2025 Federal Budget Highlights

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2025 Federal Budget Highlights

On November 4, 2025, the budget was delivered by the Honourable François-Philippe Champagne, Minister of Finance and National Revenue.

The 2025 Federal Budget focuses on stability, simplicity, and long-term growth. There are no broad tax increases or major new spending programs. Instead, the government is emphasizing restraint, modernization, and productivity.

For individuals and business owners, the goal is clear: help Canadians access benefits more easily, encourage investment in innovation and clean energy, and update trust and estate rules to maintain fairness across the system.

Economic Overview

Canada’s federal deficit is projected at $78.3 billion for 2025–26. The government aims to stabilize the debt-to-GDP ratio while maintaining funding for priorities such as housing, defence, and clean energy.

Spending will focus on programs that improve productivity, while efficiency reviews across departments are expected to reduce overlap and administrative costs. This marks a shift toward sustainable fiscal management and practical, targeted investments.

Personal and Family Tax Measures

Several measures are designed to make life more affordable, particularly for first-time home buyers, caregivers, and lower-income households.

Eliminating the GST for First-Time Home Buyers

First-time home buyers will not pay the 5 percent federal GST on new homes priced up to $1 million. For new homes between $1 million and $1.5 million, a partial GST reduction applies. This change provides meaningful savings and makes new construction more accessible for Canadians entering the housing market.

Home Accessibility Tax Credit

Starting in 2026, expenses can no longer be claimed under both the Home Accessibility Tax Credit and the Medical Expense Tax Credit. The rule prevents duplicate claims but continues to support renovations that make homes safer and more accessible for seniors or individuals with disabilities.

Top-Up Tax Credit

To balance the reduction in the lowest federal tax bracket—from 15 percent to 14.5 percent in 2025, and 14 percent in 2026—the government introduced a Top-Up Tax Credit to preserve the value of non-refundable credits such as tuition, medical, and charitable amounts. This temporary measure, available from 2025 through 2030, ensures Canadians receive the same credit value even as rates decrease.

Personal Support Workers (PSW) Tax Credit

A new refundable tax credit equal to 5 percent of eligible income, up to $1,100 per year, will be available for certified personal support workers beginning in 2026. The measure acknowledges the importance of care professionals and provides direct relief to those in long-term and community-care roles.

Automatic Federal Benefits

Starting in 2025, the Canada Revenue Agency will begin automatically filing simple tax returns for eligible Canadians who do not normally file. This will allow low-income earners and seniors to receive benefits such as the Canada Workers Benefit, GST/HST Credit, and Canada Carbon Rebate automatically. Those with more complex financial situations will continue to file regular returns.

Registered Plans, Trusts, and Estate Planning

The budget introduces several changes affecting trusts and registered plans—key tools in long-term financial and estate planning.

Bare Trust Reporting Rules

Implementation of new bare trust reporting requirements has been delayed. The rules will now apply to taxation years ending December 31, 2026, or later. This postponement gives individuals, trustees, and professionals more time to prepare for the new filing obligations.

The 21-Year Rule for Trusts

Trusts—particularly most personal or family trusts—are generally considered to have sold and repurchased their capital property every 21 years (a “deemed disposition”). This rule prevents indefinite deferral of capital-gains tax on assets that grow in value.

When property is moved on a tax-deferred basis from one trust to another, the receiving trust normally inherits the original 21-year anniversary date so that tax timing does not reset.

Some estate-planning arrangements have transferred trust property indirectly—for example, through a corporation or a beneficiary connected to a second trust—so that the transfer did not appear to be trust-to-trust. These arrangements effectively extended the period before capital gains would be recognized.

Budget 2025 broadens the anti-avoidance rule to include indirect transfers. Any transfer of property made on or after November 4, 2025, that effectively moves assets from one trust to another will retain the original 21-year schedule.

For families that use trusts in estate or business-succession planning, this change reinforces the importance of reviewing structure and timing. Trusts remain valuable for asset protection, legacy planning, and income distribution—this update simply ensures consistent application of the 21-year rule.

Qualified Investments for Registered Plans

Beginning January 1, 2027, all registered plans—RRSPs, TFSAs, FHSAs, RDSPs, and RESPs—will follow a single harmonized list of qualified investments. Small-business shares will no longer qualify for new contributions, though existing holdings will remain grandfathered. The update simplifies compliance and clarifies which assets can be held in registered accounts.

Business and Investment Incentives

For business owners, Budget 2025 provides opportunities to reinvest, innovate, and modernize operations, with emphasis on manufacturing, research, and clean technology.

Immediate Expensing for Manufacturing and Processing Buildings

Businesses can now claim a 100 percent deduction for eligible manufacturing and processing buildings acquired after Budget Day and available for use before 2030. This full write-off improves cash flow and encourages earlier expansion. The benefit will gradually phase out after 2033.

Scientific Research and Experimental Development (SR&ED)

The refundable SR&ED tax credit limit has increased from $3 million to $6 million per year, effective for taxation years beginning after December 16, 2024. This expansion strengthens support for small and medium-sized Canadian businesses investing in innovation and technology.

Tax Deferral Through Tiered Corporate Structures

To prevent deferrals of tax on investment income, new rules will suspend dividend refunds for affiliated corporations with mismatched fiscal year-ends. This ensures consistent taxation within corporate groups and aligns refund timing with income recognition.

Agricultural Co-operatives

The tax deferral for patronage dividends paid in shares has been extended to December 31, 2030, continuing to support agricultural co-operatives and their members.

Clean Technology and Clean Electricity Investment Credits

Clean-technology and clean-electricity incentives have been expanded to include additional critical minerals—such as antimony, gallium, germanium, indium, and scandium—used in advanced manufacturing and renewable energy production. The Canada Growth Fund can now invest in qualifying projects without reducing the amount of credit companies can claim, keeping the incentive structure attractive for green investment.

