Tax policy changes are looming over Canadians as 2025 approaches, and for many, the government’s financial strategies may have both detrimental and beneficial impacts. The overarching narrative reveals challenges tied to sustained tax increases alongside newly introduced credits aimed at alleviating some of the burden on families.
Federal tax policy has shown little mercy over the past few years, as 2024 bore witness to significant increases. This trend could be traced back to 2016 when the Trudeau government introduced a new income tax bracket of 33 percent. Fast forward to today, the combined federal and provincial top tax rate has skyrocketed above 50 percent across most provinces, with only Alberta and Saskatchewan falling below this threshold. According to Matthew Lau, writing for the Financial Post, the tax nightmare continues with hikes not just on income tax but also on various other fronts.
To kick off 2024, Ottawa initiated its sixth consecutive Canada Pension Plan (CPP) tax increase. Workers making $85,000 now face substantially higher taxes, with estimates showing their bills will rise from $8,111 to $8,860 by 2025. This staggering leap reflects a cumulative 71 percent increase since 2018. To put it another way, the improvements described as “enhancements” could surely turn sour for many Canadians.
Meanwhile, the government has also been increasing the carbon tax, which went up from $65 to $80 per tonne on April 1, 2024, and is projected to reach $95 per tonne shortly thereafter. The escalated tax burden is also being felt by capital gains tax, which was noted to affect much more than the mere 0.13 percent of Canadians proposed by the government, impacting approximately 4.74 million Canadians as estimated by economist Jack Mintz.
On the flip side, every cloud has its silver lining for certain groups of Canadians. The Multigenerational Home Renovation Tax Credit (MHRTC) is being introduced as part of the 2025 tax strategy. This initiative will allow families to claim up to $7,500 for renovations on secondary suites catering to seniors or individuals with disabilities. This fully refundable tax credit not only assists families but also aims to fortify community bonds and improve accessible living arrangements.
Specifically, eligibility for the MHRTC covers renovations aimed at creating self-contained units, complete with kitchens and bathrooms. Importantly, expenses related to construction materials and professional services can be claimed as part of this initiative, making it possible for families to create necessary living spaces with financial support from the government.
Families hoping to utilize the MHRTC are advised to plan their renovations carefully, ensuring all requirements are met, and maintain comprehensive records of expenses. They can follow outlined steps for claiming the credit ranging from budget management to completing necessary documentation required by Canada Revenue Agency (CRA).
For many families, the financial support doesn’t stop at home renovations. The Goods and Services Tax (GST) Credit is also part of the benefits Canadians can receive. The government has put forth four payments throughout the year aimed at lower-income households, helping them cope with everyday expenses. For 2025, Canadians can expect payments distributed on January 3, April 4, July 4, and October 3, with the amounts based on the previous year’s tax return.
Eligibility for the GST credit encompasses all Canadian residents aged 19 and over, with benefits increasing based on family size and income level. For individuals, the maximum would be set at up to $519, with additional sums for families with children—adding another layer of assistance.
To complement the assistance for families, the Canada Child Benefit (CCB) remains a pivotal source of financial support. Recalculated annually as of July based on net family income, the CCB has increased its maximum amounts, responding to rising living costs. The added support is aimed at ensuring families are not significantly hindered by financial strains, particularly with rising inflation rates.
The payments provided under the CCB vary according to certain metrics but are meant to address consistent challenges faced by families. The 2024 announcement on increased benefits by government officials, such as Minister Jenna Sudds, bolstered expectations for families requiring additional financial support.
While Canadians are bracing for more taxes, they also witness initiatives aimed at creating positive financial outcomes, especially for families. The government appears to be attempting to balance tax increases with tax relief measures, hoping to ease the collective strain on citizens. It’s clear the anticipated policies and benefits intersect at points for both economic support and continued fiscal responsibility. The effectiveness of these measures will soon become evident as families navigate the tax environment heading forward.