After the capital gains backtrack, which proposed tax changes will the CRA administer this tax season?

A raft of tax measures proposed during the past 12 months to be effective for the 2024 taxation year have not been enacted. Complicating matters this tax-filing season, the Canada Revenue Agency will administer some of these proposed measures but not others.

Most notably, the CRA is reverting to administering capital gains taxation under the current 50 per cent inclusion rate. As a result, the agency is telling taxpayers to wait to file their 2024 income tax and benefit returns if they’re reporting capital gains they realized last year.

---

---

How does the CRA determine which tax proposals to administer?

In general, the CRA will “consider administering” proposals for which the government has tabled a notice of ways and means motion in Parliament, says Déborah Cléry, a spokesperson with the CRA, in response sent by e-mail to questions from the Globe and Mail.

However, the CRA can’t administer proposed legislation that remains subject to consultation as it isn’t considered final and “changes could be made as a result of the feedback received,” Ms. Cléry said.

In certain cases, including those in which proposed legislation results in changes to refunds or benefits, the CRA waits until Royal Assent before administering.

Here’s how the CRA is proceeding on key tax proposals this year:

Extension to charitable donation deadline : The CRA is administering the federal government’s proposal to extend the deadline to Feb. 28, 2025, for taxpayers to make a charitable donation and claim an associated donation tax credit for 2024.

As outlined in draft legislation released by the Department of Finance on Jan. 23, the extension applies only to donations made in cash, cheque, credit card, money order or electronic transfer. Donations made in January and February, 2025 can be claimed on either a taxpayer’s 2024 or 2025 tax return (or carried forward).

Increase to lifetime capital gains exemption : On Jan. 31, when Finance said it was deferring the implementation date of its hike to the capital gains inclusion rate to Jan. 1, 2026, it also said it was proceeding with the proposed implementation date of June 25, 2024 for the hike to the lifetime capital gains exemption (LCGE) to $1.25-million (from $1.02-million). The CRA is administering the change.

Taxpayers can claim the LCGE on the disposition of qualified small business corporation shares or farming and fishing property.

Amendments to the trust reporting rules: Proposed changes to trust reporting rules released in draft legislation on Aug. 12, 2024 expand the circumstances under which trusts don’t have to file a tax return.

Notably, trusts wouldn’t have to file if the trustees and beneficiaries are related, the fair market value of the property held in the trust is $250,000 or less, and the trust’s property consists only of certain investments. Furthermore, trusts holding $50,000 or less in assets would be exempt from filing regardless of the types of assets held or whether trustees and beneficiaries are related.

The proposed changes were to take effect for trusts with a 2024 year-end and later, but were not enacted.

The CRA said it will administer the existing reporting rules, which are effective for 2023 and later trusts, and which don’t offer as many filing exemptions. For example, under existing legislation, only trusts holding $50,000 of assets or less are exempt from filing, as long as they hold only certain assets.

While the trust reporting rules also apply to bare trusts, the Aug. 12, 2024 draft legislation exempted 2024 bare trusts from a filing obligation.

In October, the CRA confirmed it will exempt 2024 bare trusts from filing under the existing reporting rules – just as it exempted 2023 bare trusts – unless the agency makes a direct request for a trust to file.

Alternative minimum tax changes : The alternative minimum tax (AMT) is an alternative method of calculating tax liability meant to ensure taxpayers pay at least a set minimum rate of tax. A taxpayer calculates their tax liability under the regular method and under the AMT, and then pays the higher amount.

Under proposed changes to the AMT released on Aug. 12, 2024, taxpayers would be able to deduct only 50 per cent of investment counsel and management fees from their AMT base for purposes of calculating the AMT, down from 100 per cent. However, investors in flow-through shares would be allowed to deduct all their resource expenses from their AMT base under the proposed rules.

Those changes haven’t been enacted and, under current legislation, taxpayers may not be able to deduct all resource expenses.

Effective Jan. 1, 2024, the AMT rate increased to 20.5 per cent from 15 per cent, and the exemption amount increased to $173,205 (2024) from $40,000.

Expanded access to disability supports deduction : In the 2024 federal budget and in draft legislation released on Aug. 12, 2024, Ottawa proposed expanding the list of eligible expenses for the disability supports deduction, which provides individuals with physical or mental impairments a deduction for expenses that help them work or attend school.

For example, the expanded list of eligible expenses included the cost of a specially trained service animal for a person who suffers from one or more specified disabilities. These changes would be effective Jan. 1, 2024, but they won’t be administered this year.

Carrying back losses from an estate: The government has proposed extending the period during which an executor can carry back losses from a graduated rate estate (GRE) to an individual’s final tax return. The change, to three taxation years from one, would be effective for taxpayers who die on or after Aug. 12, 2024.

The extra two tax years to carry back losses from a GRE to a final return gives executors more time to use certain tax strategies to avoid the value of a deceased’s private corporation being taxed as both a capital gain and a dividend, resulting in double taxation.

However, the change hasn’t been enacted and is not being administered this year.