THE EVOLVING MONTH OF FEBRUARY FOR TAX PAYERS

The month of February for tax preparers is usually evolving but February 2025 has more. Here, we will discuss some of the significant changes with their implications.

Capital gain inclusion rate:

On January 31, 2025, the federal government announced that the change in the capital gain inclusion rate would be deferred from June 25, 2024, to January 1, 2026. So, how does this impact individuals and corporations?

• Individuals: before the introduction of the new inclusion rate, 50% of the capital gains were taxed. Starting January 1, 2026, this will increase to 66.67%. However, for individuals, the new rate will apply only to capital gains exceeding $250,000. Therefore, for individuals with capital gains greater than $250,000, $125,000 will be included in income, and the 66.67% inclusion rate will be applied to the remaining capital gains.
• Corporations: there is no minimum threshold. The inclusion rate of 66.67% will apply to entire amount of the capital gain.

Many of us might have already considered the impact of the changes in the inclusion rate in 2024 when they were first introduced and taken action regarding our assets. However, with the extended implementation date, it’s worthwhile to revisit the analysis to decide whether to hold, sell, or take other actions with your assets. Some factors to consider include current political uncertainties, lower interest rates, and inflation. While 11 months may seem like plenty of time, it’s recommended to begin planning early to allow enough time for significant decisions to take effect. I am excited to help guide you through this analysis and provide tailored solutions.

The tariffs:
It was announced that starting in February 2025, 25% tariffs will be applied to goods exported from Canada to the USA. For many Canadian businesses that supply goods to the USA, this will represent a significant cost impact on their financial statements. As you measure the impact of this news and explore possible alternatives, it will be crucial to factor in corporate taxes to evaluate the after-tax consequences. We are here to partner with you and provide tax expertise as you make these critical business decisions.

Other reminders:
RRSP contribution deadline – March 3, 2025. Reach out to determine the optimal amount you should contribute to maximize benefits on your 2024 tax return.
FHSA – while the contribution deadline was in December, if you missed, good time to start plan and investment early in 2025 for deductions on your 2025 tax returns.
Charitable donations- new this year, charitable donations made by February 28, 2025, are eligible to be claimed on your 2024 personal tax returns.

For corporations

• T4s (employment income slips) and T5s (investment income slips) are due by February 28, 2025.
• If your tax year ended in August 2024, your corporate tax returns are due by the end of February 2025.
• If your tax year ended in December, any corporate taxes owed are due by the end of this month, unless certain conditions apply, in which case, taxes are due in three months.
• Child care service providers enrolled in CWELCC program – the Wage Enhancement Grant (WEG) reconciliations, and Enhanced Program Support (EPS) funding reconciliation and progress report are due end of February. We can assist with preparing and filing these obligations.
• Child care service providers under CWELCC program with December year end– the audited financial statements and financial annual information return (FAIR) are due April 30th. As licensed public accountants with extensive experience, we are here to assist you with preparing your audited financial statements.

Chaitali V Patel

– Founder
Chaitali Patel Professional Corporation

Contact:
Email: connect@chppc.com
Website: www.chppc.com
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