2023 December Update

It’s our final newsletter of 2023! We hope you’ve enjoyed reading with us all through the year, and have continued to find it useful in supporting the daily and monthly design of your life and finances.

After yet another year of change, you can expect even more change in 2024. We don’t know what all the specific changes will be (surprises are fun… right? Aren’t they? Maybe?), but we do know about some of them already, and they’re mostly in the number-y financial realm. Here’s your sneak peek into the future:

TFSA Contribution Room: As a Canadian resident, you’ll earn $7,000 in additional contribution room in 2024. If you haven’t used all of your contribution room from previous years, this will be added on top. If you have never made a contribution and you’ve been eligible for one since the TFSA was created, you will have contribution room of $95,000 in 2024.

Basic Personal Amount: If your income is $173,205 or less in 2024, your basic personal amount is $15,705. Once your income exceeds $173,205, the basic personal amount is clawed back until it reaches $14,156 on a net income of $246,752.

RRSP Maximum Contribution: You earn RRSP contribution room at a rate of 18% of the previous year’s active earned income – sorry, dividends don’t count! – up to annual maximums. In 2024, the maximum RRSP contribution limit increases from $30,780 to $31,560. The 2025 RRSP contribution limit is $32,490. If you get to choose your income and are basing it on RRSP room, you’ll want to use the 2025 limit to determine your 2024 income.

Prescribed Rates: Remember when you could loan family members money at 1%? Ah yes, the good old days. In the first quarter of 2024, the prescribed rate will be 6%, and that will be adjusted again in the quarters that follow. If you have overdue income tax, your interest rate will be a whopping 10%.

Lifetime Capital Gains Exemption: Are you selling shares in your qualified small business? The lifetime capital gains exemption rate increases from $971,190 in 2023 to $1,016,836 in 2024.

OAS benefit increase: If you’re collecting OAS, you’ll know that the amount you receive is adjusted for inflation every three months, unlike CPP, which is adjusted each year. It’s expected that, come January, your payment will increase 0.8%, for an increase of 3.7% over the past year.

OAS Recovery (Clawback) Threshold: If you’re collecting OAS and your income in 2023 exceeds the Minimum Income Recovery Threshold, your OAS income will be clawed back. The recovery threshold in 2023 was $86,912 and will be $90,997 in 2024.

Disability Amount: If you qualify for this non-refundable credit, it’s increasing from $9,428 in 2023 to $9,872 in 2024.

CPP Benefits Increase: If you’re collecting the Canada Pension, your payment is expected to increase by 4.4% in 2024. Your exact amount of CPP income is based on your earning history.

CPP Contributions Increase: If you are earning active employment or self-employment income, changes to the YMPE are going to impact you in 2024, and you’ll likely feel that in your paycheque. If you currently earn more than about $70,000 annually, there’s likely a point in the year when your pay increases. This is generally because you’ve hit the maximum level for both CPP and EI contributions. In 2024, that point will be reached a lot later, and here’s why:

The CPP system has been slowly updating since 2019, with incrementally increased contributions. Why? It’s not because the pension, under its current structure, is having a hard time. In fact, it’s been lauded as one of the best managed national pensions in the world.

The goal with this change is to increase the benefit you’ll receive in the future. To that end, the YMPE (the maximum amount of income that attracts CPP contributions) has been increasing annually. On top of that, in 2024, a new threshold, the YAMPE (Yearly Additional Maximum Pensionable Earnings) is being introduced.

What is the YMPE? The yearly maximum pensionable earnings amount is the dollar amount of your earnings on which you contribute to CPP. In 2023 that was $66,600. In 2024, this increases to $68,500. You pay 5.95% of your income towards the CPP on this earnings amount, and your employer pays the same – 5.95%. The maximum is $3,867.50 each. If you’re self-employed, you get to pay both – lucky you! – at 11.9% or a maximum of $7,735.

What is the YAMPE? The brand-spanking-new yearly maximum additional pensionable earnings amount (say that three times fast) is a second threshold. If you earn more than $68,500, you and your employer are going to contribute 4% of your income – or 8% in total if you’re self-employed – to CPP until your income reaches $73,200. This means that you and your employer will contribute a maximum of $188 each on this second earnings amount. If you’re self-employed, you’ll contribute a maximum of $376.

