Canada’s 2024 Tax Brackets and Rates: Here’s What You Need to Know

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    27 Feb 2024

    Canada's 2024 Tax Brackets and Rates: Here’s What You Need to Know

    Tax season's rolling in, and you know what that means – the annual update to Canada's tax brackets and rates. Staying in the loop on these updates will help you make the best of accounting services in Canada. Just a quick heads-up –  tax brackets are adjusted every year as per the inflation, making sure we keep up with the ever-changing cost of living. This year also, the tax brackets have been indexed by 4.7%, meaning they've risen to accommodate inflation. The good news? After the 2024 tax bracket changes, more income is falling into lower tax brackets, potentially leading to lower taxes for many Canadians. So, how will the new changes impact you? This article is here to help you find out.  Before you read further: Don’t forget to book your first consultation with Chartered professional accountants at CJCPA for free. 

    WHAT IS A TAX BRACKET?

    People don't pay taxes on their entire income at one rate. Instead, the income is divided into different levels called tax brackets, and each bracket has its own tax rate.  So your money goes through these levels, not sticking to just one rate.  Tax brackets are like tiers of income, and higher rates apply as your income goes up. These tax brackets get adjusted each year based on the consumer price index, and the rates represent the percentage of income that goes to regional and federal governments.  These tax rates apply to the taxable income. It is the figure that arrives after the original income goes through deductions, credits, and exemptions. In Canada, there is a marginal tax rate system, meaning that the more you earn, the higher the income tax rate. The federal government sets the federal income tax rates, but each province and territory can decide their own rates. These provincial and territorial rates are added on top of the federal amounts.

    Key Tax Brackets (2024 vs. 2023)

      Below are the 2024 federal income tax rates, compared with rates for 2023 as well. These rates will apply to your taxable income, which is the income left post deductions, credits, and exemptions. If you don’t want to miss on the the tax credits, deductions, and benefits available, consult Tax Accountant Surrey for a professional opinion.  
    Federal Tax Rate  Tax Brackets
    2024 2023
    15% $55,867 or less $53,359 or less
    20.5% $55,868 - $99,849 $51,909 - $93,572
    26% $99,849 - $156,497  $93,572 - $149,438
    30% $156,497 - $221,758 $149,438 - $216,511
    33% Over $221,758 from $216,511
      The list of 2024 provincial tax brackets is available here. As you can see, the increases vary across the brackets. While everyone benefits from the indexation, those falling within the lower to mid-income brackets might experience a more noticeable reduction in their tax liability. Apart from these changes, the personal basic amount, a non-refundable tax credit, also received a bump, rising to $15,532 in 2024. Think of it as a flat tax reduction applied to everyone's income.

    What’s the impact of Canada's NEW tax brackets? 

    The increase in tax brackets, thanks to inflation, means that more income falls into lower tax brackets. That's a win for a significant portion of Canadians, especially those in lower to mid-income brackets. However, if your income has increased beyond the new bracket thresholds, you might end up with a bigger tax tab. Thus, potentially increasing your tax bill. Good news – the big leagues, the top tax bracket, are holding steady. So, the high-income earners won't see a direct impact on their tax rate due to the bracket changes. While the overall impact is positive, navigating the changes and understanding their individual implications can be complex, especially for those with intricate tax situations. Consult a CPA firm for personal Tax filing Canada for these circumstances. 

    Thinking Beyond Numbers: Basic Strategies For Tax Planning In 2024

      Tax season is more than just paperwork. It's a chance to map out your future. Check out these quick tips:

    Maximize Deductions and Credits 

    Research and understand the deductions and credits available to you. Keep detailed records of any expenses you believe might be deductible. For this, you can think of receipts, invoices, and bank statements among others.  Things like RRSP contributions and medical expenses can seriously shrink your taxable income.

    Consider Tax-Saving Investments 

    Ever checked out RRSPs and TFSAs? They're like secret gardens for your investments, where they can grow tax-free. Plus, it's not just about stuffing cash in there – match your investment game plan with your life goals, whether it's cruising into retirement or scoring that dream home down payment.  Consider your current and expected future tax brackets to determine which option offers the most significant tax savings.

    Plan for Future Changes

    Anticipate potential income fluctuations or life events that might impact your tax situation in the coming years. If you expect a promotion, job change, or other income boost, estimate the new bracket you might fall into and understand the potential tax implications.  Early planning can help you adjust your strategies accordingly. Don’t shy away from consulting Business Planning Solution Canada firms, if you are saving up money for a startup.

    Keep Up With The Changing Times

    Remember – Knowledge is power when it comes to understanding taxes. When you are up-to-date with the changes in Canada's tax brackets and rates, you’ll be easily able to take advantage of deductions and credits. More so, planning your future will be easier, and you’ll be able to approach the tax season with confidence. You got this! CJCPA is a Canada-based Personal tax accountant Surrey firm that specializes in tax planning and filing for individuals and small businesses in Canada. Our combined experience of 30+ years makes us well-versed in the accounting, financial, and taxation changes in the country.  Book your first consultation with our experienced CPA, and discuss your tax troubles for free. Visit our website for more such latest updates in the finance landscape.  
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