Have you heard about the recent introduction of the Canada Pension Plan 2 (CPP2)? If you haven’t, it’s time to pay attention. Did you asked yourself, how will the CPP2 affect my taxes? The CPP rates have been revised and an additional rate has been introduced, which means your contributions and benefits may be affected. In this blog post, we’ll dive into the details of these changes, explore the impact they will have on Canadians, and provide you with essential information to help you navigate these new rates.
Overview of the New CPP2 Rates
Starting in 2024, a higher, second earnings ceiling of $73,200 will be implemented and used to determine second additional CPP contributions (CPP2).
Impact on Canadians
How will these changes impact Canadians’ finances? Let’s take a closer look at the numbers. With the newly revised rates, both employees and employer’s pensionable earnings between $68,500 and $73,200 are subject to the new CPP2 contributions in addition to the normal CPP rates.
For the average Canadian, this could amount up to an additional $188 in 2024, and an estimated $388 in 2025, going towards their CPP2 contributions.
Self employed individuals should expect to see a larger increase, with the 2024 expected maximum contribution of $376 in 2024, and an estimated $776 in 2025.
However, it’s important to note that these increased contributions will also result in higher future retirement benefits. The revised CPP2 rates aim to provide Canadians with a more robust pension plan and a better retirement income in the long run.
Impact on Business Owners
The introduction of the CPP2 means the employer portion of payroll taxes will also increase for any employees earning above $68,500. Business owners should review their payroll software and ensure that it is setup for the new rate before running their first 2024 payroll. Payroll tax costs could increase by up to $188 per employee in 2024.
Important Dates and Deadlines
To ensure compliance with the new CPP2 rates, keep in mind the following dates and deadlines:
January 1, 2024: The new CPP2 rates will come into effect. The gradual implementation period will begin on this date.
Understanding the changes to the CPP2 rates is crucial, and it’s important to take action and make any necessary adjustments to your payroll setup to make sure your taxes are up to date. Share this blog post with your friends and family to help them stay informed as well. Keep up to date on important tax changes by subscribing to our content.