Federal & Alberta Personal Income Tax Rates

For taxpayers in Alberta, the combined federal and provincial tax brackets are:

3. RRSP Contribution Room

For 2024, the maximum RRSP contribution limit is $31,560, up from $30,780 in 2023 (a 2.5% increase). This cap is calculated as 18% of earned income up to the annual maximum. Contributions must be made by March 1, 2025, to count for the 2024 tax year. Ensure you utilize unused contribution room from prior years.

4. TFSA Contribution Room

The annual TFSA contribution limit remains at $7,000 for 2024, consistent with 2023. The lifetime contribution room for those eligible since 2009 has now reached $99,500. Exceeding the contribution room incurs a penalty of 1% per month on the over-contributed amount.

5. CPP Adjustments and CPP2 Introduction

Starting in 2024, the Canada Pension Plan (CPP) includes two tiers: CPP and CPP2. Here’s a breakdown of the changes:

• Tier 1 Contributions: Apply to earnings between $3,500 and the YMPE.
• Tier 2 Contributions (CPP2): Apply to earnings between the YMPE and YAMPE.

Key Points:

• The YMPE increased by 4.1% from 2024, while the YAMPE saw a 10.9% increase.
• Self-employed individuals contribute at a combined rate of 11.9% (Tier 1) and 8% (Tier 2).
• The basic exemption amount remains unchanged at $3,500.00.

6. Canada Child Benefit (CCB) Adjustments

For 2024, the indexed maximum annual CCB benefits are:

• $7,437 per child under age 6 (unchanged from 2023)
• $6,275 per child aged 6 to 17 (unchanged from 2023)

Income thresholds for eligibility have increased slightly, ensuring more families can access this benefit.

7. GST/HST break

There is a temporary GST/HST break on certain items from December 14, 2024, to February 15, 2025. During the tax break, no GST or HST (whichever applies in your province or territory) will be charged on qualifying items.

8. Carbon Tax Rebate Changes

The Climate Action Incentive Payment (CAIP) continues to provide quarterly payments. However, the 2025 program introduces changes that will impact provinces differently. For example, in Alberta:

• A family of four will see an annual rebate of $976, up from $802 in 2024 (a 21.7% increase).
• Higher carbon pricing will result in larger rebates but also increased fuel costs for residents.

Other provinces affected include Saskatchewan, Manitoba, and Ontario, each with proportional increases in rebates.

9. Capital Gains Tax Changes

Effective June 25, 2024, the inclusion rate for taxable capital gains has increased from 50% to 66.7%. The new rate applies as follows:

• For Individuals: Only net capital gains exceeding $250,000 per year are subject to the increased rate.
• For Corporations and Trusts: All net capital gains are subject to the 66.7% inclusion rate.

Taxpayers should consider strategies such as tax-loss harvesting to offset gains and mitigate liabilities.

10. Basic Personal Amount (BPA)

The federal BPA for 2024 is $15,645, up from $15,000 in 2023 (a 4.3% increase). This amount allows Canadians to earn more tax-free income. Provincial BPAs may vary and should be reviewed individually.

11. Canadian Dental Care Plan

From 2025, the Canadian Dental Care Plan expands coverage to families earning less than $90,000 annually, with full benefits available to those earning under $70,000. This plan significantly reduces out-of-pocket costs for dental care.

Key Considerations and Reminders

1. Track Changes: Stay updated on legislative changes, especially for capital gains and benefit adjustments.
2. File Early: Filing early can help avoid delays and ensure access to refunds and benefits.
3. Keep Records: Maintain tax documents for at least six years for potential audits.
4. Seek Advice: Consult tax professionals to optimize filing and minimize liabilities.

By understanding these updates and planning accordingly, Canadians can maximize their tax benefits and meet their obligations for the 2024 tax year.