Tax Changes for 2025
Hello All,
Given that tax season is close at hand, I thought it would be an appropriate time to share (and refresh my own understanding of) the business and personal tax changes coming in 2025.
Online Mail Transition
Starting spring 2025, Revenue Canada (CRA) will make online mail the default for most business correspondence
What this means: You will need to make sure you are signed up for "my business account" and update your notifications. To do this go to “Profile” select "Manage notification preferences".
Capital Gains Inclusion Rate
The CRA is administering proposed changes to the capital gains inclusion rate, effective June 25, 2024. For corporations, the inclusion rate will increase from 50% to 66.7% for all capital gains. For individuals, there is a $250,000 exemption.
What this means: Even though this is not officially legislation, CRA is treating it as if it is. Interest and penalties will be waived for corporations and trusts with filing due dates on or before March 3, 2025.
Canada Pension Plan Adjustments
For 2025, the Year's Maximum Pensionable Earnings (YMPE) will be $71,300, and the Year's Additional Maximum Pensionable Earnings (YAMPE) will be $81,200.
What this means: In 2024, both CRA and Revenue Quebec introduced a second limit for CPP(QPP in Quebec). This is continuing in 2025.
For the first limit, you will pay regular CPP contributions on your income ,while for income between $71,300 and $81,200, there’s an extra level of CPP contributions.
Note, income above $81,200 isn’t subject to CPP contributions.
Automobile Deduction Limits
The ceiling for capital cost allowances (CCA) for passenger vehicles will increase after January 1, 2025. Deductible leasing costs will also increase.
What this means: If you buy a car for your business, the maximum amount you can claim for depreciation (capital cost allowance or CCA) will go up to $38,000. So, even if the car costs more than $38,000, you can only base your tax deduction on this limit.
Similarly, if you lease a car for your business in 2025, you can deduct a maximum of $1,100 per month
Automobile Allowance Rates
CRA increased the automobile allowance rates for 2025 as follows:
For the first 5,000 kilometers driven annually: 72 cents per kilometer.
For each additional kilometer beyond 5,000: 66 cents per kilometer.
What this means: This means that if you (as the owner manager of a corporation) or an employee drive their personal vehicle for business purposes, they (or you) can be reimbursed at these rates, per kilometer driven, without the payment being taxable.
Personal Tax Changes
Tax Brackets
Federal income tax brackets for 2025 have been adjusted upward by 2.7% to account for inflation.
What this means: The increase in tax brackets is simply to account for inflation, so people don’t pay higher taxes from cost of living salary increases.
RRSP Changes
The RRSP dollar limit for 2025 has increased to $32,490, up from $31,560 in 2024
What this means: You can contribute (in 2025) up to 18% of your 2024 earned income to your RRSP, to a maximum of $32,490, plus any unused contribution room from previous years. The total amount that you can contribute in any given year can be found on your notice of assessment.
TFSA Updates
The annual TFSA contribution limit for 2025 remains at $7,000, unchanged from 2024.
What this means: You can contribute $7,000 to your TFSA account in 2025 plus any amounts from previous years that you did not contribute. While these contributions are not tax deductible, all investment income that is earned in the account is tax free forever.
Tax Season Start Date:
For the early birds, the first day that you can file your tax return is February 24, 2025. Other deadlines for 2025 can be found here or download my new business (unincorporated) tax deadline calendar.
As always, if you have any questions or comments, simply reply to this email.
I wish all of you an excellent weekend!
Ronika
GST/HST Made Simple Course
As most of you know, I have a new GST/HST and QST course designed to help self employed and small business owners, administrators, and accountant/bookkeepers with all aspects of the sales tax process. The goal of the course is help you with your decision making, every step of the way and save you time, money and stress.
The course is divided up into core modules, each of which has short videos and essential summaries to help reinforce the learning and make reference to key points very easy.
Additionally, there are step by step how to guides and an easy to use spreadsheet (with a video lesson) to help you track your sales taxes. For those of you that use QuickBooks, I have included videos and step by step guides as well.
Finally, and importantly, if you have any questions, there is a space for comments within each lesson or you can reach out to me directly.
Click here for more details about the course and to enroll. If you have any issues, please don't hesitate to let me know.
Early Bird Price: $97 (Regular Price: $127)
Ends January 15th!
P.S. Those of you who signed up for the waiting list or attended the GST/HST webinar (in September) would have received a special discount code via email. If you did not receive it (or can't find it), simply reply to this email and I will resend it.
Announcements
tax tips for 2025 Webinar replay
Thank you to everyone who attended the tax tips for 2025 webinar!
If you weren't able to make it or if you would like to watch it again, you can find it on my youtube channel here.
New Business/Self Employed Tax Deadline Calendar
A list of deadlines for both CRA and RQ that every small business/self employed owner should know in 2025. Download the calendar here.
Interview on CBC All in a Weekend
I did a short interview on CBC's Saturday morning show about how to prepare for your finances in the new year. You can listen here.
New videos
How the GST/HST Quick Method Can Save You Time and Money (I redid this video as my first one had an incorrect calculation)
How to Review Your Balance Sheet at Year End in QBO
Tax Tips for 2025 Webinar Replay
If you would have a request for a video please leave a comment directly in the video or reply to this email.
Subscribe to get videos directly in your feed and/or visit my channel to find other QBO, accounting and tax tutorials.
Links of Interest
More on the capital gains proposals: Since they are not legislation, there is a great deal of speculation on what will happen once parliament re-opens.
Tax incentives for homeowners in 2025 including the first time home buyers credit, FHSAs and Multigenerational Home Renovation Tax Credit
Carbon tax rebates in 2025: Details from CRA about how much of the rebate you are entitled to in contributing provinces.
Do you want to attract the Perfect Client? Some good insights in this video from Graham Cochrane.
50 Excel Shortcuts: Are you an excel nerd (like me)? This article has a comprehensive list of shortcuts to help you streamline your spreadsheeting.
How I Help
My goal is to simplify finance, accounting and tax for small business owners, minimize the stress that comes from uncertainty and help you bolster your financial knowledge so that you can feel more confident.
Free Resources
books (PDF)
Use code "special" to save 15%
If you would prefer a print version all books are also available on Amazon. These come with a free PDF if you email me your proof of purchase.
Consulting Services
For those of you who would like personalized guidance about your situation, I also provide one one one consultations. For more details, and to book a consultation, check out my services page.
Note that I no longer provide ongoing accounting or tax preparation services.
Reviews/Feedback
For anyone who has purchased my books through Amazon, a review would be hugely appreciated.
I would love to hear your comments on my current blog posts, topic ideas for new blogs, book feedback or anything else that you want to talk to me about. You can use my feedback form or email me directly at ronika@montrealfinancial.ca.
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