Happy New Year!!  For my reflections of 2024, I thought I’d present the Top 5 Worst New Canadian Tax Policies of 2024 and the Top Tax “Wish” For 2025.

There were a lot of contenders for Top 5 Worst Tax Policies for 2024.  I literally had to spend hours and hours poring through the candidates.  It was a tough exercise with so much to choose from.  After a lot of blood, sweat and tears, here’s the Top 5:

5. The Alternative Minimum Tax Amendments – the AMT has been around since 1986 and what a waste it is.  It’s a refundable tax that has the stated purpose of making the “rich” pay their fair share when they take advantage of otherwise legal tax avoidance provisions.  Think about that for even two seconds.  The deductions / credits affected people are using are legal.  And if the extra AMT applies, it’s refundable in the seven subsequent years.  The 2024 amendments expand the broadness of the application to the “rich” but the refundable mechanism is maintained.  This has long been a very unnecessary and silly tax and the amendments continue to prove that.  It needs to go.

4. ​The “bare trust” reporting debacle – after six years of the government being warned by various tax practitioners and organizations of the proposed trust reporting deficiencies, and in particular the last 2.5 years when bare trusts were added to the reporting regime proposals, the 2023 first reporting season was a total debacle. Frankly, such reporting rules were a complete embarrassment of how not to introduce taxation policy.  After announcing in August 2024 that bare trusts will be exempt from reporting for 2024 but reappearing in 2025 with a variety of intended carve-outs, such amendments have not been passed into law and may have to be re-introduced if they don’t get passed before an election.

3. ​The “flipping tax” – ok, yes, technically this was introduced by the federal government in 2023…not 2024.  It applies to residential homes that are “flipped” within 365 days of acquisition unless certain “life events” apply.  If applicable, such profits are fully taxed (not eligible for capital gains treatment) and not eligible for the principal residence exemption.  It is a wholly ridiculous, unnecessary and duplicative rule adding complexity since the existing Income Tax Act already taxes “flippers” in this way.  The Canada Revenue Agency simply needs to enforce such a rule.  The reason the flipping tax is a 2024 winner is because the province of British Columbia decided to replicate this poor policy for its own province but, of course, it had to expand the application to any dispositions within 730 days (being prorated down to zero application between 366 to 730 days).  It is unbelievable to me that poor policy is easily copied with little or no thought.  And recently Statistics Canada has released support that “flippers” are certainly not a material contributor to Canada’s housing challenges despite the loud voices of others. This is not a surprise to me.

2. ​The prohibition of deductions for certain short-term rental owners – part of the “bogey-man” approach that the government chose to try to deal with Canada’s self-inflicted housing challenges, a new rule was introduced to prohibit all deductions for owner-operators of short-term rental properties that operate in a jurisdiction that prohibits such rentals.  This is an outrageous new rule that was cheered on by many “NIMBYs” who, frankly, might not appreciate that such a rule puts tax compliant criminal drug dealers on a better tax footing than those targeted by this new rule.  Simply put, this is an extremely dangerous precedent and poor taxation policy.

1. ​The capital gains inclusion rate proposal – there has been a lot of ink spilled on this poorly thought-out proposal that was so obviously a last minute “throw-in” to the 2024 federal budget. It was released in a blaze of rhetoric that the “rich” needed to pay more, was necessary for inter-generational “fairness” (since “older Canadians” have already earned their money), that the “capital gains advantage” was causing nurses to pay more tax than those evil investment bankers, etc, etc.   Flawed in its concept to exempt individuals and certain trusts from its application on the first $250K of annual capital gains (which throws the foundational concept of tax integration out the window), the draft legislation was released a mere 2 weeks prior to its planned implementation date of June 25, 2024. The second round of draft legislation was released in early August 2024 and it’s super complex.  The draft legislation was never released into a bill and given the political chaos that Canada is currently experiencing, such proposals are on life-support.  If they end up in the garbage bin, I won’t be shedding too many tears since that’s where these proposals belong especially since it was supported by the non-sensical “tax the rich” crowd.