Canadian Entrepreneurs’ Incentive

The government has confirmed it will not proceed with the previously proposed Canadian Entrepreneurs’ Incentive. The existing Lifetime Capital Gains Exemption remains unchanged and continues to apply to the sale of qualified small-business shares.

Tax Simplification and Repealed Measures

To simplify administration and reduce complexity, two taxes are being repealed:

– Underused Housing Tax, beginning in 2025

– Luxury Tax on aircraft and vessels for purchases made after November 4, 2025

In addition, the Canada Carbon Rebate will issue its final household payment in April 2025, with no rebates available for returns filed after October 30, 2026. These changes are meant to streamline compliance and eliminate programs that were costly to administer.

Government Direction and Spending Priorities

Beyond taxation, the budget sets out the government’s broader policy priorities.

Downsizing Government: A comprehensive efficiency review is underway to eliminate duplication across departments and generate long-term savings.

Cuts to Immigration: To ease pressure on housing and infrastructure, temporary-resident levels will be reduced by about 20 percent over two years, while maintaining pathways for essential workers.

Defence Spending: Canada will invest an additional $7 billion over five years to strengthen NATO participation, Arctic defence, and cybersecurity. By 2030, defence spending is expected to reach 1.8 percent of GDP.

Oil and Gas Emission Cap: A phased-in cap starting in 2026 will allow companies to meet targets through carbon-capture and clean-tech investments rather than penalties.

Final Thoughts

For individuals, the most relevant updates include GST relief for first-time home buyers, improved benefit access, and continued tax relief for caregivers and support workers. For business owners, the focus remains on productivity—through immediate expensing, expanded SR&ED credits, and clean-tech investment incentives. For families using trusts or inter-generational structures, the clarified 21-year rule reinforces transparency in estate planning.

If you’d like to review what these changes mean for you or your business, please get in touch. We can look at your goals and make sure you’re well prepared for the year ahead.

What You Need to Know About RRIFs

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What You Need to Know About RRIFs: Turning Your RRSP Into Retirement Income

As retirement approaches, many Canadians start wondering: what happens to all the savings they’ve been building in their RRSP? The good news is, your RRSP doesn’t just stop working for you when you turn 71. Instead, it can be converted into a Registered Retirement Income Fund (RRIF)—a flexible way to draw steady income while keeping your investments working.

What is an RRIF, and how is it different from an RRSP?

An RRIF is essentially the next stage of your RRSP. While an RRSP is designed for growing your retirement savings, an RRIF is designed for drawing income from them. You’re required to convert your RRSP into an RRIF (or an annuity) by the end of the year you turn 71, though you can convert earlier if it suits your needs.

Unlike an RRSP, you can’t contribute new money to an RRIF, and you’re required to withdraw at least a minimum amount each year. The investments inside your RRIF—like GICs, stocks, bonds, mutual funds—can continue to grow tax-deferred, but your withdrawals are taxable as income.

How do you transfer funds into an RRIF and what can you hold in it?

Converting your RRSP to an RRIF is straightforward. You open an RRIF account at your financial institution and transfer all or part of your RRSP into it. There are no taxes payable on this transfer itself.

Your RRIF can hold the same types of investments you had in your RRSP. That means you can continue to hold stocks, bonds, GICs, mutual funds, ETFs, and even cash. Many people simply carry their RRSP portfolio over to the RRIF unchanged, but it’s also an opportunity to adjust your investments to align with your income needs and risk comfort level.

Do you have to convert all your RRSPs at once?

If you have more than one RRSP account, you don’t have to convert all of them into an RRIF at the same time. You can convert just one account, a portion of your savings, or all of them—whatever works best for your situation.

Some people convert one RRSP early to supplement income while leaving the rest to grow. Others choose to convert all their accounts into one or more RRIFs for simplicity. Just keep in mind that by December 31 of the year you turn 71, all RRSP funds must be converted—whether into RRIFs, annuities, or withdrawn as cash.

You can also have more than one RRIF if you prefer to keep different investments or strategies separate. Each RRIF has its own minimum withdrawal based on its balance at the start of each year.

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When should you convert your RRSP?

You must convert your RRSP into an RRIF no later than December 31 of the year you turn 71, but you don’t have to wait until then. Some Canadians choose to convert earlier, especially if they retire before age 71 and want to start drawing from their savings. Others may convert a portion of their RRSP to an RRIF early to smooth out taxable income over several years or to supplement other income sources.

Can you convert before age 71?

Yes. You can convert your RRSP to an RRIF at any age, as long as you’re ready to begin taking taxable withdrawals. For example, someone retiring at age 60 may decide to convert part of their RRSP to an RRIF and leave the rest in the RRSP to continue growing.

Converting your RRSP to a RRIF at retirement

By the end of the year you turn 71, you can no longer contribute to an RRSP — and you must convert it into an income stream. The most common way to do this is by transferring it into a Registered Retirement Income Fund (RRIF).

A RRIF keeps your investments tax-sheltered, but you’re required to withdraw a minimum amount each year, which is taxable. The minimum starts small and increases as you age.

Alternatively, you can purchase an annuity to guarantee income for life, but a RRIF gives you more flexibility to manage your investments and withdrawals.

Understanding RRIF Minimum Withdrawals

One of the key rules with an RRIF is that you must withdraw at least a minimum amount each year, starting the year after you open the account. This minimum is calculated as a percentage of the total value of your RRIF on January 1 each year, and the percentage increases as you age.

