As Canadians ring in the new year with cost of living top of mind, many would likely want to get ahead on their finances for 2025.
There are several changes coming into effect as early as Jan. 1 that could affect people’s pocketbooks and how they file tax returns.
The official 2025 tax season kicks off in mid-February.
Here’s what is changing for tax filing, government benefits and savings contributions, among other tax-related updates.
There are questions looming over the implementation of the capital gains tax changes that were introduced earlier this year.
The federal government tabled a notice of ways and means motion in June, increasing the inclusion rate for taxable capital gains, but legislation is yet to be passed to formalize those changes.
In preparing for the 2025 tax filing season, the Canada Revenue Agency is able to take direction from the ways and means motion, even if it hasn’t been passed formally through Parliament.
Global News has reached out to the CRA for clarity about the impending changes to capital gains taxes.
Capital gains are the proceeds from the sale of an asset like a stock or an investment property.
All capital gains come with an inclusion rate, meaning a percentage of profits realized from the sale is added to taxable income in that year.
Under the new changes, that inclusion rate would rise to 67 per cent from 50 per cent on any gains realized above $250,000 annually for individuals.
That two-thirds inclusion rate would apply to all such gains made by corporations and many trusts.
However, Canadians’ principal residences would remain exempt from capital gains taxes.
Effective June 25, there is also a new $250,000 annual threshold to ensure individuals earning modest capital gains continue to benefit from the current 50 per cent inclusion rate, according to the finance department.
A two-month “tax holiday” on various items, including certain groceries, will remain in effect till Feb. 15, 2025.
That means Canadians will not have to pay GST/HST on things like prepared foods, snacks, restaurant meals, takeout or delivery, alcoholic beverages and children’s clothing.
The two-month tax break will save taxpayers an estimated $1.5 billion, according to the parliamentary budget officer (PBO).
Depending on inflation, Canadians could expect an increase in government benefits, such as the Canada Child Benefit and Old Age Security, in the new year.
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The scheduled changes are based on inflation, meaning Canadians will get a top up in these benefits to reflect changes in the Consumer Price Index (CPI).
The OAS amounts are reviewed each year in January, April, July and October to reflect cost of living increases, as measured by the CPI.
For the October to December period, OAS benefits rose by 1.3 per cent, according to the government.
For the first quarter of 2025, OAS payments will remain unchanged since the CPI did not increase over the previous three-month period, according to Employment and Social Development Canada.
CCB payments are recalculated annually in July based on a family’s net income from the previous year and inflation.
GST/HST credit payments are made quarterly. They are meant to help individuals and families with low and modest incomes offset the GST or HST that they pay.
Between July 2024 and June 2025, single Canadians without any children could get up to $519 in GST/HST credit.
CCB and GST/HST credits are all non-taxable.
In the new year, Canadians will be able to set aside more tax-exempt money for their retirement.
The contribution limit for the registered retirement savings plan (RRSP) is increasing to $32,490 for the 2025 tax year, up from $31,560 the year before.
Maximum pensionable earnings and contributions are also going up.
The Year’s Maximum Pensionable Earnings (YMPE) for 2025 will be $71,300 — up from $68,500 the previous year. However, the basic exemption amount, which is a personal exemption that is applied to each YMPE, for 2025 remains the same at $3,500.
Employee and employer Canada Pension Plan contribution rates for 2025 stay unchanged at 5.95 per cent. The maximum contribution is increasing to $4,034.10 each—up from $3,867.50 in 2024.
The self-employed CPP contribution rate remains at 11.90 per cent, and the maximum contribution will be $8,068.20—up from $7,735.00 in 2024, according to the Canada Revenue Agency.
After two consecutives increases, the contribution room for the tax-free savings account (TFSA) will remain unchanged at $7,000.
Starting Jan. 1, the income tax deduction limits for businesses leasing vehicles will go up, the Department of Finance Canada announced on Monday.
For new leases entered in the new year, tax deductible leasing costs will increase from $1,050 to $1,100 per month (before tax).
For new and used Class 10.1 passenger vehicles acquired on or after Jan. 1, 2025, the ceiling for capital cost allowances (CCA) will be increased from $37,000 to $38,000 (before tax), the department said.
“The limit on the deduction of tax-exempt allowances paid by employers to employees who use their personal vehicle for business purposes in the provinces will increase by two cents to 72 cents per kilometre for the first 5,000 kilometres driven, and to 66 cents for each additional kilometre.”
“For the territories, the limit will also increase by two cents to 76 cents per kilometre for the first 5,000 kilometres driven, and to 70 cents for each additional kilometre,” it adds.
The CRA has extended an exemption to the reporting of bare trusts for the 2024 tax year.
That means that, unless specifically requested by the agency, Canadians with bare trusts won’t need to file T3 or Schedule 15 documentation when they complete their return next spring for the current tax year.
However, the T3 return for trusts with a Dec. 31, 2024, tax year-end will need to be filed and the deadline for that is Mar. 31, 2025.
Canadians filing their tax returns online should be aware of some changes that go into effect come January 2025.
The CRA says it is updating the T619 electronic transmittal record for the 2025 tax year, which will affect all information returns filed electronically.
“You need to include the updated T619, Electronic Submittal record to create your complete submission,” the agency says on its website.
The CRA is also restricting submissions to one return type, so a combination of multiple return types will no longer be accepted.
To flag any errors when filing, new online validations will also take effect in January.
Ottawa is pushing ahead on automatic tax filing, with its national pilot program expected to continue into the new year.
The CRA is also planning to increase its invites for the SimpleFile by Phone service to two million Canadians total — up from 1.5 million — so they can file their taxes automatically for the 2025 season.