Close the year strong:
Top 5 year-end tax strategies 2024 for Canadians

 

1.    Harvest capital losses

Tax-loss selling continues to be a strategic approach for investors looking to offset capital gains both in the current year and gains realized in the previous three taxation years (by filing the CRA T1A form). Losses can also be carried forward indefinitely to reduce taxes in future years. With updated market dynamics, you must ensure all trades settle by December 30, to utilize this strategy effectively for 2024 tax purposes.

2.    Donate to charity

The charitable sector experiences heightened activity each year as the holiday season approaches¹. Donating publicly traded securities, ecologically sensitive land or other qualifying capital properties to registered charities can provide significant tax benefits. The 2024 Budget continues to support charitable giving by maintaining
a zero-inclusion rate for capital gains on donated securities, enhancing the incentive for investors to give strategically.

3.    Contribute to Registered Education Savings Plans (RESPs)

An estimated 75 per cent of young Canadians aged 25-34 will attain a postsecondary qualification² . To support funding these education costs, RESPs remain a crucial tool. Subscribers may contribute up to $2,500 per year, per beneficiary to an RESP to attract government grants of up to $500 (20% of the contribution amount), up to a lifetime maximum of $7,200. If there is accumulated grant room, the contribution room to attract grants is $5,000 per year. Depending on where you live, you may also benefit from additional provincial government grants based on your contributions. If your child or grandchild turned 15 in 2024, and has never been the beneficiary of an RESP for which at least $100 in annual contributions has been made for any four prior years (and not withdrawn), no Canada Education Savings Grant (CESG) may be claimed in the future. To ensure future CESG claims are possible in this case, there are two options:

•    $2,000 must be contributed to their RESP prior to the end of the year that they turned 15, or
•    If there have been three prior years with contributions of at least $100, only $100 in RESP contributions will be required in 2024.

For 2024, the contribution deadline is December 31.

4.    Make Registered Retirement Savings Plan (RRSP) contributions

Although you have until March 3, 2025 to make RRSP contributions for the 2024 tax year, contributions made as early as possible will maximize tax-deferred growth. Your 2024 RRSP deduction is limited to 18% of income earned in 2023, to a maximum of $31,560, less any pension adjustment plus any previous unused RRSP contribution room and any pension adjustment reversal.

5.    Contribute to Tax-Free Savings Account (TFSA)

When it comes to demographics, younger Canadians have embraced the usage of TFSAs with approximately 33 per cent under the age of 40, and 42 per cent between the ages of 40 to 65³ owning accounts. The TFSA contribution limit in 2024 has increased to $7,000 and is a powerful tool for tax-free growth. For those who have never contributed, the total contribution room can reach up to $95,000 (if you were aged 18 or older in 2009). When compared to RRSPs, which have a maximum contribution age of 71 (unless you have a younger spouse), TFSAs do not have a maximum age limit. This also makes TFSAs a good vehicle to shelter investment income tax for those over the age of 71. Additionally, TFSAs enjoy far more flexibility than RRSPs in terms of tax-free withdrawals at any time, any amount and for any reason.
 

What does your legacy look like?

While the end of the year is a good time to ensure that you take advantage of the programs, tax credits and deductions that the Canadian government makes available, it is also an excellent time to reflect on our legacies. Some activities that you may want to consider:

Review your will and make sure it works Many Canadians do not have an estate plan and if they do, the chances that they have discussed it with their heirs are slim. Reviewing estate planning documents (your will and powers of attorney) should ideally be done at least every three years. These documents should be updated whenever there has been a material change in your circumstances, such as to your finances, health, marital status, intentions, legacies or province of residence.

Review your risk management plan Risk management is about more than asset allocation and market volatility surrounding mutual funds and other investment products. It also involves ensuring protection is in place should unforeseen events occur, such as illness, disability or early death - and preparing for the chance that you outlive your savings. These are uncomfortable matters to think about, and we often avoid even contemplating such events happening to us, but that’s no excuse to be unprepared. This reality supports the argument for purchasing disability insurance, as it is statistically more likely that you will be injured than die while you’re in the workforce. Reviewing your risk management plan should be a priority for all.

Federal tax bracket thresholds for 2024⁴

In 2024, the federal bracket thresholds will see an upward adjustment by 4.7 per cent:

Impact: If you earned $100,000 in 2023, you would pay approximately $138 less in tax on the same amount in 2024 (excluding any effect of applicable tax credits).

The basic personal amount for 2024 is $15,705 for taxpayers with a net income of $173,205 or less. At income levels above $173,205, the basic personal amount is gradually reduced until it reaches $14,156 for a net income of $246,752.

 

Tax rate	2024 taxable income	2023 taxable income
33.0%	Over $246,752	Over $235,675
29.0%	Over $173,205	Over $165,430
26.0%	Over $111,733	Over $106,717
20.5%	Over $55,867	Over $53,359
15.0%	Up to $55,867	Up to $53,359

 

Endnotes

¹ Jake Fuss, Nathaniel Li and Grady Munro, “Generosity in Canada The 2023 Generosity Index,” Fraser Research Bulletin, Dec 2023, www.fraserinstitute.org/sites/default/files/generosity-index-2023.pdf
² Klarka Zeman, “From high school, into postsecondary education and on to the labour market,” Statistics Canada, July 2023, www150.statcan.gc.ca/n1/pub/81-595-m/81-595-m2023004-eng.htm
³ Jamie Golombek, “New data from CRA shows Canadians have nearly 300 billion reasons to love their TFSAs,” Financial Post, Jan 2021, financialpost.com/personal-finance/taxes/new-data-from-cra-shows-canadians-have-nearly-300-billion-reasons- to-love-their-tfsas
⁴ “Income tax rates for individuals,” Government of Canada, Personal Income Tax, Jan 2024, www.canada.ca/en/revenue- agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-   previous-years.html

 

This material has been prepared for informational purposes only and should not be considered personal investment advice or solicitation to buy or sell any securities. As well, it is not intended to provide, and should not be relied on for, tax, legal or accounting advice. It may include information concerning financial markets as at particular point in time and is subject to change without notice. Every effort has been made to compile it from reliable sources; however, no warranty can be made as to its accuracy or completeness. Investors should seek appropriate professional advice before acting on any of the information here. Worldsource Financial Management Inc. and Worldsource Securities Inc. are divisions of Worldsource Group of Companies Inc., operating as Worldsource Wealth Management.