The deadline

Game over for 2024 on Tuesday night. Then, excitement!

Well, this means you have two business days to do a few things that might save giving some tax to Chrystia. Whoops, make that Dominic. (For now.)

There’s some new stuff to consider. For example, if you’re one of the legions of people who jumped into the short-term rental (STR) business, and have never bothered to become compliant with local regs, you’d better make that call tomorrow.

Current law (in effect since the beginning of 2024) prevents an owner from deducting legitimate STR operating expenses from taxable income if the business “is not compliant with the applicable provincial or municipal licensing, permitting or registration requirements.” That could hurt, since mortgage interest, utilities, laundry service, maintenance and insurance premiums are all deductible in whole or part. The good news is that even if you were a bad, non-registered, evil person all year, if you repent by Tuesday night the operation will be considered compliant for all of ’24, with expense deductions allowed.

Another big consideration is the capital gains thingy. As you know, the feds raised the inclusion rate in 2024 – so gains above $250,000 are whacked further. On the first quarter million, half the gain is included in annual taxable income. Above that, the inclusion rate jumps to two-thirds. And while the enabling legislation has not actually passed through Parliament (nothing has), the meanies at CRA are acting as if it did.

What to do? (If you are so blessed…)

Spread it out. Each year (unless they change the rules again) the first $250,000 will have that 50% inclusion rate, so instead of claiming half a million in a single year, claim it in two and save a bundle.

As for capital losses, tools to reduce capital gains, they can be carried back three years to reduce tax previously paid, or used in any future year. That means for 2024 (before the latest change) or back to 2021 losses are at the 50% rate. Going forward, they’ll be adjusted to the 2/3 rate for gains over a quarter million.

But wait. You’re not a multi-millionaire tossing around big cap gains? No worries. The feds want to attack you as well.

For example, the clawback on OAS starts at an income level of just over $99,000. The age credit disappears when you have a princely annual stipend of $44,325. If you can shift income sources around to minimize this, do so. Or, of course, you can delay taking OAS for up to five years if you’re still working and making bank. (But think carefully about not taking money the government wants to give you…)

Also, if you’re behind on alimony payments, fix that by Tuesday might in order to claim the deduction. Other stuff that can earn a deduction or tax credit if claimed by December 31st include digital news subscriptions, moving expenses, multigenerational home renovation expenditures, child care expenses, charitable donations, political contributions, medical expenses, eligible employment expenses, union, professional dues, carrying charges and interest expense.

Yet more new stuff includes a change to the RRSP plan allowing the houseless to borrow from retirement plans for a real estate downpayment. The limit has been upped to $60,000 – and double that for a couple. The money need not be fully repaid into the RRSP for 15 years – but if the withdrawal is made before the end of 2025 that period does not even start until five years after the home purchase. (Naturally, you must weigh the cost of not having tax-free growth within your retirement plan for two decades.)

There’s more. The AMT (alternative minimum tax) has been tweaked to further nail higher-income people who use legitimate tax breaks to reduce earnings. But there are new breaks for people selling a business, especially to employees or kin, plus the $1.25 lifetime capital gains tax exemption.

And, as this pathetic blog detailed the other day, you’ve got to open a crazy FHSA before the end of the year in order to carry forward the eight grand in contribution room which will hopefully be funded in 2025. The TFSA gets topped up anytime after Wednesday. And you have until the first of March to feed your RRSP.

Busy, busy.

Or, you can ignore all this and pay up. They’re hoping.

About the picture: “Hello Garth, I just wanted to write to you and express my appreciation to you and your partners on the blog,” writes Keith. “I love what you do and can’t believe you do it for free, especially when I imagine what kind of comments you have to filter out on a daily basis. Anyways, here are the cats that came as a benefit of my partner moving in with me. Ghost (black one) and Trix. It’s amazing how much animals can help keep us sane in these trying times, where would we be without them.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2024/12/29/the-deadline-2/