SCL Tax Newsletter Jan 2025 Updates (sorry, it's a long one)
- Sarah Lee
- Feb 12
- 8 min read
FOR TAX YEAR 2024 & FOR UPCOMING TAX YEAR 2025
Note, this was initially released Jan 9 2025 While I have been writing tax newsletters for many many years, this will be the first issuance under SCL!
As we kick off tax season, this will be a lengthy one (sorry!) Enjoy and always, reach out if any clarification is needed!!
📅 0:29 Important Deadlines (Add to Your Calendar!!)
✅ 2:58 Tax Checklists & Templates
❓ 4:10 The Most Common Tax Questions That Come Up
🚨 5:01 Recent Tax Changes to Not Miss
👀 6:00 Pending Tax Changes Being Monitored…
🕵️♂️ 6:34 Bigger CRA Audit Hot Areas
FOR TAX YEAR 2024
While I have been writing tax newsletters for many many years, this will be the first issuance under SCL! As we kick off tax season, this will be a lengthy one (sorry!)
Enjoy and always, reach out if any clarification is needed.
Important Deadlines (add to your calendar!!)
As an individual, your personal tax filing & payment deadline (T1) is April 30, 2025.
As an unincorporated self-employed individual, your personal tax filing (T1 & T2125) and GST filing is due June 16, 2025 while the payment remains April 30, 2025. Yes, the government always wants to be paid first.
Now, if you are the shareholder of a corporation, there are some extra responsibilities to keep on your radar. This includes:
T2 (corporate tax return) filing is due 6 months after your year-end while the payment is typically due 3 months after the year-end. So, for a December 31st year-end, this will be a filing deadline of June 30, 2025 while tax payment is due March 31, 2025.
GST (corporate) filing and payment is due 3 months after your year-end of March 31, 2025.
As a reminder, if you were requested to pre-pay quarterly tax installments, please double check you are caught up with any applicable:
Personal Installment deadlines
Corporate Installment deadlines
GST (self-employed or corporate) deadlines
With our current ultra high prescribed rates, it is almost never advantageous to be tardy with these pre-payments. Gone are the days of pre Q2 2022. Unclear what this means? Reach out for clarification if needed.
Other important deadlines to monitor:
PST filing and payment is typically due 30 days after the reporting period. Double check your filing frequency and respective deadlines to maximize the cash-back commission to be received.
T4 and T5 filing deadlines will be February 28, 2025. These are informational returns only.
WCB - while this is often the forgotten cousin of tax season, their auditors are on the hunt. Ensure you are registered (triggered if salary or dividends issued, even to shareholders). The deadline is typically the end of February 2025. Double check your Annual Report.
T3 deadlines will be March 31, 2025. Note, CRA has already announced (hooray, no last minute surprises this year!) bare trust arrangements will NOT need to file for 2024. With that said, this may not be the case next year. Please consult your lawyer if you think you may have unintentionally entered into a bare trust arrangement.
UHT – the federal underused housing tax, hands down one of the most poorly written and rushed tax policies I’ve ever encountered, has thankfully undergone a re-write with Bill C-69 receiving Royal Assent on June 20, 2024. If you’re still caught by the revised rules, make sure to file and pay by April 30, 2025. And remember, this is separate from your municipal or provincial vacancy taxes like the empty home tax or speculation tax—check those deadlines too!
Anything catch your eye? Need further clarity? Book a 15-30 minute catch up call to walkthrough any of the above. At SCL, education is our top priority. While painful, I promise, it’s better than the alternative (a.k.a. penalties and tax audits).
SCL Checklists
You know Sarah loves to stay organized. Feel free to use the following checklists to conquer your tax season!
If engaging SCL for any tax filings this upcoming season, please note I will be away April 16- May 2nd. Therefore, information will need to be submitted no later than March 31, 2024 to file before April 15, otherwise a tax estimate will be provided and filing completed upon my return.
SCL Resources & Templates
Access the free resources above and download a local copy for your reference.
Note, I will be launching some new educational resources in the upcoming season. Excited to share! Please stay tuned.
FOR UPCOMING TAX YEAR 2025
CRA’s Indexed Tax Rates, Credits and Benefits effective Jan 1 2025
CRA’s RRSP and TFSA Limits effective Jan 1 2025
The most common questions that come up pertain to:
RRSP Contribution Deadline (Tax Year 2024): Mark your calendar—March 3, 2025. Your limit depends on your earned income, so double-check your CRA Notice of Assessment for accuracy. And please, don’t overcontribute—the penalties aren’t worth it.
TFSA Contribution Limit (2025): It’s still $7,000. Didn’t contribute in previous years? Good news! You can catch up and stack your unused room—time to let that tax-free magic grow, grow, grow!
FHSA (First Home Savings Account): This is the new kid on the block launched in 2023, and it’s shockingly underused. Saving for your first principal residence? Don’t skip this! Unlike RRSPs and TFSAs, you must open an account to create your $8,000 annual contribution room, and only $8,000 unused room carries forward per year. It’s a little more complex, but don’t let that stop you—this one’s a game-changer!
The above are three very different tax-advantaged tools with unique focus areas. Make sure you’re using the right one for your respective goals. Not sure where to start? Reach out.
HBP - Speaking of first time home buyers, let’s not forget about the traditional RRSP home buyer plan. A great compliment to the shiny new FHSA. What’s interesting here is that the withdrawal limit has increased from $35,000 to $60,000 effective April 16, 2024. This is a big jump from the historical $20,000 limit. The repayment terms are quite generous so definitely consider this one!
