Federal Budget 2024: What You Need to Know

Under the current rules of the Home Buyers’ Plan (HBP), prospective homebuyers can borrow up to $35,000 from their Registered Retirement Savings Planto put towards purchasing a new home without paying any tax. The full amount needs to be paid back within 15 years. The budget increased the withdrawal limit to $60,000, so now couples purchasing a home together would be able to withdraw up to $120,000 from their RRSPs tax-free.

In addition, currently the repayment must begin the second year following withdrawal of the funds, while the budget defers the start of the repayment by an additional three years. This means that if you took money from your RRSP between January 1, 2022 and December 31, 2025, you would start repaying funds in the fifth year following that first withdrawal.

Students at eligible post-secondary undergraduate schools who apply for student aid with their province or territory (except for the Northwest Territories, Nunavut or Quebec, which have their own student aid programs) are automatically eligible for the Canada Student Grant. The budget is extending the maximum amount for another year; the maximum Canada Student Grant for full-time students is $4,200, and for part-time students it is $2,520. Interest-free Canada Student Loans will increase from $210 to $300 per week.

Under the section titled “Improving Tax Fairness,” the budget proposed a hike in the taxable portion of capital gains over $250,000 by individuals, and on all capital gains realized by corporations and trusts, from 50% to two-thirds, effective June 25, 2024. Capital gains up to $250,000 will still be taxed at 50%. For example, if you buy a cottage or second home for $500,000 and later sell it for $800,000, you will have made a capital gain of $300,000. Under the new legislation, that gain will be taxed at 67.67%, and added to your taxable income. There is still an exemption on capital gains tax when you sell your primary residence.

To help with the high cost of mortgage payments, the budget proposed extending the maximum amortization period from 25 years to 30 years for first-time home buyers purchasing a newly constructed home. This new insured product will be available August 1, 2024. According to the budget document, “The government will monitor whether housing inflation and supply conditions permit expanding access to 30-year insured mortgage amortizations more broadly.”

New legislation, titled the Canada Disability Benefit Act, provides a direct benefit for low-income working people with disabilities. The feds intend the act to come into effect June 2024 and to begin payments in July 2025 amounting to a maximum benefit of $200 a month, or $2,400 per year, for people with disabilities between the ages of 18 and 64. To be eligible for this benefit,  you will need a valid Disability Tax Credit certificate. The government has not yet published the income thresholds for the benefit, but it is expected that over 600,000 low-income people with disabilities will be eligible.

Canada aims to reduce tobacco use to less than 5% by 2035. To help reach that goal and discourage younger Canadians from picking up vaping, Budget 2024 proposed increasing the tobacco excise duty tax by $4 per carton of 200 cigarettes, on top of the automatic inflation adjustment increase of $1.49 per carton that took effect on April 1. The budget also proposes to increase the vaping excise duty rates by 12% as of July 1, 2024. 

Bill C-64, the Pharmacare Act, outlines the first phase of a national pharmacare program in Canada, which provides coverage for prescription contraceptives and diabetes medications. The budget proposes providing $1.5 billon over five years to Health Canada to support the launch of this program. Coverage of these medications will be provided through existing provincial and territorial pharmacare programs.

The Canada Child Benefit (CCB) provides support for eligible families with children under the age of 18. Currently, families receiving the CCB lose this benefit one month after the death of an eligible child; under the new budget, recipients will continue to receive the benefit for six months.

Eligible tradespeople and apprentices in the construction industry are  currently allowed to deduct up to $4,000 in eligible travel and relocation expenses. Budget 2024 removes any cap on expenses, retroactive to the 2022 taxation year, for tradespeople required to work at a job site more than 120 km from their home.

For taxpayers who are served a new measure called a Notice of Non-Compliance for failing to comply with a request for assistance or information, Budget 2024 enables the Canada Revenue Agency (CRA) to impose of penalty of $50 per day for each day the notice is outstanding, to a maximum of $25,000. The recipient of this notice can request a review by the CRA, and then a second review by a federal judge if the review is unsuccessful. The intent of this new amendment is to increase the consequences of failing to comply with the CRA’s request for information or additional documents.  

The budget proposed changes to these four tax credits:

• Volunteer Firefighters Tax Credit (Line 31220) and the Search and Rescue Volunteers Tax Credit (Line 31240): Increase the claim amount from $3,000 to $6,000, providing $900 of tax relief.
• Disability  Supports Deduction (Line 21500): Expand the list of eligible expenses that help cover the cost of accessibility tools and services for people with disabilities to include service animals, alternative computer input devices (e.g. assistive keyboard, Braille display), ergonomic work chairs and bed positioning devices.
• Mineral Exploration Tax Credit: Extend eligibility for one more year, to March 31, 2025.

There are a lot of changes on the horizon for Canadians. If put into place, they could make a (small) dent in the high cost of living most are experiencing right now.