2024-01-06 19:25:14
Canadians preparing their taxes and budgets for 2024 might get unexpected relief from inflation.
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Although cost of living increases have generally stabilized in 2023, inflation in recent years serves as a benchmark for a number of government programs and tax reporting metrics.
In other words, the inflation of recent years might provide certain households with unexpected tax assistance.
Here are the main financial changes in 2024.
Higher tax brackets thanks to inflation
Canadians’ marginal tax rates are expected to undergo a significant adjustment for inflation this year.
The Canada Revenue Agency (CRA) uses the previous year’s inflation index to determine the amount of tax Canadians will pay on different amounts of income the following year. The higher the limits of each bracket, the less tax Canadians will pay on the corresponding portion of their income.
As inflation reached its highest level in 41 years in 2022 and remained very high for most of this year, taxpayers might benefit from benefits when filing their returns. tax for the year 2023.
The federal escalator for 2023 has been set at 6.3%, a significant jump from 2.4% in 2022, Global News reports.
After these changes, the federal tax brackets for 2023, divided by income, are as follows:
$53,359 or less, taxed at 15%
$53,359.01 to $106,717, 20.5% tax rate
$106,717.01 to $165,430, 26% tax rate
$165,430.01 to $235,675, 29% tax rate
Above $235,675.01, the tax rate is 33%
For fiscal year 2024, this factor is expected to decrease slightly to 4.7%.
Quebec also has an indexation rate of 6.44% for the year 2023, with the following rates:
$49,275 or less, 14% tax rate
$49,276 to $98,540, 19% tax rate
$98,541 to $119,910, tax rate at 24%
$119,911 and over, tax rate at 25.65
A lot of
Old Age Security (OAS) is also indexed to inflation, but this indexation is quarterly rather than annual. For the first quarter of 2024, OAS benefits will increase by 0.8% compared to the previous quarter.
The amount Canadians can save and invest tax-free also increases due to inflation.
Contribution room for the tax-free savings account will increase by $7,000 in 2024, compared to $6,500 in 2023. Also indexed to inflation, this is the first time that this amount has increased two years in a row.
The registered retirement savings plan contribution limit is $31,560 for the 2024 taxation year, compared to $30,780 the previous year. The individual limit is always the lesser of this figure and 18% of your gross income.
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