On the heels of ringing in the new year here in Grande Prairie, come changes from the Federal Government that will affect the personal financial planning of Canadians for the year ahead. Although increases in source deductions may reduce take-home pay, increases to Tax-Free Savings Accounts, Registered Retirement Savings Plans and First Home Savings Accounts contribution limits could create tax advantages for savings and investing. For those looking to sell a business, an increase to the Lifetime Capital Gains Exemption could mean over one million dollars in tax-free income.
TFSA Annual Increase
Tax-Free Savings Accounts (TFSA), are a significant tax-advantaged savings and investment tool for Canadians. Using post-tax dollars to grow and withdraw investments tax-free, along with their flexibility, makes TFSAs a popular choice for those 18 years and older.
Created in 2009, Canadians have seen steady increases in the TFSA contribution limits over the past 15 years. The contribution room has increased, on average, $500 every 4 to 5 years, with 2013 being an exception. However, after a $500 increase only last year, the Federal Government has elected to increase again, bringing the 2024 annual amount up to $7,000. This equates to a lifetime contribution limit of $95,000 for anyone 18 years or older in 2009. For those born after 1991, add the contribution limits for all qualifying years to calculate the lifetime amount.
| Year(s) | Contribution Limit |
| 2009 to 2012 | $5,000 per year |
| 2013 & 2014 | $5,500 per year |
| 2015 | $10,000 |
| 2016 to 2018 | $5,500 per year |
| 2019 to 2022 | $6,000 per year |
| 2023 | $6,500 |
| 2024 | $7,000 |
For those who haven’t maxed out previous contributions, any unused contribution room from previous years continues to carry forward.
RRSP Limit Increase
Registered Retirement Savings Plan (RRSP) maximum contribution amounts have also increased in 2024 by nearly $800 from 2023’s limit of $30,780 to $31,560. This increase allows individuals earning in a higher tax bracket to shelter additional income from immediate taxation, creating more opportunities for wealth creation within this tax-deferred account.
These increases in TFSA and RRSP accounts reflect the need for more robust retirement savings. Leveraging these tools early can help create more personal, financial security as earners approach retirement.
2024 FHSA Contributions
The Government of Canada has set the lifetime contribution limit for a First Home Savings Account (FHSA) at $40,000, with a 2024 contribution limit of $8,000.
For those looking to get into home ownership in the future, this newer savings and investment account type offers a tax-advantaged investment choice to save for a down payment. The FHSA provides account holders with the advantage of tax-deductible contributions while removing taxes payable on the growth within the fund, similar to a TFSA, when used for the purchase of a home.
Active 2: “First-time homebuyers” comprise Canadians over the age of 18, who have not lived in a home they owned for the past five years, allowing previous homeowners to be eligible.
CPP Contributions
The Canada Pension Plan (CPP) continues to be an essential part of many Canadians’ income as they enter retirement. In 2024, the yearly maximum pensionable earnings will increase from $66,600 in 2023 to $68,500.
CRA is also introducing a new component of CPP called the “second additional component” or “CPP 2.0” for 2024. This is the first step in a multi-year plan to enhance the CPP by increasing future benefits and addressing changes to real purchasing power from inflation. A 4% deduction on earnings between $68,500 and $73,500 is being introduced to bring the annual total maximum CPP contribution limit to $4,055.50.
Employers also need to match the higher contributions for employees. Self-employed individuals, who cover both the employee and employer portions of CPP contributions, will feel the costs of CPP 2.0 a little harder, with a combined maximum contribution of just over $8,100 with the enhancement.
2024 Income Tax Brackets
The Federal Government has adjusted the progressive Canadian tax bracket system for 2024. Following a high period of inflation, the income ranges within each tax bracket have changed, shifting upwards, while the taxation rates remain steady. For those working in Grande Prairie, Alberta, where wages are comparatively higher than in other provinces, these changes may be more pronounced as they can earn more income before moving up a tax bracket.
The Basic Personal Amount (BPA) also increases in 2024 to provide a higher minimum amount of earnings before income is taxable.
The following table compares the 2024 and 2023 income tax bracket thresholds for applicable rates.
| Tax Rate | 2023 Income Bracket Begins | 2024 Income Bracket Begins |
| 15% | $15,000 | $15,705 |
| 20.5% | $53,359 | $55,867 |
| 26% | $106,717 | $111,733 |
| 29% | $165,430 | $173,205 |
| 33% | $235,675 | $246,752 |
LCGE Increase
Lifetime Capital Gains Exemption (LCGE) enables certain Canadian business owners and investors to sell shares of incorporated businesses without paying tax on a portion of profits. In 2024, this limit increased to $1,016,836. for eligible transactions, this means the portion of the sale up to this exemption limit would incur no tax.
As we move forward into the year ahead, these changes in personal tax rates impact most income-earning individuals. While the uptick in source deductions might lead to reduced take-home pay, the augmented contribution limits for registered accounts and the LCGE increase could present advantageous opportunities for tax-efficient savings and investments. Smart budgeting and tax planning with a professional, such as our team here at McNabb Lucuk LLP, could get you, your family or your business on the right financial path.
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