CPP - many are still unaware of the massive changes launched back in 2019. The gradual enhancements are now in full blast with your CPP1 contribution maxing out at $4,034 and CPP2 (yes, there is a level 2 since Jan 1 2024) maxing out at $396. What does this mean? If you are employed, you are contributing up to $4,430 from your paycheck in 2025 while our self-employed heroes will need to set aside $8,860. This is CPP - not income tax related. Angry yet?
Not sure whether dividends, salary, or a mix is the best approach for you? The perfect cocktail will depend on your unique financial needs. Reach out if we have not yet done a distribution exercise.
EI – as an employee, you will contribute up to $1,078 to EI in 2025. If you’re self-employed or own more than 40% of a corporation, by default you are exempt from the program. Feel like you’re missing out on benefits like parental leave or sickness coverage? You can self-register with the CEIC to opt into the program.
Recent tax changes to not miss:
Received Royal Assent Dec 12, 2024 with an effective from Dec 14, 2024, to Feb 15, 2025. Many thoughts on this one but this newsletter is already getting dangerously lengthy. Note, as a consumer, this means no GST or HST will be charged on select essentials like food & beverages, children's clothing & toys, books & newspapers and apparently, video games. As a business owner, please be extra mindful of your bookkeeping during this period. This may impact not only the sales tax charges on your sales but the ITCs to be claimed on your return.
Alternative Minimum Taxes (AMT):Received Royal Assent Jun 20, 2024 with a retro effective date of Jan 1, 2024. Changes were made to the old AMT rules (as it was moreorless ineffective) with an aim to impact the ultra high-income earners by further limiting deductions and ensuring a minimum level of tax is paid. While you may not be the target audience, AMT may apply to you in a year with a significant capital gain. If disposing of any significant taxable capital property, reach out if a pre-calculation is warranted.
Real Estate related changes
Are you a real estate baron (or in the making?) . Do not forget about 2 significant tax changes that were enacted recently:
Residential Anti-Flipping Sale Rules (Federal):Received Royal Assent Dec 15, 2022 and came into effect Jan 1, 2023. Unless exempted, profits from selling residential properties owned for less than 12 months will be taxed as business income (full inclusion) rather than as a capital gain.
BC Home Flipping Tax Rules (Provincial):
Bill 15 was passed on Apr 25, 2024 and came into effect Jan 1, 2025. With very few exceptions, profits from selling residential properties owned for less than 2 years will be greeted with an additional provincial income tax (up to 20%). This tax will be paid come income tax time and not at the point of sale.
Short-Term Residential Rental Rules (Provincial):Bill C35 was passed on Oct 26, 2023 and came in effect May 1, 2024. Aside from the licencing restrictions, the tax impact for non-compliant short-term rental properties resulted in limitations to common deductions such as mortgage interest, property taxes and maintenance.
Pending tax changes being monitored….
It has been a whirlwind in the tax world since July 2017. The current focus areas to keep on your radar remain:
Capital Gain inclusion rate change from 50% to 66.67%
While we all knew this change was inevitably coming, the 50% inclusion rate has been around since 2001. So, understandably many were upset on Budget Day 2024.
But, why am I upset? It is not the “why” but the “how”. It’s how the poorly drafted policy came with lightning quick proposed effective date of less than 90 days from initial announcement. It is how the poorly drafted policy is a clear brazen attempt to scare many taxpayers into realizing their capital gains much too early, resulting in a loss of compounding power. It is how the drafted policy clearly violates tax integration. It is how after many stressful months, the policy has yet to receive royal assent. That’s right. An effective date of June 20, 2024 yet this tax policy is not yet law as at the date of this newsletter’s issuance. Facepalm x 10,000. To quickly summarize:
As an individual, your capital gain inclusion rate will likely remain at 50% unless exceeding $250,000. Thereafter, the excess will be based on an inclusion rate of 66.67%
As a corporation, you are out of luck. Any capital gain will be greeted with the higher inclusion rate of 66.67%. No threshold.
Also mentioned in Budget 2024, this lacklustre proposal (honestly, what can any of us do with $250 nowadays?) is aiming to be a one-time refundable tax credit to offset taxes payable. As this applies to 2023, taxpayers will need to ensure they’ve filed to “qualify”. Note, this proposal has yet to receive royal assent as at date of this newsletter issuance.. And my bet is that it will not pass. Any bets?
Note, this is separate to the Canada Carbon Rebate for Small Businesses previously announced and distributed. Unfortunately, BC corporations were not eligible. already issued to eligible businesses in respect to their 2023 corporate tax filings. You did not need to apply for this rebate. If you were eligible, you should have automatically received the payment.
Bigger CRA Audit Hot Areas
The CRA continues to focus on common deductions like travel, vehicle, and home office expenses. Review letters are often sent out before escalating to a full audit. If you receive a review letter, do not fear! We must respond promptly with the requested documents—ignoring it won’t make it disappear!
Remember to keep your receipts and records handy for six years after your year-end. Do not shred/throw away!
What’s next?
The Federal Budget is typically released in April, with the current political and economic uncertainty, things may be different for this 2025 year! Stay tuned.
That’s a wrap for now :)
Disclaimer: This content is for educational purposes only and should not be considered financial, tax, or legal advice. Everyone’s situation is different—before making any decisions, consult a qualified tax professional or financial advisor to ensure it aligns with your specific circumstances. 🚨
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