Update on Quebec’s Economic and Financial situation- Tax Updates 2024

December 2, 2024

Overview

On November 21, 2024, Quebec’s government issued the 2024 Update on Quebec’s Economic and Financial Situation. This comprehensive summary highlights the key changes introduced in the Update.

Personal Tax Measures

Changes to the tax credit for career extension

Effective for the 2025 taxation year, the following changes will be applied to the tax credit for career extension to make it more effective and better adapted to the current labor market:

The age of eligibility will be raised from 60 to 65 years.
The exclusion threshold will be increased from $5 000 to $7 500 and indexed as of 2026.
The maximum income (exceeding the exclusion threshold) eligible for the tax credit will increase from $11,000 to $12,500 and will be indexed as of 2026.
The reduction threshold will be increased from $40,925 to $56,500, with the reduction now calculated based on net income instead of only work income.
The reduction rate will be increased from 5% to 7%
The grandfather rule for workers who were born before January 1, 1951, will be abolished.

These changes aim to better align the eligibility age with Quebecers’ average retirement age (which use to be around 61 in 2011 and is now close to 65), enhance incentives for individuals aged 65 and over, and reduce tax assistance for high-income earners.

Harmonizing capital gains taxation with the federal tax system

Effective June 25, 2024, the capital gains inclusion rate increased from 50% to 66.7%. It is important to note, however, that such increased inclusion rate has not yet received royal assent.

In an effort to complete the harmonization with the federal tax system in respect of this change, the Quebec government has announced the following measures:

Capital gains exemption in respect of certain resource properties

Quebec government introduces changes to Quebec’s capital gains exemptions on the disposition by individuals of certain resource properties. These changes include:

New rules for calculating the eligible taxable capital gain amount and the individual’s historical account of exploration expenses, adjusted to reflect the increased inclusion rate.
Measures to prevent over-claiming exemptions for gains previously taxed at the lower inclusion rate of 50%.

These amendments will apply as of the 2024 taxation year, with transitional rules.

Withholding tax rate on disposition by non-resident of taxable Quebec property

The tax legislation will be amended to increase the withholding rate on dispositions of taxable Quebec Property by non-residents from 12.875% to 17.167%, reflecting the new capital gains inclusion rate. This change will apply to dispositions proposed or completed after December 31, 2024.

Withholding tax rate on acquisition of specified immovable property from inter vivos trust

The Quebec government has also announced changes, which will be effective January 1^st, 2025, to the tax rules for the acquisition of specified immovable property held by inter vivos trusts to reflect the new capital gains inclusion rate. Under the new rules, the purchaser will have to remit 17.167% (instead of 12.875%) of the purchase price of such property on behalf of such trust.

For further information, visit the Information bulletin 2024-9 and the Update on Quebec’s Economic and Financial Situation – Fall 2024.