2024 Year-End Tax Planning: Deadlines and Strategies
It’s not too late to make the most of year-end tax planning! Even though the end of 2024 is just around the corner, there’s still time to make moves using smart strategies that can significantly reduce your tax burden and position you for financial success in 2025.
We’ve put together the below summary of tax considerations and key details you need to know about approaching deadlines, major tax changes like the updated capital gains inclusion rate and AMT rules, and actionable strategies to help you stay ahead.
Time’s running low, so be sure to take note of any measures that might impact you or your business, and reach out to your DMCL advisor for tailored guidance on how to plan effectively.
For Individuals
December 15, 2024
Ensure your quarterly tax instalment due December 15, 2024 (falls on a Sunday) is received by the CRA by December 16, 2024 (Monday) to avoid interest charges. Payments made in person at your financial institution or electronically are considered received by the Canada Revenue Agency (CRA) on the date of payment. The CRA currently charges 9% interest, compounded daily, on underpaid taxes and an instalment penalty for insufficient instalments.
Check your CRA instalment reminder for the amount due and use the form if paying in person, or access the form and pay online through CRA MyAccount.
December 31, 2024 (December 27, 2024 settlement date for trades)
Tax Loss Selling: If any of your investments have a fair market value below your cost, selling them before year-end can help offset capital gains realized in 2024 or the previous three years. To ensure the sale is settled by December 31, 2024, you must initiate the trade no later than December 27, 2024. However, be mindful of the superficial loss rules, which prevent you from claiming a loss if you (or an affiliated person) repurchase the same security within 30 days of the sale.
New for 2024 is the impact of the June 25, 2024 capital gains inclusion rate changes. These changes introduce a key consideration: whether you should focus on “loss selling” to manage gains or “gain selling” to take advantage of the lower inclusion rate, depending on your situation and investment goals.
To clarify:
- For post-June 24, 2024, capital gains, the first $250,000 in gains is subject to a 50% inclusion rate, while gains exceeding $250,000 are taxed at a higher inclusion rate of 66.67%.
- This means your decisions on loss selling or gain selling should be informed by whether you expect to exceed the $250,000 gain limit in either period 2 (June 25–December 31, 2024) or in 2025.
Here’s how you might approach this, depending on your expected capital gains:
- Consider loss selling by December 27, 2024 if your period 2 gains (June 25–December 31, 2024) are expected to exceed $250,000. Loss selling can help reduce your period 2 taxable gains to the $250,000 threshold, limiting exposure to the higher 66.67% inclusion rate.
- Consider gain selling by December 27, 2024 if your period 2 gains are expected to stay below $250,000 and you anticipate exceeding $250,000 in gains in 2025. Selling before year-end allows you to take advantage of the lower 50% inclusion rate in period 2.
These strategies can be complex and should align with your overall investment objectives, so it’s important to consult your investment advisor for tailored guidance.
Registered Account Contributions
- Tax-Free First Home Savings Account (FHSA): You can contribute up to $8,000 to a FHSA for the 2024 tax year to reduce your taxable income. If you are planning to contribute to an FHSA in 2025, consider opening the account by December 31, 2024, so you can double your contribution from $8,000 to $16,000 in the new year. If you opened a FHSA in the first year it was available (2023), your maximum contribution room in 2025 will be $24,000.
- Registered Education Savings Plan (RESP): Consider contributing $2,500 to an RESP by December 31, 2024, for each child (up to age 17) to earn a $500 government grant per child. If you haven’t maximized contributions for previous years, you can still catch up—but only one year at a time.
- Registered Retirement Savings Plan (RRSP): You have until March 1, 2025, to make an RRSP contribution for the 2024 tax year. Consult with your financial advisor on your RRSP contribution limit, as the penalties are stiff if you over-contribute (1% per month of the over-contribution until it is withdrawn).
- If you turn 71 in 2024, make your final RRSP contribution and convert your RRSP to a Registered Retirement Income Fund (RRIF) before December 31, 2024, to avoid penalties.
- Tax Free Savings Account (TFSA): You can contribute up to $7,000 to a TFSA for 2024 if you are 18 years old or over and are a resident in Canada. If you need to withdraw funds (e.g., for a home purchase or unexpected financial needs), consider withdrawing by December 31, 2024, instead of waiting until the new year. By doing so, you can replace the withdrawal in 2025 when you have funds to recontribute rather than having to wait until 2026.
Charitable Donations
Consider donating appreciated securities rather than cash to a registered charity to lower the after-tax cost of giving. Donating securities in-kind allows you to eliminate capital gains tax and receive a charitable tax credit based on the value of the donation. This strategy is particularly beneficial given the proposed capital gain inclusion rate increases to 66.67% post June 24, 2024 for individuals with gains over $250,000 and for companies. However, under the updated Alternative Minimum Tax (AMT) rules, high-income earners who donate securities may still be subject to AMT.
