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, it was announced that the federal government is deferring change in capital gain inclusion rate from June 25, 2024 to January 1, 2026. How does this impact individuals and corporations.
- Individuals – before introduction of the new inclusion rate, 50% of the capital gain was taxed. This will be changed to 2/3rd beginning January 1, 2026. However, for individuals, the new rate will apply on capital gain above $250,000. Therefore, for individuals if the capital gain is greater than $250,000, $125,000 will be included in income and 66.67% inclusion rate will be applied to remaining capital gain.
- Corporations- there is no minimum threshold. The inclusion rate of 66.67% will apply to entire amount of the capital gain.
While many of us would have considered impact of the changes in inclusion rate in 2024 when it was first introduced and would have considered line of actions for our assets, however, with extension in the implementation date, it is worthwhile revisiting the analysis to hold, sell or other treatment with your assets. Some of the factors to consider in analysis should include current political uncertainties, lower interest rate, and inflation. While 11 months from now sounds long enough time to defer the analysis, it is recommended to begin planning early so there is enough time to put significant decisions in action. I am excited to help you through the analysis and provide you with the tailored solutions.
The tariffs:
It was announced that starting from beginning of February 2025, 25% tariffs will be applied on goods exported from Canada to USA. For many Canadian businesses those are supplying goods in USA, this is a significant cost that will hit their financial statements. While measuring impact from this news and possible alternatives, considering corporate taxes would become crucial to evaluate after tax impact. We are here to partner with you to help provide tax expertise while making your critical business decisions.
Other reminders:
RRSP contribution deadline – March 3, 2025. Reach us to determine optimum amount you should contribute which will help 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 claim on 2024 personal tax returns.
For corporations
- T4s – employment income slips and T5 – investment income slips are due February 28, 2025
- If your tax year end was August 2024, your corporate tax returns are due by end of February 2025
- If your tax year end is December, any corporate taxes owed are due by end of this month unless certain conditions are met then the taxes are due in three months.
- Child care service providers enrolled in CWELCC program – the Wage Enhancement Grant (WEG) reconciliations, and Enhanced Program Support Funding reconciliation and progress report are due end of February. – we assist with preparing and filing these fund 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. We are licensed public accountants with long experience to assist you with the audited financial statements
Chaitali V Patel
Founder
Chaitali Patel Professional Corporation