For example, if you are 71, the minimum is about 5.28% of your RRIF balance. At 80, it’s about 6.82%, and it continues to rise each year. You can always withdraw more than the minimum if you need to, but you cannot withdraw less.

If you’d like to lower your required withdrawals, you can choose to have the minimum based on your younger spouse’s age when you set up the RRIF. This option is helpful if you want to keep more money invested and reduce taxable income in the early years.

It’s important to plan these withdrawals carefully, especially if you don’t need all the income right away. Any funds you withdraw that you don’t spend can be invested in a TFSA or a non-registered account, depending on your available contribution room and tax strategy.

What if you don’t need the money immediately?

Even if you don’t need the income right now, you still have to withdraw at least the minimum each year. There’s no option to skip withdrawals altogether, but you can reinvest the money in a non-registered account or a TFSA if you have contribution room, allowing it to continue growing tax-efficiently.

How are RRIF withdrawals taxed?

Withdrawals from an RRIF are considered taxable income in the year you take them. Your financial institution will issue a T4RIF slip, which shows the taxable amount (Box 16) and any tax withheld. You report the taxable amount on line 13000 of your personal tax return under “Other income.” Any tax already withheld is credited when you file.

It’s a good idea to plan your RRIF withdrawals alongside other income sources (like CPP or OAS) to help manage your overall tax bill and avoid moving into a higher tax bracket.

What happens at death? Choosing a beneficiary and successor annuitant

When you open an RRIF, you can name a beneficiary or a successor annuitant. If you name your spouse as a successor annuitant, they can take over the RRIF without tax consequences, continuing to receive income from it. If you name your spouse or a financially dependent child as a beneficiary, the RRIF can be transferred to them with reduced tax consequences. If no beneficiary is named, the full value of the RRIF is included as income on your final tax return.

Naming the right person and understanding the tax implications is an important step in ensuring your retirement savings benefit your loved ones as you intended.

Your RRIF is more than just a requirement after age 71—it’s a flexible and valuable way to turn your hard-earned savings into a sustainable income stream. Planning how and when to convert your RRSP, understanding your minimum withdrawal requirements, and choosing a beneficiary thoughtfully can help you get the most out of your retirement savings.

If you’d like help reviewing your options, reach out—we’d be happy to guide you through the process.

Disclaimer: This article is for informational purposes only and does not constitute financial, legal, or tax advice. Always consult a qualified professional regarding your specific situation. We are not responsible for any actions taken based on this content.

Sources:

Government of Canada. Registered Retirement Income Fund: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/completing-slips-summaries/t4rsp-t4rif-information-returns/payments/chart-prescribed-factors.html

Tax Tips. Registered Retirement Income Fund: https://www.taxtips.ca/rrsp/rrif-minimum-withdrawal-factors.htm

OAS Clawback 2025: What Retirees Need to Know About the Recovery Tax

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OAS Clawback 2025

If you’ve worked hard to build your retirement income, the last thing you want is to see your government benefits clawed back. Yet for many Canadians, the Old Age Security (OAS) recovery tax—commonly called the OAS clawback—can quietly reduce this valuable benefit.

Here’s how the recovery tax works in 2025, what happens if you delay OAS to age 70, and the strategies we use to help our clients minimize or avoid the clawback.

What is the OAS Recovery Tax?

OAS is a monthly benefit available to most Canadians aged 65 and older. However, once your income exceeds a certain level, the government recovers part or all of your OAS through the recovery tax.

This is calculated based on Line 23400 of your tax return—net income before adjustments. In 2025, the clawback begins when your income exceeds $93,454. For every dollar above that amount, you must repay 15 cents of your OAS.

If your income reaches approximately $151,668 (age 65–74) or $157,490 (age 75+), you could lose your entire OAS benefit for the year.

How Much is the OAS Benefit in 2025?

From July through September 2025, the maximum monthly OAS payment is:

  • $734.95 for individuals aged 65–74 (about $8,820 annually)

  • $808.45 for individuals aged 75+ (reflecting a 10% enhancement introduced in 2022)

These amounts are indexed quarterly to inflation and are subject to clawback if your Line 23400 income exceeds the threshold.

What Happens if You Delay OAS Until 70?

You can choose to delay receiving OAS up to age 70, increasing your monthly benefit by 0.6% for each month deferred—a total boost of up to 36% if you wait the full five years.

While a higher payment may sound appealing, it can also lead to larger OAS repayments if your income—including CPP, investment returns, or pension income—exceeds the recovery threshold. Delaying OAS often makes sense for healthy individuals who expect to live into their late 80s or beyond and have lower taxable income during the deferral period.

How the OAS Recovery Tax Works

Example: Alan is 68 and receives the maximum OAS: $8,820 annually. In 2025, the clawback threshold begins at $93,454. Alan’s line 23400 income is $100,000—that’s $6,546 over the clawback threshold. As a result, he must repay: $6,546 × 15% = $981.90

This leaves Alan with $7,838.10 in OAS benefits for the year. If he earns more, the repayment increases proportionally. Once Alan’s income reaches around $151,668 (if aged 65–74) or $157,490 (if aged 75+), his entire OAS would be clawed back.

The recovery tax calculation is automatic and appears on your Notice of Assessment each spring, adjusting your OAS payments for the following July–June period.

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Strategies to Reduce or Avoid the OAS Clawback

The good news? There are practical ways to lower your Line 23400 income without compromising your lifestyle. Here are some of the strategies we use to help our clients keep more of their benefits:

Use a TFSA for Retirement Income

Withdrawals from a Tax-Free Savings Account (TFSA) don’t count toward Line 23400. Drawing income from a TFSA instead of taxable accounts can help preserve your OAS and reduce your tax burden.

