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2024 Tax updates [Free Download: Quick Tax Facts e-book (PDF: 3.1MB)]

By: Benefits by Design | Tuesday February 20, 2024

Updated : Wednesday February 21, 2024

2024 Tax updates [Free Download: Quick Tax Facts e-book (PDF 3.1MB)]

Out with the old and in with the new! Tax updates for the 2023 tax reporting cycle, and 2024 maximums and limitations are available now in our annual guide: Quick Tax Facts e-book! Look no further for everything you need to know regarding benefits taxation for both employers and employees.

Free Download: Quick Tax Facts e-book (PDF: 3.1MB)

Tax updates for 2024

Every year we can expect to see some updates on different rates, as well as minimum and maximum amounts. This year was no different in that regard. However, due to the new Canadian Dental Care Plan (CDCP) and concerns over the funding for the Canada Pension Plan (CPP), there are a few new contribution updates that employers should be aware of to ensure compliancy.

New secondary Canada Pension Plan and Quebec Pension Plan contribution level

Perhaps the largest change starting in 2024 is the secondary level of CPP and QPP contributions being instituted. Also known as CPP2, this second contribution level will only affect higher income earners.

In 2024, anyone making up to the basic contribution level of $68,500 will pay 5.95% (6.40% in Quebec) towards the CPP. This contribution is matched by the employer, and those who are self-employed pay both portions. The CPP2 will impact earnings above the basic contribution level, up to $73,200, at a rate of 4% (same for the QPP). This will mean employees and employers will pay a maximum CPP2 of $188 each, as outlined below:

$73,200 – $68,500 = $4,700 x 0.04 = $188

It’s important to keep in mind that although the CPP is a self-funded program, the benefits are not solely reliant on contributions. The CPP Investment Board manages the funds and invests them responsibly to ensure their continued growth.

Concerns have been raised about the availability of funds for future generations as baby boomers retire across the country. In an effort to assuage these concerns, the government has introduced the CPP2. But not to worry, the extra contributions will be available upon retirement. In fact, those who have not contributed will not see any gains. Only individuals who contribute to the CPP2 will have access to the added benefit amount, and the longer one contributes, the greater the impact on their CPP benefit at retirement.

For further details on rates, exemptions, minimums, and limits, please refer to the 2024 Quick Tax Facts.

Canadian Dental Care Plan reporting obligation

As many employers are aware, the government has added a new box for reporting access to dental services coverage of any kind. The requirement is to report whether an employee and their eligible dependents (if applicable) had access to dental services coverage of any kind on December 31st of the reporting tax year.

You may be wondering, why just on December 31st of the reporting year? Because the government is trying to determine if, during the current year (in this case 2024) an employee would be eligible for the CDCP. Therefore, if they did not have coverage on December 31st, and they fit the other eligibility requirement, they would be eligible for the CDCP going forward. The caveat is if an employee is eligible for employer paid dental benefits after January 1st, 2024, the government will not have this information.

The other criteria for benefits are based on annual family income – with tiers for different earnings which provide different levels of coverage.

For more information on how to report the dental coverage your employees have available, please see the 2024 Quick Tax Facts guide.

Annual tax updates

As mentioned above, certain thresholds and rates are updated annually to keep pace with inflation. Below are the most common.

Canadian Pension Plan and Quebec Pension Plan benefit amounts

The maximum monthly retiree benefit that can be paid out under the CPP and QPP in 2024 rose slightly to $1,364.60. This amounts to an annual increase of $696.36.

There was also a slight increase in the monthly amount for death benefits. However, the lump sum death benefit of $2,500 remained unchanged.

Employment Insurance increases

As with the CPP and QPP, benefit amounts for Employment Insurance (EI) need to increase so employees have enough income to pay their bills should they become unemployed through no fault of their own.

In 2024, the maximum weekly benefit rose by $18 to $668. To keep pace with this, the maximum annual insurable earnings (amount they base EI contributions on) has also increased from $61,500 to $63,200. Contribution rates also went up slightly, which means that employees and employers will be paying a bit more overall in 2024 towards their EI premiums.

Tax Free Savings Accounts, Registered Pension Plans and Retirement Savings Plans limits

It comes as no surprise that Tax Free Savings Account (TFSA), Registered Pension Plan (RPP) and Retirement Savings Plan (RSP) limits have increased in 2024, since they do every year.

The limits for RPPs and RSPs are designed to advise people how much of their contributions for the tax year it was deposited will be tax-sheltered. In other words, any amounts deposited into your RPP, or RRSP are not subject to income tax. It’s a great way for higher-income taxpayers to save some of their excess income without paying large amounts of taxes on it.

Keep in mind that withdrawals from a TFSA, RPP or RSP (unless for a specific purpose such as the purchase of a new home) usually count as income in the year of withdrawal. This is why it is usually recommended that individuals do not start drawing upon their RPPs or RSPs until they do not have a steady income. This ensures their total annual income is lower than or close to the first taxation tier, and retirees won’t have to pay large amounts of taxes on the withdrawals.

Tax reporting is usually not considered an exciting adventure – it needs to be precise and accurate, which doesn’t leave any room for error. This is why we’ve gathered the most requested tax information, including how to handle the taxation of your employee benefits plan.