Dear Client, January 2025
Thank you for your continued business in 2024. Below I have highlighted various updates for your personal and/or business tax considerations.
Important Reminders
Tax Free Savings Account (TFSA)
The TFSA contribution limit for 2025 is $7,000. If you have never contributed to a TFSA, you could invest up to $102,000 in 2025 (that is the TFSA contribution room that has accumulated with annual limits since the TFSA program began in 2009 for Canadian residents 18 years or older).
Common TFSA Mistakes:
You may have invested with different financial institutions during the year, and in total you invested over the annual limit. The annual TFSA contribution limit applies to all your TFSAs combined for that year.
Financial institutions have until the end of February to send information to CRA about the previous year’s transactions (i.e. contributions and withdrawals). Do not rely on the CRA’s online tracking of your TFSA contribution room too early in the calendar year. It is important to always calculate your contribution room before you contribute.
If you make a withdrawal in a year and then re-contribute the same amount in that same year, the re-contribution will count towards that year’s annual contribution limit. It does not represent a repayment of the original withdrawal amount. In some cases, this could put you over the contribution limit for that year. For example, in 2025 the contribution limit is $7,000. If I withdraw $10,000 in 2025 and then re-contribute the same $10,000 in 2025, I now have an overcontribution of $3,000 because the deposit has gone over the annual limit for 2025.
If you have overcontributed there may be a 1% tax on the overcontribution. Please consult with me immediately as we may be able to take time-sensitive steps to rectify this error without incurring the penalty.
Extension of 2024 Charitable Donations to February 28, 2025
Charitable donations for 2024 may be made up until February 28, 2025. The federal government has made this allowance in light of the Canada Post mail stoppage.
Federal Budget 2024 – Capital Gains Tax Changes in “Limbo”
The capital gains tax changes for individuals, corporations and trusts on capital gains and losses realized on or after June 25, 2024 has NOT been passed into law yet. Should the minority Liberal government fall before this becomes law, these changes may not happen.
The CRA will continue to administer the proposed legislation during this tax season until the new government decides on how to proceed. Any tax returns that have been filed under the proposed legislation will be reassessed by the CRA if the proposed legislation does not become law.
Under the proposed legislation, two-thirds of capital gains would be taxed instead of one-half. Individuals will be exempt from this proposed change on gains less than $250,000.
Capital gains occur from sales of investments such as stocks and bonds, rental properties and cottages.
The principal residence exemption on your home will continue to be available.
Estate Planning, Deceased and Trust Returns
My practice includes the preparation of deceased returns and trust returns.
There are a number of claims that can be made in the final return of a deceased that are not normally allowed.
Please refer to my website for estate planning blogs including estate planning checklists, a decision tree for the family cottage transfer, and information about probate (estate administration tax).
I look forward to serving your future accounting needs.
Dean Constand CPA
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