COO and Director, Financial Planning
Spring is around the corner, and along with the warmer weather comes tax season. This month, we would like to highlight a few changes to be aware of and share some helpful tips for preparing your 2023 taxes.
Getting Started
The deadline to file your 2023 personal income taxes is April 30th, 2024. If you are self-employed or have a spouse or a common-law partner who is self-employed, the deadline to file your taxes is June 15th (June 17th this year, since the 15th is a Saturday) but all taxes owing must still be paid by April 30th. Filing on time is important, not only to avoid penalties on amounts owing, but also to ensure you receive all the benefits to which you are entitled. The Canada Revenue Agency (CRA) has listed the steps involved in filing your 2023 taxes here.
Our Tax Preparation Checklist also outlines the information you’ll need to gather to file your tax return.
Using Tax Preparation Software
The vast majority of Canadians are now using one of the many CRA-certified tax software programs to prepare and submit their annual tax return. CRA maintains a list of approved software, including some free (or pay-what-you-want) packages. Popular options include TurboTax, Wealthsimple Tax, and UFile.
If your finances are complicated, or if you’re uncomfortable completing your taxes on your own, working with an accountant can be a smart option. This may be particularly true if you are self-employed, own your own business, have experienced a major life change over the past year, or have complex investment income.
New Contribution Limits, a Savings Account for First Time Homebuyers, and Changes to Home Office Expense Claims
The CRA used an inflation rate of 4.7% to index 2024 tax brackets and other key amounts, which is significantly lower than the increase we saw in 2023.
The Tax-Free Savings Account (TFSA) dollar limit for 2024 has increased to $7,000. The cumulative TFSA limit is now $95,000 for someone who has never contributed to a TFSA and has been an adult resident of Canada since 2009.
The Registered Retirement Savings Plan (RRSP) deduction limit for 2024 is the lesser of $31,560 or 18% of your earned income in 2023.
The First Home Savings Account (FHSA) is now available from many investment firms and banks. This new registered plan gives prospective first-time homebuyers the ability to save on a tax-free basis towards the purchase of their first home in Canada. Contributions to a FHSA are tax deductible, similar to a RRSP, and withdrawals to purchase a first home are not taxed, similar to a TFSA. Annual contributions are capped at $8,000, and there is a $40,000 lifetime limit. A maximum of $8,000 of unused participation room can be carried forward to the following year.
If you are an employee who works from home, be aware that the temporary flat rate method for claiming home office expenses (formerly $2 per day) is no longer available. For 2023 and future years, employees need to follow the detailed method to make these claims.
We hope this article helps guide you toward a less stressful and more organized tax season. If you have additional questions regarding how to best manage your cash flow, plan for retirement or improve your overall financial well-being, a Money Coach can help. Our Investment Report Card is also a great option if you’re looking for a second opinion on your investment portfolio.
NOTE: The author is not able to address comments/questions regarding an individual’s specific tax situation. To work with a Money Coach to address your tax planning needs, we encourage you to book a complimentary initial consultation.