If you have a company with appreciated securities, consider donating through your company (rather than personally) for more tax savings.
January 30, 2025
Ensure that any prescribed rate loans between family members or trusts are paid by January 30, 2025, to avoid unintended tax consequences.
For Trusts
December 31, 2024
Trustees must make resolutions to distribute or allocate any 2024 income or taxable capital gains to beneficiaries before year-end. Failure to do so could result in the trust paying taxes at the highest marginal rate. For those affected by the 2023 trust reporting rules, be sure to consult with your DMCL advisor to ensure compliance with the new requirements.
For Businesses
Consider paying year-end bonuses or declaring dividends before your fiscal year-end to take advantage of tax deductions in 2024. Repaying shareholder loans can also help reduce corporate taxes.
If your business is making significant purchases before year-end, consider accelerating these expenses to benefit from capital cost allowance (CCA) deductions. Additionally, it may be beneficial to defer sales of assets that would result in a capital gain, especially given the new capital gains inclusion rate.
Businesses involved in crypto-assets should prepare for upcoming changes under the Crypto-Asset Reporting Framework (CARF), which will be in effect in 2026 but requires businesses to begin preparing for new compliance measures starting now.
All Taxpayers: What’s New for 2024
Capital Gains Inclusion Rate
The capital gains inclusion rate is proposed to increase from 50% to 66.67% as of June 25, 2024 with the exception that individuals’ total capital gains of up to $250,000 each year (for 2024, $250,000 for gains after June 24 2024) will still be at the 50% inclusion rate. This proposed change applies to both individuals, trusts (except Graduated Rate Estates), partnerships, and companies, and significantly impacts tax planning strategies. It’s critical you track capital gains and losses carefully across the two periods in 2024:
- Period 1: January 1 to June 24, 2024 (50% inclusion rate)
- Period 2: June 25 to December 31, 2024: 50% inclusion rate for gains up to $250,000; 66.67% inclusion rate for gains over $250,000
As noted above, consider whether you should hold off on loss selling by December 27, 2024 until 2025 to take advantage of the lower 50% capital gains inclusion rate on all gains in period 1 (January 1 to June 24, 2024) and up to $250,000 of gains in period 2 (June 25 to December 31, 2024).
Lifetime Capital Gains Exemption (LCGE)
The LCGE is proposed to be increased as of June 25, 2024, to shelter capital gains of up to $1,250,000 (increased from $1,016,836) from Canadian income tax* from the sale of qualified small business corporation (QSBC) shares. If you own a growing small business, consider whether you want to reorganize it to include family members as owners through a family trust to potentially multiply access to the $1,250,000 LCGE when selling the company/exiting the business.
*Note that there may be AMT payable—see below.
Alternative Minimum Tax (AMT)
There have been many changes to AMT as of January 1, 2024, that have made the AMT rules even more complex. These include, the AMT exemption increasing to $173,000 for 2024, up from $40,000 in prior years. Additionally, the AMT rate has increased to 20.5%. AMT will now apply more broadly to high-income individuals which will include individuals with income over $173,000 (whether increased in 2024 because of capital gains and/or stock option benefits).
Therefore, affected “high income individuals” include those with capital gains, those claiming capital losses and/or non-capital losses, and/or those with employee stock option benefits. Certain deductions and credits are also limited to 50% (versus 100% previously) such as charitable donations, employment expenses, moving expenses, childcare expenses, interest and carrying charges, and non-refundable credits.
Expanded General Anti-Avoidance Rules (GAAR)
The GAAR rules have been expanded to include any transaction where one of the main purposes (not just the main purpose) is to obtain a tax benefit that could be considered an abuse or misuse of the Income Tax Act. Transactions that lack economic substance will now indicate that abuse or misuse.
Be sure to document the purpose of any transactions in case the CRA questions your tax planning strategies. If GAAR is found to apply, there is a new 25% penalty of the tax benefit unless the taxpayer voluntarily files and reports details of the transaction(s) on CRA’s Reportable Transaction Information Return Form RC312 with 90 days of any one of the steps of the transaction. Therefore, we will see more voluntary reporting especially if the taxpayer is already likely to be reviewed by the CRA.
Next Steps
With significant changes to the tax landscape, year-end tax planning has never been more important. At DMCL, we’re here to help you navigate these updates and ensure that your tax strategy is optimized for both 2024 and beyond. Contact your DMCL advisor today to get personalized advice on wrapping up your 2024 tax year and beginning your preparations for a tax-efficient 2025.
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