Tax season starts Monday. Here’s what you need to know

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Tax season officially begins on Monday with the opening of the Canada Revenue Agency’s online filing portal to submit 2024 personal income tax returns. During last year’s tax-filing season, the CRA received more than 33 million returns, resulting in more than 19 million individual tax refunds, with an average refund of $2,294. Of these, 79 per cent were issued by direct deposit right into Canadians’ bank accounts.

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Once again, the CRA is encouraging taxpayers who have not yet done so to sign up for direct deposit before filing your 2024 tax return. The agency is also asking taxpayers to file electronically. There are numerous certified tax software products available this year, some of which are free. By combining online filing with direct deposit, the CRA says that this tax season you could get your tax refund in as little as eight business days. Paper returns, on the other hand, could take up to eight weeks to process, delaying any refund.

If you have a modest income and a simple tax situation, volunteers at a free tax clinic may be able to file your taxes for you. You can visit a free tax clinic in your area, or you can make a virtual appointment. To find out if you’re eligible, and to find a tax clinic near you, check the CRA’s site for a listing of free tax clinics. Some Canadians with simple tax filing situations may also receive an invitation to file their tax return over the phone or digitally with SimpleFile.

Let’s review the key filing dates, and what’s new on the 2024 tax return to get you ready for the 2025 tax filing season.

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Key dates and deadlines

While the submission of electronic returns begins on Feb. 24, the filing deadline for most individuals to file their tax return, and pay any taxes owed, is April 30. If you or your spouse or common-law partner were self-employed in 2024, then you have until June 16, 2025 to file (the normal extended deadline of June 15 falls on a Sunday this year). If, however, you owe the CRA money, you still need to pay by April 30 to avoid non-deductible arrears interest, currently being charged at a rate of eight per cent, compounded daily.

Taxpayers who are reporting capital gains realized in 2024 on their returns are being given additional time to file, due to the complications that arose from the botched implementation of the capital gains inclusion rate which was supposed to take effect as of June 25, 2024, but was deferred to 2026. The CRA announced that it would grant relief of late-filing penalties and interest until June 2, 2025, for individuals who need to report capital gains.

CRA online services

The CRA has made a number of improvements to its digital services. First, the agency has launched a document verification service, which allows you to verify your identity and get immediate access to your CRA account without having to wait for a CRA security code by mail. More than one million Canadians have already used this new service.

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The CRA has also introduced an online chat service in CRA My Account. This service allows you to discuss account-specific issues with a live CRA agent who can answer questions about personal income tax, benefits, payments to the CRA, and more.

Alternative minimum tax (AMT)

The government introduced changes for 2024 to the alternative minimum tax (AMT) regime, which imposes a minimum level of tax on taxpayers who claim certain tax deductions, exemptions or credits to reduce the tax that they owe to very low levels. Under the AMT system, there is a parallel tax calculation that allows fewer deductions, exemptions, and credits than under the regular income tax calculation. If the amount of tax calculated under the AMT system is more than the amount of tax owing under the regular tax system, the difference owing is payable as AMT for the year.

The good news is that the new AMT will only affect taxpayers whose taxable income in 2024 was more than $173,205. If you’re in that tax bracket, and plan to claim large tax deductions on your 2024 return, such as loss carryforwards from prior years, or significant deductible interest expense, watch out for the AMT, which is automatically calculated by the tax software. Fortunately, you have seven years to recover any AMT paid, so be sure to get professional tax advice if you’re looking for strategies that will help you recoup AMT paid.

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Canada pension plan (CPP) and Quebec pension plan (QPP) enhancement

As of January 2024, a second additional contribution of four per cent was required by both employees and employers on pensionable earnings greater than the year’s maximum pensionable earnings ($68,500 in 2024) but not more than the year’s additional maximum pensionable earnings ($73,200 in 2024). This amount is reported in box 16A (CPP) or box 17A (QPP) of your T4 slip. For self-employment income and other earnings, the rate for second additional contributions is eight per cent. For more information, see Schedule 8 of the 2024 tax package.

Capital gains

As discussed last week, the updated Schedule 3, Capital Gains or Losses for 2024, is still asking taxpayers to separately report gains or losses before and after June 25, 2024. The CRA noted that while the inclusion rate increase was deferred until 2026, it is keeping the Period 1 and Period 2 reporting on the T1 return “to ensure consistency with the tax slips that have already been published, those currently being issued to taxpayers and those filed with the CRA.”

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Donation deadline

In late December 2024, the federal government announced an extension of the 2024 charitable donation deadline until Feb. 28, which is meant to mitigate the impact of the postal strike. Only donations made in the form of cash or cheque, credit card, money order or electronic payment qualify for the extension.

Short-term rentals

Finally, if you have a non-compliant short-term residential rental property that is rented for a period of less than 90 consecutive days, as of Jan. 1, 2024, you’re no longer able to deduct expenses against the income from that property.

In a news release issued last month about non-compliant short-term rentals, the CRA reminded taxpayers that if you suspect someone may be cheating on their taxes, you can submit an anonymous lead online.

Jamie Golombek, FCPA, FCA, CFP, CLU, TEP, is the managing director, Tax & Estate Planning with CIBC Private Wealth in Toronto. Jamie.Golombek@cibc.com.

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