The intended result of all these increases is that, when you’re ready to start collecting your CPP income, that income will be higher than it would have been under the previous regime. If you’re interested in learning how your national pension plan is doing, and you enjoy nerdy actuarial reports, you can read the 2023 annual report right here.

Each year, in lieu of holiday gifts, we make charitable donations to support the communities we’re so proud to be a part of. This year, we’ve made donations to Covenant House and Backpack Buddies, two great organizations that support the well-being of children and youth. We get pretty teary-eyed at the idea of any kids struggling because they don’t have enough to eat or a safe place to simply exist. Both of these great organizations ensure that some of the most vulnerable people in our society are able to have their most basic needs met.

Thank you for being part of our community and the success of our business. Without you, we could not make these donations, and children in our community might be that much colder and hungrier. We encourage you to consider both Covenant House and Backpack Buddies in your charitable giving this year. PLUS, you’ll get a tax deduction. Everyone wins – especially the kids.

Wishing you an amazing, restful holiday season.

Your Spring Planning Team

Practice Notes:

Your Spring Planning team will be on holiday starting Wednesday December 20th and returning Tuesday January 2nd. We’ve booked the whole day on January 2nd to manage emails and remember what we do for a living. We expect to be back in full form with our brains in our heads on Wednesday January 3rd.

Our annual strategic planning retreat will be taking place between Wednesday January 24 and Friday January 26. It’s so important that we pay attention to keeping Spring Planning sustainable and innovative, so that we can ensure we are here for YOU over the long term. We dedicate this time every year (and ½ a day every quarter) to pay attention to how far we’ve come, where we are going, and how we can adjust our plans to meet with the realities of life. It’s just like the work we do with you!

“Free” Fridays remain booked permanently in our calendars. These days are free to us at Spring because they are our opportunity to work on becoming better planners, whether through collaboration and discussion, education, research, or even a little down time. It’s been a regular practice since the summer of 2017, and we will continue to set aside the time to become better versions of ourselves every week. Even 1% better is solidly worth it, because we know that will be reflected in the work we do for you.

Spring in the News:

On December 6th, Julia was on EmpoweredTV with Elizabeth Naumovski, talking about finances and children of all ages. You can watch the video right here.

Julia has been a certified Family Enterprise Advisor (FEA) since 2014 and a board director at Family Enterprise Canada since 2020. Supporting families with shared resources, complex structures and multiple generations requires a lot of expertise, often from more than one advisor. At Spring, we have been collaborating with Trella Advisory Services since April 2023 to support those specific multigenerational family clients working through transitions. For those families who need support from experts in even more areas than Julia can fit in her brain, you now have access to the full team at Trella. You can read the recent Trella Q&A with Julia right here.

Julia is also a founding member of the Financial Planning Association of Canada and has served as Vice President since its inception in 2019. Starting in 2024, Julia will be the President of this growing organization, with the support of Executive Director Joanna Schultz and an outstanding board of directors.

Please check out our media page here for videos, podcasts, interviews and more.

Planning News Digest:

• Want to read about AMT changes? If you donate to charity regularly, and in large amounts, this might be really important. The Canadian government has tabled legislation that could raise the Alternative Minimum Tax. Read the full article here.
• Late income taxes just got a lot more expensive The Canada Revenue Agency (CRA) is charging higher interest rates on overdue taxes, raising the risk of heavier costs if a taxpayer makes payments late or is later reassessed. The full article is available here.
• A Guide on Gifting to Grandchildren Courtesy of O’Sullivan Estate Lawyers in Toronto, here are some great ideas, and important considerations for those of you who might be thinking of giving your family members a little something extra this year. Read the full article here.

Feature from the Archives:

Tips for the Holiday Season – If you’re fEeLiNg (that’s how we write it at Spring) responsible for ensuring other people have a great time this holiday season, and that expectation is weighing you down, here are some of our tips for the holiday season.

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