The new tax regulations for 2025 are coming: capital gains tax increases, RRSP limit increases!
As the new year approaches, the cost of living has become the most concerning issue for Canadians, and many may hope to improve their financial situation before 2025.
Several changes that will take effect as early as January 1st may affect people's wallets and their tax filing methods.
The official tax season for 2025 will begin in mid February.
The following are changes in tax declaration, government welfare and savings payments, and other tax related updates:
Capital gains tax
The implementation of the capital gains tax reform measures introduced earlier last year has faced many doubts.
The federal government proposed a fiscal action notice in June to increase the inclusion tax rate of taxable capital gains, but these changes have not yet been formally determined through legislation.
When preparing for the 2025 tax filing season, the Canada Revenue Agency can follow the guidance of tax planning proposals, even if the proposal has not yet been formally passed in parliament.
GlobalNews has contacted the Canadian Revenue Agency to inquire about the upcoming changes in capital gains tax.
Capital gains refer to the income generated from the sale of assets such as stocks or investment properties.
All capital gains have an inclusive tax rate, which means that a certain proportion of the profits from sales will be included in the taxable income for the current year.
According to the new changes, the inclusion rate for personal income exceeding 250000 yuan per year will increase from 50% to 67%.
The two-thirds inclusion rate will apply to all such income obtained by the company and many trusts.
However, Canadians' primary residence will still be exempt from capital gains tax.
The Ministry of Finance stated that starting from June 25th, a new annual threshold of 250000 yuan will be established to ensure that individuals earning moderate capital gains continue to enjoy the current 50% inclusion tax rate.
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Tax free period
Implement a two month "tax-free period" for various goods, including certain groceries, valid until February 15, 2025.
This means that Canadians do not need to pay GST/HST for goods such as cooked food, snacks, restaurant meals, takeout or delivery, alcoholic beverages, and children's clothing.
According to the Parliamentary Budget Officer (PBO), the two month tax reduction measures will save taxpayers approximately 1.5 billion yuan.
benefit
Based on inflation, Canadians can expect an increase in government benefits such as the Canada Children's Benefit and Old Age Security in the new year.
The scheduled changes are based on inflation, which means Canadians will receive an increase in these benefits to reflect changes in the Consumer Price Index (CPI).
The OAS amount is reviewed annually in January, April, July, and October to reflect the cost of living growth measured by CPI.
According to the government, OAS benefits increased by 1.3% between October and December.
The Department of Employment and Social Development Canada stated that due to the lack of CPI increase in the first three months, OAS payments for the first quarter of 2025 will remain unchanged.
The CCB subsidy amount is recalculated in July each year based on the family's net income and inflation rate from the previous year.
The GST/HST credit is paid quarterly. Intended to help low - and middle-income individuals and families offset the GST or HST they pay.
From July 2024 to June 2025, single Canadians without children can receive a GST/HST credit of up to $519.
CCB and GST/HST credits are both tax-free.
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contribution limit
In the new year, Canadians will be able to save more tax-free funds for retirement.
The contribution limit for a registered retirement savings plan (RRSP) will increase from 31560 yuan in the previous year to 32490 yuan in the 2025 tax year.
The maximum pension income and contributions will also increase.
The annual maximum retirement income (YMPE) for 2025 will be 71300 yuan, higher than the previous year's 68500 yuan. However, the basic tax exemption for 2025 (applicable to individual tax exemptions for each YMPE) remains unchanged at 3500 yuan.
The contribution rate for employees and employers to the Canada Pension Plan remains unchanged at 5.95% in 2025. The maximum payment per person will increase from 3867.50 CAD in 2024 to 4034.10 CAD.
According to data from the Canada Revenue Agency, the CPP contribution rate for self-employed individuals remains at 11.90%, and the maximum contribution amount will be $8068.20, higher than $7735.00 in 2024.
After two consecutive increases, the contribution space for a tax-free savings account (TFSA) will remain unchanged at $7000 CAD.
Vehicle deduction limit
The Canadian Ministry of Finance announced on Monday that the income tax deduction limit for rental vehicle companies will be raised from January 1st.
For new leases signed in the new year, the deductible rental cost will increase from 1050 yuan per month to 1100 yuan (before tax).
The department stated that for new and used 10.1-liter passenger cars purchased on or after January 1, 2025, the capital cost allowance (CCA) cap will increase from 37000 yuan to 38000 yuan (pre tax).
The deduction limit for tax-free allowances paid by employers to employees who use private vehicles for commercial purposes in various provinces will be increased by two cents, with 72 cents per kilometer for the first 5000 kilometers and 66 cents per kilometer thereafter
For the region, the oil price limit for the first 5000 kilometers will also increase by 2 points, reaching 76 points per kilometer, and then 70 points per kilometer, "it added.
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Bare trust reporting
The Canada Revenue Agency has extended the reporting exemption for naked trusts until the 2024 tax year.
This means that unless specifically requested by the agency, Canadians with naked trusts do not need to submit T3 or Schedule 15 documents when completing their tax returns for the current tax year next spring.
However, trusts whose tax year ends on December 31, 2024 are required to submit a T3 declaration form, with a deadline of March 31, 2025.
Tax declaration update
Canadians who submit tax returns online should be aware of some changes that will take effect in January 2025.
The Canada Revenue Agency has announced that it is updating the T619 electronic transmission records for the 2025 tax year, which will affect all information declaration forms submitted electronically.
The agency stated on its website: "You need to include updated T619 electronic submission records to create a complete submission
The Canada Revenue Agency will also limit the submitted content to one type of tax refund, and therefore will no longer accept combinations of multiple types of tax refunds.
In order to mark any errors during submission, the new online verification will also take effect in January.
Ottawa is promoting automatic tax declaration, and its national pilot program is expected to continue into the new year.
The Canada Revenue Agency also plans to increase the number of invitations for the Simple File telephone service from 1.5 million to 2 million Canadians, so that they can automatically declare taxes by 2025.
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