Manage RRIF Withdrawals

RRIF withdrawals are fully taxable and included in Line 23400. If you don’t need the full minimum withdrawal, we may recommend delaying full RRSP-to-RRIF conversion or converting just part each year starting at age 65. This can help smooth your income and avoid large spikes.

Delay OAS or Split Withdrawals Over Time

If you’re planning to delay OAS, we’ll help ensure you’re not unintentionally stacking income in the deferral years. Likewise, we can help you spread RRSP-to-RRIF conversions over several years to avoid unnecessary spikes in income.

Pension Income Splitting

If you’re married or in a common-law relationship, you can split up to 50% of eligible pension income with your spouse. This reduces your taxable income and can keep you below the clawback threshold—especially effective when one spouse earns significantly less.

Choose Tax-Efficient Investments

Not all investment income is taxed equally:

  • Capital gains: 50% taxable; more clawback-friendly

  • Eligible dividends: grossed up for Line 23400 purposes, potentially triggering more clawback despite the tax credit

  • Interest income: fully taxable and the least efficient for minimizing clawback

We can help structure your investments to be as clawback-friendly as possible.

Donate Securities Instead of Cash

Donating appreciated publicly traded securities directly to a registered charity eliminates the capital gains tax, reduces net income, and supports a cause—all while lowering recovery tax exposure.

Defer Large Income Events

Selling a property, realizing a large capital gain, or cashing a pension lump sum can push you into full clawback territory. If possible, we can help you plan these events to spread them over several years or delay them to a lower-income year.

Consider Leveraged Investing

Some higher-net-worth clients use leveraged investment strategies—borrowing to invest in tax-efficient, capital-gains-producing assets. Interest may be deductible, and investment income can be structured to reduce Line 23400. This is a high-risk strategy and something we’ll discuss carefully if appropriate.

Talk to Your Financial Advisor

Everyone’s income, retirement timing, and tax situation are unique. That’s why we take the time to understand your goals, project your Line 23400 income, explore different scenarios, and build a personalized strategy designed to minimize the recovery tax while keeping your lifestyle in mind.

The OAS recovery tax can quietly chip away at your retirement income—but it doesn’t have to. With the right guidance and a plan tailored to you, it’s possible to keep more of what you’ve worked so hard to earn.

If you’re already retired or approaching retirement, now is the perfect time to sit down and talk. Together, we’ll review where you stand, explore your options, and build a strategy that keeps more of your income working for you. We’re here to help you make the most of your retirement—let’s get started.

Disclaimer: This article is for informational purposes only and does not constitute financial, legal, or tax advice. Always consult a qualified professional regarding your specific situation. We are not responsible for any actions taken based on this content.

Sources: Old Age Security Payment Amount – Government of Canada: https://www.canada.ca/en/services/benefits/publicpensions/old-age-security.html

Old Age Security Pension Recovery Tax– Government of Canada: https://www.canada.ca/en/services/benefits/publicpensions/old-age-security/recovery-tax.html 

Tax Tips for Filing Your 2024 Income Tax Return

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The deadline for filing your 2024 income tax return is April 30, 2025. Stay informed about the latest tax changes and benefits available to maximize your savings and ensure compliance. This guide outlines the key updates and important deductions and credits separated into sections for Individuals and Families, and Self-Employed Individuals.

For Individuals and Families

Alternative Minimum Tax (AMT)

  • Increased minimum tax rate and basic exemption threshold.

  • Modified calculation for adjusted taxable income affecting foreign tax credits and minimum tax carryovers.

  • Limited value on most non-refundable tax credits.

Canada Pension Plan (CPP) Enhancement

• The standard CPP contribution rate remains at 5.95% for both employees and employers on earnings up to $68,500 (the Year’s Maximum Pensionable Earnings or YMPE) in 2024.

• Additionally, employees and employers each contribute an extra 4% on earnings between the YMPE ($68,500) and the Year’s Additional Maximum Pensionable Earnings (YAMPE) of $73,200 in 2024.

Home Buyers’ Plan (HBP)

  • Withdrawal limit increased from $35,000 to $60,000 after April 16, 2024, with temporary repayment relief available.

Volunteer Firefighters and Search and Rescue Volunteers

  • Amounts increased from $3,000 to $6,000 for eligible individuals completing at least 200 hours of combined volunteer service.

Basic Personal Amount (BPA)

• For 2024, the Basic Personal Amount (BPA) has increased to $15,705 for taxpayers with net income up to $173,205.

• For taxpayers with net incomes above this amount, the BPA is gradually reduced, reaching a minimum of $14,138 at incomes of $235,675 or higher.

Short-term Rentals

  • Expenses related to non-compliant short-term rentals are no longer deductible after January 1, 2024.

Popular Tax Credits and Deductions

Canada Training Credit (CTC) Eligible taxpayers aged 26 to 65 can claim this refundable tax credit to cover a portion of eligible tuition and fees for training or courses to enhance their skills.

Canada Caregiver Credit (CCC) This non-refundable tax credit supports individuals caring for family members or dependents with a physical or mental impairment. The amount varies based on the dependent’s relationship, net income, and circumstances.

Child Care Expenses Child care expenses, such as daycare, nursery schools, day camps, and boarding schools, are deductible if incurred to enable a parent or guardian to work, pursue education, or conduct research.

Disability Tax Credit (DTC) The DTC provides a non-refundable tax credit for individuals with disabilities or their caregivers to reduce the amount of income tax payable. Applicants must have a certified disability lasting at least 12 months.

Moving Expenses Deductible moving expenses include transportation and storage costs, travel expenses, temporary living costs, and incidental expenses incurred when relocating at least 40 kilometers closer to a new work location, educational institution, or business location.

