Finance and Technology

Get the Most From Your 2024 Tax Return

Feb 2024 | By Harbourfront Wealth Management

For Canadian seniors and retirees, navigating the tax landscape in 2024 requires a keen understanding of the latest changes and strategic planning to ensure financial well-being. As we move forward, it’s important to highlight several key updates and strategies specifically tailored to meet your unique needs in retirement.

Firstly, the enhancement to the Canadian Pension Plan (CPP) is a significant development that deserves attention. The CPP enhancement program, which began in 2019 and will continue through 2025, is designed to bolster your retirement income by increasing the maximum CPP benefit by approximately 50%. This phased enhancement aims to provide higher income replacement for retirees, which could be particularly beneficial for those who have consistently earned above the Year’s Maximum Pensionable Earnings (YMPE)​​.

Additionally, the increase in the Basic Personal Amount (BPA) to $15,705 for 2024 offers a slight tax relief for most Canadians, including seniors. This adjustment means you can earn a bit more income before owing any federal tax, providing a welcome buffer for retirees managing their taxable income​​.

Pension income splitting remains an effective strategy for couples in retirement, allowing you and your spouse or common-law partner to allocate pension income in a way that could lower your combined tax liability. This strategy is especially advantageous for couples with differing income levels, potentially reducing the overall tax rate on your retirement income and maximizing your after-tax income​​.

For those of you over the age of 65, the age amount tax credit is an important consideration. Depending on your income level, this non-refundable credit can reduce the amount of tax you owe. If your income is below a certain threshold, you might be eligible for a higher credit, with the potential to transfer any unused portion to your spouse, optimizing your tax situation further​​.

Moreover, it’s crucial to be aware of the expanded trust reporting rules that now include situations where a trust acts as an agent for its beneficiaries, commonly known as a bare trust. This change could have implications for many, requiring careful attention to ensure compliance and avoid potential penalties​​.

In conclusion, staying informed and strategically planning around these tax changes and opportunities can significantly impact your financial security in retirement. As Financial Planners, our goal is to support clients in navigating these complexities, ensuring you make the most of the benefits available to you while maintaining compliance with the evolving tax regulations. Together, we can work towards optimizing peoples retirement planning and achieving financial peace of mind.

For more information on taxes and other wealth-building questions, contact the experts at www.wealthbuilding.ca.