Tax filing in Canada Changes

Filing income taxes 2024 will look different for tax payers this year. Lots of new changes for 2024 taxes are about to begin here in Canada.

New tax measures, and changes to existing ones, will begin affecting Canadians in 2024. But tax experts say the effects on most individuals are likely to be minor, unless they’re high-income earners.

GST/HST exemptions, the elimination of deductions for some short term rentals, new alternative minimum tax rates and changes to Canada Pension Plan (CPP) contributions are among the new measures coming in 2024.

Eliminating short-term rental deductions

The elimination of some short-term rental deductions was announced in the Fall Economic Statement (FES) and kicks in on Jan. 1. 

The federal government announced this change, it justified the move by saying that in Montréal, Toronto and Vancouver in 2020, there were almost 19,000 homes being operated as short-term rentals that could be used for permanent housing.

To encourage owners to return those units to the long-term rental market, some municipalities imposed bans on short-term rentals, while others applied restrictions on how they operate. Despite the bans and restrictions, some owners continued to rent out these properties. The federal government is now eliminating that tax break, denying operators of short-term rentals any income tax deductions for expenses if they operate in provinces or municipalities that have banned short-term rentals.

In provinces that still allow short-term rentals, operators that are not compliant with local regulations and laws will also be denied the deduction.

On the better note… GST/HST removals

In the FES, the federal government announced it was taking the GST/HST off “professional services rendered by psychotherapists and counselling therapists.”

The government said it was making the change to help ensure that Canadians can afford the care they need.

According to the Parliamentary Budget Officer, the measure will cost $64 million in lost revenue over a five-year period.

The federal government also began removing the GST from the construction of new rental apartments to spur new housing developments in November. In the FES, it announced it was extending that initiative to new co-op rental housing.

Income taxes and the new “bare trusts”

Beginning Jan. 1, federal income tax bracket thresholds in Canada will rise. This rise is to be 4.7 per cent across all brackets, compared to a 2023 rise of 6.3 per cent. Basic personal exemption amounts have also been adjusted to account for inflation. Believe it or not, our inflation has come down.

When Canadians do their taxes in 2024, they’ll be required to report any involvement in “bare trusts.”

Unlike express trusts, where people seek out a lawyer to create a trust, bare trusts happen almost accidentally when a parent cosigns a mortgage for a child and becomes partial owner, or when an aging parent puts their kids down as partial owners of their house in anticipation of an impending death.

In those cases, the bare trust does not earn any money for the trustee to report in a given tax year. In 2024, CRA will for the first time require that Canadians fill out a T3 return for the previous year naming the trustees, beneficiaries and settlors of each trust.

We have heard people describe this change as “sneaky” because even though Canadians are not going to be taxed on a trust’s value, failing to report they are a member of a bare trust could result in a fine of $2,500, or five per cent of the value of all property in the trust, whichever is higher.

Take note of just some of the changes that are occurring this 2024 for the 2023 tax year and beyond. In our view, some changes are good and will benefit the taxpayer. In many other instances, changes can cause hardship to our taxpaying Canadians.