Interest Paid on Student Loans Interest paid on eligible student loans can be claimed as a non-refundable tax credit. The loans must be under federal, provincial, or territorial student loan programs.

Donations and Gifts Donations made to registered charities or other qualified organizations qualify for non-refundable federal and provincial tax credits. Typically, you can claim eligible amounts up to 75% of your net income.

GST/HST Credit The GST/HST credit is a quarterly refundable payment designed to offset the impact of sales tax on low to moderate-income individuals and families. Eligibility is automatically assessed based on your annual tax return.

For Self-Employed Individuals

CPP Contributions

  • Enhanced CPP contribution rate for self-employed individuals.

Filing and Payment Deadlines

  • Tax Return Deadline: June 16, 2025 (June 15 is Sunday).

  • Balance due must be paid by April 30, 2025.

Reporting Business Income

  • Report income on a calendar-year basis for sole proprietorships and partnerships.

Digital Platform Operators

  • New reporting rules requiring platform operators to collect and report seller information.

Mineral Exploration Tax Credit

  • Eligibility extended for flow-through share agreements signed before April 2025.

Need Assistance?

If you’re unsure about your eligibility for specific credits or deductions, reach out to your tax consultant or tax advisor for personalized guidance. They can help you optimize your tax return, maximize your savings, and ensure compliance with CRA regulations.

Sources

Bank of Canada Announces Interest Rate Cut Amid Economic Uncertainty

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On March 12, the Bank of Canada announced another reduction in its benchmark interest rate, bringing it down to 2.75%. This decision comes as the Canadian economy faces ongoing pressures, including uncertainty surrounding U.S. trade policies, slower job growth, and persistent inflation concerns.

These rate adjustments aim to help stabilize the economy during this unpredictable time, providing support to consumers and businesses as policymakers navigate a challenging economic landscape.

Staying Focused Amid Market Fluctuations

During times like these, market uncertainty can feel overwhelming, but history has shown that markets tend to recover over time. While short-term fluctuations can be unsettling, a well-balanced and diversified approach helps manage risk and keeps you positioned for long-term success. The key is to remain patient and avoid making impulsive decisions based on temporary market movements.

We understand that recent market volatility, driven by changing trade policies and shifting interest rates, may cause concern about how your investments and finances could be affected. It’s natural to feel uncertain during periods of economic turbulence. However, it’s important to remember that markets have historically proven resilient, eventually recovering from downturns and periods of uncertainty.

Rather than reacting to day-to-day changes, it’s important to stay focused on the bigger picture. Market cycles come and go, and those who stay committed to a structured investment approach are often better positioned to navigate challenges and take advantage of future opportunities.

We’re Here to Support You

Your financial well-being remains our highest priority. If you have questions or concerns about your investments or if you’d simply like reassurance about your current strategy, please reach out. We’re always here to offer guidance, clarity, and support as you navigate these uncertain times.

Let’s connect—schedule a call with us today.

Source: Bank of Canada. “Bank of Canada Announces Interest Rate Cut Amid Economic Uncertainty.” 12 Mar. 2025. 

https://www.bankofcanada.ca/2025/03/fad-press-release-2025-03-12/

Getting Ready for Money Emergencies

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Life can throw unexpected events your way that can hit you in the wallet. Whether it’s falling ill, getting laid off, or facing hefty repair bills for your car or home, these situations can strain your finances. To stay ahead and avoid falling into debt, it’s a good idea to have an emergency fund. This is cash you set aside specifically to handle unforeseen expenses, so you’re not left scrambling for money when the unexpected happens.

Why Emergency Funds Matter

An emergency fund is like an insurance policy for unexpected expenses that everyone can benefit from. It’s a stash of money specifically saved to cover daily living costs during emergencies that catch you off guard, such as:

  • Sudden car repairs
  • Vet visits
  • Losing your job
  • Sudden home repairs
  • Medical emergencies

Creating an emergency fund helps you to:

  • Deal with surprise costs without going into debt
  • Stay away from expensive loans like payday loans or credit card cash advances
  • Keep control of your finances
  • Feel less worried about unexpected expenses.

An emergency fund offers peace of mind during life’s surprises, preventing debt by covering costs without needing to use up savings or retirement funds, which could result in extra fees.

How much do you need?

The amount you should save depends on your financial situation, like how much you earn, what you spend each month, and if you have any dependents. A good rule is to have enough money to cover three to six months of necessary expenses, like rent, groceries, bills, and childcare.

How to Build Your Emergency Fund

Building an emergency fund to cover three to six months of essential living expenses might feel overwhelming, but the key is to start saving gradually. Even putting away a small amount regularly can add up significantly over time.

Here are some ways to build up your emergency fund:

  1. Automate your savings: Pick how much money you want to save, when you want to save it, and how often. Then, arrange for the money to be automatically moved from your regular account to your savings account. You can set up this automatic transfer to happen on your payday. That means the money you’ve chosen to save will be moved as soon as your paycheque is put into your account.
  2. Take advantage of opportunities to boost your emergency fund whenever you can. This might happen when you get extra money, like a tax refund, a pay raise at work, or when you sell things such as a car. Even receiving money as a gift or getting a bonus from your job can help. Additionally, when you finish paying off a loan, consider putting the money you used for payments into your emergency fund instead. Since you’re already used to budgeting for those payments, it’s an easy way to increase your savings without much extra effort.
  3. Make it a habit: Make saving a regular part of your routine by incorporating it into your daily habits. Here are some simple tips to help you get started: drop any loose change into a container whenever you come home, set up a savings, mark your saving dates in advance on your calendar, and use sticky notes on your fridge to remind yourself to save regularly. These small actions can make a big difference in building your savings over time.

Where to keep your emergency fund?

