A magnifying glass enlarges the holographic image of Parliament Hill's Peace Tower on a $20 bill, shown in a display case at the Bank of Canada Museum in Ottawa, Wednesday, Sept. 4, 2024. THE CANADIAN PRESS/Justin Tang
As 2025 begins, Canadians are reflecting on the rising cost of living and looking for ways to manage their finances more effectively. Several updates taking effect this year may impact tax filing, government benefits, and savings contributions.
Capital Gains Tax Updates
Uncertainty continues regarding changes to capital gains tax rules introduced earlier in 2024. Although the federal government proposed increasing the inclusion rate for taxable capital gains from 50% to 67% for gains exceeding $250,000 annually, the necessary legislation has yet to be passed.
Despite this, the Canada Revenue Agency (CRA) can implement the proposed changes under the June notice of ways and means motion. Principal residences remain exempt from capital gains taxes, and a new $250,000 threshold ensures smaller gains retain the 50% inclusion rate.
Temporary Tax Break on Essential Items
A two-month tax exemption on select goods and services will continue until February 15, 2025. This “tax holiday” includes GST/HST exemptions on prepared foods, restaurant meals, takeout, children’s clothing, and even alcoholic beverages. The initiative is expected to save Canadians approximately $1.5 billion.
Canadian $100 bills are counted in Toronto, Feb. 2, 2016. Once your financial goals are set, it can be helpful to set a reminder to review them regularly. THE CANADIAN PRESS/Graeme Roy
Adjustments to Government Benefits
In line with inflation, benefits such as the Canada Child Benefit (CCB) and Old Age Security (OAS) may see adjustments in 2025. While OAS benefits were increased by 1.3% from October to December 2024, there will be no further changes for early 2025 due to stagnant inflation.
CCB amounts, recalculated each July based on family income and inflation, remain non-taxable, as do GST/HST credit payments, which support individuals with low to moderate incomes.
Retirement Contributions and Savings Limits
The contribution limit for Registered Retirement Savings Plans (RRSPs) has increased to $32,490 for 2025, up from $31,560. Maximum pensionable earnings for the Canada Pension Plan (CPP) also rise to $71,300, with corresponding increases in employee and employer contributions.
Meanwhile, the Tax-Free Savings Account (TFSA) contribution limit remains at $7,000 after consecutive increases in recent years.
Vehicle Deduction Limits for Businesses
Businesses will see higher income tax deduction limits for vehicle leasing and allowances. Starting January 1, tax-deductible leasing costs rise to $1,100 per month, while the ceiling for capital cost allowances increases to $38,000. Additionally, mileage allowance rates for employees using personal vehicles for business have been adjusted, reflecting incremental increases for both provinces and territories.
Bare Trust Reporting Requirements
The CRA has extended the exemption for bare trust reporting through the 2024 tax year. Taxpayers will not need to file T3 or Schedule 15 documentation unless specifically requested. However, trust returns for December 31, 2024, must be filed by March 31, 2025.
Tax Filing Process Changes
Several updates will affect Canadians filing taxes online in 2025. These include modifications to the T619 electronic transmittal record, restrictions to single return-type submissions, and enhanced online error validations.
Additionally, Ottawa is expanding its automatic tax filing pilot program and the SimpleFile by Phone service, allowing more Canadians to benefit from streamlined filing options.
As these changes unfold, staying informed can help Canadians navigate the evolving financial landscape and make the most of available opportunities.
