February 21, 2025 | Planning Matters | 5 min read

2024 Year-end Tax Planning Guide

As we are in tax season, it's important to consider tax planning strategies that can help minimize liabilities and take full advantage of available credits and deductions. This guide highlights key areas that taxpayers should be aware of to ensure they maximize their tax benefits while complying with filing requirements.

Expenses You May Be Entitled to Deduct

Employment Expenses – Auto and Home Office

• Automotive Expenses: Employees required to use their vehicles for work (excluding commuting) may claim work-related expenses if not reimbursed, or if the reimbursement is unreasonable.
• Home Office Deduction: Eligible employees may claim a portion of utilities, rent, internet fees, and office supplies. A completed form T2200 from the employer is required.
  

Carrying Charges and Deductible Interest

This includes interest on borrowed funds for income-generating investments, such as purchasing stocks, bonds, or real estate. Additionally, investment counsel fees and financing charges for non-registered accounts are included.

Childcare Expenses

This includes daycare, babysitting, boarding schools, and day camps. The lower-income spouse can deduct these expenses with the required receipts and the provider's Social Insurance Number.

Moving Expenses

To qualify, you must relocate at least 40 kilometres closer to a new job, business, or educational institution. Eligible deductions include transportation costs, storage fees, legal expenses, temporary housing costs, and expenses related to selling your residence.

Tax Credits You Might be Eligible to Claim

• Charitable Donations: Combine donations within a family to maximize tax savings.
• Medical Expenses: Includes dental, eyeglasses, private insurance, and travel for medical care.
• Pension Tax Credit – A $2,000 tax credit is available for eligible pension income, such as payments from an RRIF or annuity.
• Attendant Care & Nursing Home Expenses: Available for those with disabilities.
• Disability Tax Credit: For individuals with prolonged impairments in physical or mental function.
• Teacher & Early Childhood Educator School Supply Tax Credit: 25% refundable credit for up to $1,000 of eligible purchases.
• Canada Training Credit: Refundable credit encouraging professional development.
• Student Loan Interest: Interest on government-issued student loans is eligible.
• Home Buyers' Tax Credit: 15% credit on up to $10,000 for first-time buyers.
• Home Accessibility Tax Credit: A 15% credit of up to $20,000 is available for qualifying home modifications for seniors and disabled individuals.
• Multigenerational Home Renovation Tax Credit (MHRTC) – Up to $7,500 refundable credit for renovations that create a self-contained living space for a senior (65+) or a person with a disability.
• Pension Sharing – Canada Pension Plan (CPP) recipients can share benefits with their spouse to minimize overall taxes.
• Clean Buildings Tax Credit: For energy-efficient commercial and residential property upgrades in British Columbia.
• Digital News Subscription Tax Credit: 15% credit on up to $500 for digital news subscriptions.

Other Considerations

• Old Age Security (OAS) Clawback – If your 2024 net income exceeds $90,997, OAS benefits may be reduced. Consider strategies to defer income and minimize clawback exposure.
• Pension Income-Splitting—Eligible pensioners can transfer up to 50% of pension income to a spouse or common-law partner to reduce their tax liabilities.
  

Residential Property Considerations

Owning residential property in Canada involves various tax rules, from exemptions on selling a principal residence to taxes on underused or vacant properties. Even if tax-exempt, home sales must be reported to avoid penalties. Here are key points for homeowners, landlords, and investors.

Principal Residence

If you sold your principal residence in 2024, you must report the sale on your tax return. To claim the principal residence exemption, complete Form T2091(IND) and meet the criteria.

Short-Term Rentals

Starting January 1, 2024, short-term rental operators cannot deduct expenses from rental income if they fail to comply with provincial or municipal regulations. This applies to rentals of less than 90 consecutive days.

Underused Housing Tax (UHT)

If you own residential property in Canada, you may need to file an annual return for each property. See our detailed UHT comments in our guide.

Home-Flipping Tax

Suppose you sold a residential property in 2024 that you owned for under 12 months. In that case, profit may be treated as business income instead of capital gains, and the principal residence exemption would not apply.

"Even if tax-exempt, home sales must be reported to avoid penalties"

What's New for 2024?

Alternative Minimum Tax (AMT)

The AMT rate has increased from 15% to 20.5%, with a higher exemption threshold of $173,205 for 2024 (previously $40,000). Other key changes include:

• Capturing more income – Capital gains and employee stock options are subject to higher inclusion rates for AMT purposes.
• Limited Deductions – Several deductions (including employment expenses, interest, investment counsel fees, moving expenses and childcare) and most tax credits are now limited to 50%.
• Exempt Trusts – Graduated Rate Estates, Employee Ownership Trusts and certain Indigenous trusts are now exempt from AMT.
  

Capital Gains Inclusion Rate

The date on which the capital gains inclusion rate is proposed to be increased from one-half (50%) to two-thirds (66.67%) is being deferred from June 25, 2024 to January 1, 2026 (if it is enacted at all). Individuals (excluding most trusts) with net capital gains of $250,000 or less during the year will continue to be subject to the 50% inclusion rate.

Capital Gains Exemption

The lifetime capital gains exemption (LCGE) for qualified small business shares and farm/fishing properties increased to $1,250,000 (up from $1,016,836) for dispositions occurring on or after June 25, 2024. The LCGE will be indexed to inflation starting in 2026.

What To Do Next?

Importance of Filing & Filing on Time

The deadline to file your 2024 tax return is April 30, 2025 (June 16, 2025 for self-employed individuals). Late filings may result in penalties and interest. Timely filing is also essential to maintain eligibility for government benefits such as the Canada Child Benefit and GST/HST credit.

NOTE: The information contained herein should not be treated by readers as investment, tax, or legal advice and should not be relied on as such. You should consult legal or tax professionals regarding your specific situation.

About the Contributor

Raymond Loucks, CPA, CA, TEP, FEA is a Director, Tax with Crowe Mackay LLP in Vancouver. With over 20 years of experience in public practice as a tax professional, he specializes in Canadian income taxes for individuals, corporations, partnerships, and trusts; advising private companies on restructuring and succession planning; and advising high net-worth individuals and their families on estate and trust planning.

He can be reached at Raymond.Loucks@crowemackay.ca or 604-684-4511.