Given that emergencies can occur unexpectedly, having quick access to your funds is important. Although a regular chequing account may offer immediate access to your money, it’s best to keep your emergency fund separate from your regular account. This prevents accidental spending on non-emergencies. Look for an account that:

  • Is distinct from your regular spending account
  • Has minimal or no transaction fees
  • Permits penalty-free withdrawals
  • Earns interest on your savings

Consider exploring “cash equivalents” as an option to invest your money. They’re a bit like cash but can also help your money grow with interest. They’re safe and easy to get your money from. But before you decide, make sure you understand how and when you can take your money out and if there are any extra fees or charges. Examples of cash equivalents include:

  • Savings accounts
  • Chequing accounts
  • High-interest rate savings accounts (HISA)
  • Guaranteed Investment Certificates (GIC)
  • Money market funds

Having an emergency fund can be a lifeline during tough financial times, preventing you from falling into debt. While there’s no fixed amount you should stash away, assessing your financial situation can guide you in determining your ideal emergency fund size. If you need assistance in planning your emergency fund, don’t hesitate to reach out to us for personalized guidance and support.

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Understanding the Registered Education Savings Plan (RESP)

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Planning for your child’s education can be both exciting and overwhelming. The rising costs of post-secondary education make it important for parents and families to consider the financial tools available to help ensure children have the opportunity to pursue their educational dreams. One such tool is the Registered Education Savings Plan (RESP), a tax-deferred savings account specifically designed to help save for a child’s post-secondary education in Canada.

Eligibility and How to Open an RESP

You can open a Single Plan for an individual beneficiary, such as your child, or a Family Plan if you wish to contribute to the education of multiple children in your family. The great news is that anyone can open an RESP for a child, whether you’re a parent, grandparent, or other family member, making it a versatile option for educational savings.

RESP Withdrawals and Beneficiary Requirements

RESPs can be used to cover a broad range of educational expenses. The only stipulation is that the beneficiary must attend a qualifying educational institution, which could be a university, college, or technical or vocational school. Withdrawals from the RESP will help support tuition, textbooks, living expenses, and more, as long as the student is enrolled part-time or full-time.

Key Benefits of an RESP

RESPs come with a range of benefits that make them an attractive savings vehicle for education:

– Lifetime Contribution Limit: You can contribute up to $50,000 over the lifetime of the plan for each beneficiary.

– Tax-Deferred Growth: While contributions to an RESP are not tax-deductible, the investment growth within the plan is tax-deferred. This allows your savings to grow faster, as taxes on the earnings are deferred until the funds are withdrawn.

– RESP Duration: You can keep the plan open for up to 35 years, giving you ample flexibility for when the funds may be needed.

Canadian Education Savings Grant (CESG)

One of the biggest incentives for opening an RESP is the Canadian Education Savings Grant (CESG). Through this program, the government will match 20% of your annual contributions, up to a maximum of $500 per year. Over time, this can accumulate to a lifetime maximum of $7,200 in CESG funds for each child. If you’re unable to contribute the maximum amount in a given year, the unused CESG contribution room is carry-forwardable, and you may be able to receive up to $1,000 in grant payments annually in future years.

Eligibility for CESG

To qualify for the CESG, the beneficiary must be:

– 17 years of age or younger

– A Canadian resident

– In possession of a valid Social Insurance Number (SIN)

A Smart Way to Save for the Future

Starting an RESP early can make a significant difference in how much you can save for your child’s education. With contributions that grow tax-deferred, along with generous government grants like the CESG, the RESP is a valuable tool to help ease the financial burden of post-secondary education. Planning for your child’s future today ensures that when the time comes, they can focus on their studies without worrying about the costs.

Consider opening an RESP to take advantage of the substantial benefits and opportunities this plan offers. Start investing in your child’s future today!

Stay Ahead in 2024: A Comprehensive Checklist for Federal Tax Updates

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With the upcoming 2024 Canadian tax rule changes, it’s important to review your financial strategies. We’ve identified the key changes that we expect to influence financial decisions for investors, business owners, incorporated professionals, retirees, and individuals with high income or net worth.


Capital Gains Inclusion Rate

Starting on June 25, 2024, the tax on capital gains is changing. Until now, you would only have to include half of your capital gains in your income for tax purposes. But after that date, you’ll have to include two-thirds of any capital gains over $250,000 on your tax return. This is also the case for employee stock options. 

Consequently, for corporations and trusts, they will have to include two-thirds of all their capital gains, no matter the amount. This is a significant change. 


Lifetime Capital Gains Exemption (LCGE)

The budget proposes increasing the LCGE for qualified capital gains from $1,016,836 to $1.25 million, effective for sales made after June 24, 2024. This change increases tax benefits for individuals selling certain types of property, such as small business shares or farming and fishing assets.


Alternative Minimum Tax (AMT)
The 2023 budget included updates to the AMT, suggesting revising the charitable donation tax credit for AMT calculations, increasing the claimable amount from 50% to 80%.


Employee Ownership Trust (EOT)

The budget proposes a tax exemption on up to $10 million in capital gains for individuals selling their businesses to an EOT if certain criteria are met. 


Canadian Entrepreneurs’ Incentive

This new tax measure offers a reduced inclusion rate of 1/3 for up to $2 million in capital gains during an individual’s lifetime, with this limit being phased in over 10 years. However, it’s important to know that not all businesses qualify—this doesn’t apply to businesses in professional services, finance, real estate, hospitality, arts, entertainment, or personal care.

Below is a checklist to help you navigate the tax adjustments and ensure your financial plans are updated and aligned with the new rules.


Investors

  • Investments: Evaluate portfolios to identify where capital gains can be realized under the current lower inclusion rate.

  • Investment Property: Consider advancing the sale of such properties to benefit from the existing capital gains rate.

