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It's Your Money  

Essential tax numbers for 2024

Tax numbers to know

As the calendar turns to 2024, Canadian consumers need to be well-versed in the essential tax numbers that will shape their financial strategies for the year.

From personal income tax brackets to contribution limits for popular savings accounts, staying informed about these figures is crucial for making informed financial decisions. Here is a summary of the essential tax numbers for 2024 and an explanation of how they may impact consumers:

1. Personal income tax brackets—Understanding the personal income tax brackets is fundamental for every taxpayer. Maintaining the progressive tax system, the basic personal amount (the income threshold below which no federal tax is owed) is set at $15,705 for 2024. Beyond this threshold, the tax rates increase incrementally based on income levels.

It's crucial for individuals to be aware of the tax brackets to plan their finances effectively. Consider consulting with a tax professional to optimize your tax strategy and take advantage of available credits and deductions.

2. Tax-Free Savings Account (TFSA) contribution limit—The TFSA continues to be a popular savings vehicle for Canadians. For 2024, the TFSA contribution limit has been indexed to inflation, resulting in an increase to $7,000 for 2024 and a lifetime contribution amount of $95,000.

That means Canadian consumers who have used up all of their previous room can contribute an additional $7,000 to their TFSA in 2024, offering a tax-efficient way to save and invest for both short-term and long-term goals.

3. Registered Retirement Savings Plan (RRSP) contribution limit—The RRSP remains a key tool for retirement planning, providing individuals with a tax-deferred way to save for their golden years. In 2024, the RRSP contribution limit is 18% of earned income, up to a maximum of $31,560.

Contributing to an RRSP not only helps you save for retirement but also provides immediate tax benefits, as contributions are deducted from your taxable income. Be mindful of your RRSP contribution room and aware that contributions to a company pension will reduce this amount.

4. Canada Pension Plan (CPP) and Employment Insurance (EI) contributions—For 2024, the maximum pensionable earnings under the Canada Pension Plan have increased to $68,500 and the basic exemption amount remains at $3,500. New for 2024, earnings between $68,500 and $73,200 will be subject to a second tranche of CPP contributions.

Additionally, the EI contribution for 2024 has gone up by three per cent with the maximum annual insurable earnings (federal) for 2024 at $63,200.

5. Small business tax rate—Small businesses play a crucial role in the Canadian economy, and the small business tax rate is a key consideration for entrepreneurs. For 2024, the federal small business tax rate is 9% (there are additional provincial tax rates on top of this), applicable to the first $500,000 of active business income.

Small business owners should consider leveraging this tax advantage by reinvesting income over the $500,000 mark back into their businesses to stimulate growth. Understanding the small business tax rate is vital for effective business planning and financial management.

6. Lifetime capital gains exemption—The lifetime capital gains exemption is $1,016,836 for 2024, up from $971,190 in 2023.

Navigating the tax landscape requires a clear understanding of the essential tax numbers for 2024. From personal income tax brackets to contribution limits for savings accounts, staying informed empowers Canadian consumers to make strategic financial decisions.

Whether planning for retirement, maximizing savings opportunities, or managing a small business, awareness of these tax numbers is the foundation for a sound financial strategy in the year ahead.

Consider consulting with a certified financial planner to tailor your approach based on your individual circumstances and goals.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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About the Author

Brett Millard is vice-president and a member of the executive leadership team at FP Canada, the national professional body for the financial planning industry. A not-for-profit organization, FP Canada works in the public interest to foster better financial health for all Canadians by leading the advancement of professional financial planning in Canada. 

He has worked in the financial advice industry for more than 15 years and is designated as a chartered investment manager (CIM) and is a certified financial planner (CFP).

He has written a weekly financial planning column since 2012 and provides his readers with easy to understand explanations of the complex financial challenges they face in every stage of life. Enhancing the financial literacy of Canadian consumers is a top priority for Brett and his ongoing efforts as a finance writer focus on that initiative. 

Please let Brett know if you have any topics you’d like him to cover in future columns ,or if you’d like a referral to a qualified CFP professional in your area, by emailing him at [email protected].

 



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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