3 CRA Benefits Most Canadians Can Grab in 2024 

The CRA has enhanced some of its benefits in 2024. Here’s how Canadians can make the most of these benefits.

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The Canada Revenue Agency (CRA) has enhanced the savings benefits for the new financial year. Everyone saves for emergencies, retirement, a first home, and a better future. And the CRA has made these savings efforts more rewarding with registered savings accounts that allow you to grow your investments tax-free. It is a huge benefit. 

How CRA’s tax benefits add value to your investments 

If you added the capital gain tax on the profit you make every time you sell a stock, the tax bill would be huge. By eliminating taxes you can reinvest a higher amount to make more money. Suppose the tax bill on your investment profit is $500. A tax exemption gives you $500 extra to invest. And if your investment gives a 20% average annual return, your $500 could become $1,244 in five years. If you save $500 in taxes every year, your investments will only compound. 

Three CRA benefits most Canadians can grab in 2024 

  • Registered Retirement Savings Plan (RRSP) has a maximum 2024 contribution limit of $31,560, or 18% of your 2023 income, whichever is higher. 
  • First Home Savings Account (FHSA) with a maximum contribution limit of $8,000. 
  • Tax-Free Savings Account (TFSA) with a maximum 2024 contribution limit of $7,000. 

The names themselves state the purpose of these accounts. 

Making the most of the TFSA benefit

While you cannot deduct TFSA contributions from taxable income, withdrawals are tax-free, and you can keep contributing as long as you live. This flexibility encourages you to use the TFSA to save for emergencies, wealth, vacation, or even a startup idea. 

You could consider high-growth stocks like payments platform Nuvei (TSX:NVEI) for the TFSA. The company’s three-pronged growth strategy is to:

  • Expand alternate payment methods by adding payment apps, currencies, cryptos, and others. 
  • Grow the consumer base across verticals, geographies, and company size. 
  • Grow through acquisitions. 

The stock has the potential to scale in a growing economy as commercial activities pick up. It is growing beyond e-commerce and targeting flight payments, digital services, financial services, and more. Even though the stock is up 74% from its October 2023 dip, it is still trading 42% below the March 2023 level (before it was hit by short-selling). There is still ample room for recovery before the stock returns to normal growth. 

Making the most of the FHSA benefit

Both contributions and withdrawals are tax-free in the FHSA, but only if the withdrawal is used for buying your first home. This clause restricts the use of FHSA, but the tax benefits make it a good account for high-growth stocks. You can deduct $8,000 from your taxable income now. The FHSA has a lifetime contribution limit of $40,000, and its lifetime is 15 years or when you turn 71, whichever is early. 

You can make the most of the FHSA by investing in high-growth stocks like Constellation Software or Hive Digital Technologies that can grow your investment by 1,000% in 10 years. This way, you can accumulate a maximum downpayment as there is no withdrawal limit. 

Making the most of the RRSP 

The RRSP is for your retirement. The contribution begins at age 18 and ends at age 71. You can deduct your RRSP contributions from your taxable income. If you max out on your RRSP in 2024, a $31,560 contribution can save you at least $4,734 (15% federal tax) in the federal tax bill. The savings would be higher if you fall under the higher tax bracket.

You can use the $4,700-plus tax savings to invest in the TFSA. Despite these benefits, many Canadians don’t max out an RRSP because the withdrawals are taxed at your marginal tax rate. If you want to make RRSP withdrawals, do it in a year when your overall income is low. 

You could consider stable dividend stocks like Enbridge for your RRSP and enjoy regular passive income for the long term. 

Investing tip 

If you want to generate wealth in the long term, first max out TFSA, then FHSA, and lastly RRSP. But if your purpose is tax savings, the FHSA could be your first choice and then an RRSP.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool has positions in and recommends Nuvei. The Motley Fool recommends Constellation Software and Enbridge. The Motley Fool has a disclosure policy. Fool contributor Puja Tayal has no position in any of the stocks mentioned. 

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