  • Estate Planning: Revise plans to address potential increases in capital gains taxes, ensuring estates are structured for tax efficiency.

  • Employee Stock Options: Adjust the timing of exercising stock options to align with the upcoming changes in inclusion rates.


Business Owners:

  • Corporate Investments: Assess the impact of increased inclusion rates on corporately held assets, exploring the timing of gains realization. Review trust-held investments. 

  • Lifetime Capital Gains Exemption: Maximize the benefits of the increased LCGE for qualifying business assets.

  • Employee Ownership Trust: Consider the advantages of transferring business ownership via an EOT.

  • Succession Planning: Update your succession plans to consider the potential impact of capital gains tax changes.

  • Entrepreneurs Incentive: Check if you are eligible to reduce capital gains taxes. 


Incorporated Professionals:

  • Investments: Assess both personal and corporate investments for the new inclusion rate. Determine the most tax-effective structure for holding and realizing gains from investments.

  • Succession Planning: Time the potential sale of your professional corporation to capitalize on the current LCGE.


Retirees:

  • Estate Planning: Update estate plans considering the impending increase in capital gains rates.

  • Life Insurance Coverage: Ensure life insurance is adequate to cover increased capital gains tax liabilities upon death.

  • Non-Registered Investments and Retirement Income: Review your strategy for non-registered investments to manage taxes on gains and adjust your retirement income plans to accommodate the upcoming changes in capital gains rates.


Individuals with High Income or Net Worth: 

  • Investments: Evaluate portfolios to identify where capital gains can be realized under the current lower inclusion rate. Review trust-held investments. 

  • Investment Property: Consider advancing the sale of such properties to benefit from the existing capital gains rate.

  • Estate Planning: Revise plans to address potential increases in capital gains taxes, ensuring estates are structured for tax efficiency.

  • Charitable Contributions: Align your charitable giving strategies with the new tax benefits and AMT considerations.

Please reach out to us to review your financial strategy together and ensure it aligns with the upcoming changes. 

2024 Federal Budget Highlights

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On April 16, 2024, Canada’s Deputy Prime Minister and Finance Minister, Chrystia Freeland, presented the federal budget.

While there are no changes to federal personal or corporate tax rates, the budget introduces:

  • An increase in the portion of capital gains subject to tax, rising from 50% to 66.67%, starting June 25, 2024. However, individual gains up to $250,000 annually will retain the 50% rate.

  • The lifetime exemption limit for capital gains has been raised to $1.25 million. Additionally, a new one-third inclusion rate is set for up to $2 million in capital gains for entrepreneurs.

  • The budget confirms the alternative minimum tax changes planned for January 1, 2024 but lessens their impact on charitable contributions.

  • This year’s budget emphasizes making housing more affordable. It provides incentives for building rental properties specifically designed for long-term tenants.

  • Introduces new support measures to aid people buying their first homes.

  • Costs for specific patents and tech equipment and software can now be written off immediately.

  • Canada carbon rebate for small business.

Capital Gains Inclusion Rate

The budget suggests raising the inclusion rate on capital gains after June 24, 2024:

  • Corporations and trusts, from 50% to 66.67%.

  • Individuals, on capital gains over $250,000 annually, also from 50% to 66.67%.

For individuals, the $250,000 annual threshold that applies to net capital gains—the amount remaining after offsetting any capital losses. This includes gains acquired directly by an individual or indirectly through entities such as partnerships or trusts. Essentially, this threshold acts as a deductible, considering various factors to determine the net gains eligible for the increased capital gains tax rate.

Individuals in the highest income bracket, who earn above the top marginal tax rate threshold, will face a higher tax rate on capital gains exceeding $250,000 due to these changes. Furthermore, the budget modifies the tax deduction for employee stock options to align with the updated capital gains taxation rates yet maintains the initial 50% deduction for the first $250,000 in gains. Regarding previously incurred financial losses, the budget plans to adjust the value of these net capital losses from past years so that they are consistent with the current gains, upholding the uniformity with the new inclusion rate.

The budget outlines transitional rules for the upcoming tax year that straddles the implementation date of the new capital gains rates. If the tax year begins before June 25, 2024, but ends afterward, capital gains realized before June 25 will be taxed at the existing rate of 50%. However, gains accrued after June 24, 2024, will be subject to the increased rate of 66.67%. It’s important to note that the new $250,000 threshold for higher tax rates will only apply to gains made after June 24.

Consequently, for individuals earning capital gains beyond the $250,000 threshold and who fall into the highest income tax bracket, new rates will be effective as outlined in the table below. Specifically, this pertains to individuals with taxable incomes exceeding $355,845 in Alberta, $252,752 in British Columbia, $1,103,478 in Newfoundland and Labrador, $500,000 in the Yukon, and $246,752 in all other regions.

Further details and guidance on these new rules are expected to be provided in future announcements.

Lifetime Capital Gains Exemption

The budget proposes raising the Lifetime Capital Gains Exemption (LCGE) for qualified capital gains from $1,016,836 to $1.25 million, effective for sales made after June 24, 2024. Additionally, the exemption will once again be adjusted for inflation starting in 2026. This change aims to increase the tax benefits for individuals selling certain types of property, such as small business shares or farming and fishing assets.

 

Canadian Entrepreneurs’ Incentive

The Canadian Entrepreneurs’ Incentive is a new tax measure which provides a reduced inclusion rate on capital gains from the disposition of qualifying small business shares.

Qualifications for the incentive include:

  • Shares must be of a small business corporation directly owned by an individual.

  • For 24 months before selling, over half the corporation’s assets must be actively used in a Canadian business or be certain connected assets.

  • The seller needs to be a founding investor who held the shares for at least five years.

  • The seller must have been actively involved in the business continuously for five years.

  • The seller must have owned a significant voting share throughout the subscription period.

  • The incentive does not apply to shares linked to professional services, financial, real estate, hospitality, arts, entertainment, or personal care services sectors.

  • The shares must have been acquired at their fair market value.

  • The incentive allows for a reduced inclusion rate of 1/3 for up to $2 million in capital gains during an individual’s lifetime, with this limit being phased in over 10 years.

This measure will apply to dispositions after December 31, 2024.

Alternative Minimum Tax (AMT)

The 2023 budget included updates to the AMT, with proposed changes outlined in the summer of 2023. The budget suggests revising the charitable donation tax credit for AMT calculations, increasing the claimable amount from 50% to 80%.

Further proposed changes to the AMT include:

  • Permitting deductions for the Guaranteed Income Supplement, social assistance, and workers’ compensation benefits.

  • Exempting employee ownership trusts (EOTs) entirely from AMT.

  • Allowing certain tax credits, like federal political contributions, investment tax credits (ITCs), and labour-sponsored funds tax credit, to be carried forward if disallowed under the AMT.

These changes would take effect for tax years beginning after December 31, 2023. Additionally, the budget proposes technical amendments that would exempt specific trusts benefiting Indigenous groups from the AMT.

Employee Ownership Trust (EOT) Tax Exemption

The budget proposes a tax exemption on up to $10 million in capital gains for individuals selling their businesses to an EOT if certain criteria are met:

  • Sale of shares must be from a non-professional corporation.

  • The seller, or their spouse or common-law partner, must have been actively involved in the business for at least two years prior to the sale.

  • The business shares must have been solely owned by the seller or a related person or partnership for two years before the sale, and mainly used in active business.

  • At least 90% of the EOT’s beneficiaries must be Canadian residents after the sale.

  • If multiple sellers are involved, they must jointly decide how to divide the $10 million exemption

  • If the EOT doesn’t maintain its status or if the business assets used in active business drop below 50% at any point within 36 months after the sale, the tax exemption may be revoked.

  • For Alternative Minimum Tax purposes, the exempted gains will face a 30% inclusion rate.

  • The normal reassessment period for the exemption is extended by three years.

  • The measure now also covers the sale of shares to a worker cooperative corporation.

This exemption is valid for sales occurring from January 1, 2024, to December 31, 2026.

Home Buyers Plan (HBP)

The budget proposes enhancements to the HBP for 2024 and beyond, effective for withdrawals after April 16, 2024. These include:

  • Raising the RRSP withdrawal limit from $35,000 to $60,000 to support first-time homebuyers and purchases for those with disabilities.

  • Extending the grace period before repayment starts from two to five years for withdrawals made between January 1, 2022, and December 31, 2025, deferring the start of the repayment period and thereby providing new homeowners additional time before they need to commence repayments

Interest Deductions and Purpose-Built Rental Housing

The budget proposes a selective exemption from the Excessive Interest and Financing Expenses Limitation (EIFEL) rules for certain interest and financing expenses related to arm’s length financing. This exemption is for the construction or purchase of eligible purpose-built rental housing in Canada and applies to expenses incurred before January 1, 2036. To qualify, the housing must be a residential complex with either at least four private apartment units, each with its own kitchen, bathroom, and living areas, or 10 private rooms or suites. Additionally, at least 90% of the units must be designated for long-term rental. This exemption will be effective for tax years starting on or after October 1, 2023, in line with the broader EIFEL regulations.

Accelerated Capital Cost Allowance (CCA) – Purpose built rental housing

The budget introduces an accelerated CCA of 10% for new rental projects that start construction between April 16, 2024, and December 31, 2030, and are completed by December 31, 2035. This accelerated depreciation applies to projects that convert commercial properties into residential complexes or expand existing residential buildings that meet specific criteria under the EIFEL rules. However, it does not cover renovations to existing residential complexes.

Additionally, these investments will benefit from the Accelerated Investment Incentive, which allows for immediate depreciation deductions for properties put into use before 2028. Starting in 2028, the regular depreciation rules, including the half-year rule, will apply.

Accelerated Capital Cost Allowance (CCA)- Productivity-enhancing assets

The budget introduces immediate expensing for newly acquired properties that become operational between April 16, 2024, and December 31, 2026. This applies to specific categories such as:

  • Class 44- Patents and rights to patented information

  • Class 46- Data network infrastructure and related software

  • Class 50- General electronic data-processing equipment and software

Properties that are put into use between 2027 and 2028 will continue to benefit from the Accelerated Investment Incentive.

To qualify for this accelerated depreciation, the property must not have been previously owned by the taxpayer or someone closely connected to them, and it must not have been received as part of a tax-deferred deal. Also, if a tax year is shorter, the depreciation will be adjusted accordingly and will not carry over to the next year.

Canada Carbon Rebate for Small Businesses

The budget introduces a Canada Carbon Rebate for small businesses, offering a new refundable tax credit automatically. To be eligible, a Canadian-controlled private corporation must:

  • File a tax return for its 2023 tax year by July 15, 2024, for the fuel charge years from 2019-20 to 2023-24. For subsequent fuel charge years, it must file a tax return for the tax year that ends within that fuel charge year.

  • Employ 499 or fewer people across Canada during the year that corresponds with the fuel charge year.

The amount of the tax credit for each eligible business will depend on:

  • The province where the company had employees during the fuel charge year.

  • The number of employees in that province multiplied by a rate set by the Minister of Finance for that year.

  • The CRA will automatically calculate and issue the tax credit to qualifying businesses.

We can help!

Wondering how this year’s budget will impact your finances or your business? We can help – give us a call today!