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Update from Canadian Immigration: Latest on Application Backlogs

On August 29, 2024, Immigration, Refugees, and Citizenship Canada (IRCC) released the latest update on the immigration application backlog. According to the report, which is always a month behind, there were a record 2,364,700 citizenship, immigration, and visa applications in progress as of July 31.

Notably, the backlog of applications that exceed the usual IRCC service standards has surpassed 1 million for the first time since November 2022, reaching 1,002,400. This data encompasses a range of application types, including citizenship, permanent residence, and temporary residence.

Comparision with Previous Data

A comparison of the backlog data from June 30 and May 31, 2024, shows notable changes across all application types from the previous months.

The data indicates a reduction in the backlog for citizenship and permanent residence applications between June 30 and July 31, with citizenship applications decreasing by 3.70% and permanent residence applications by 0.93%.

Conversely, there has been a substantial rise in the backlog for temporary residence applications, which increased by 11.80%. This surge has led to an overall increase in the total backlog by 7.02% over the two-month period.

Future Backlogs Projections

The IRCC’s continued efforts to manage the backlog are anticipated to lead to a potential reduction of 20-30% in the total backlog by mid-2025.

Here are the official IRCC backlog projections for the end of this month

The emphasis continues to be on improving processing efficiency, especially in the temporary and permanent residence categories, which have experienced the greatest variations recently.

IRCC’s approach involves increasing technological use, optimizing resource allocation, and making policy adjustments to address the growing demand for immigration services.

These efforts are designed to keep the Canadian immigration system both responsive and efficient, despite the increasing volume of applications.

Implications on the Applicants

The IRCC aims to process 80% of applications within their service standards, with a backlog below 20% considered normal.Current backlog and future projections indicate that IRCC has achieved this goal for citizenship, express entry, and family sponsorship applications.However, the department continues to face challenges with temporary residence applications, largely due to a surge in new applications.This includes temporary resident visas (TRVs), study permits, and work permits, with TRVs and work permits experiencing the most significant impact.

Conclusion

How to Reduce Canadian Taxes on Capital Gains.

Many newcomers will be considered Canadian residents for tax purposes. They will have a Social Insurance Number (SIN) and need to file taxes with the Canada Revenue Agency (CRA) each year.

Keep reading to find out about key capital gains tax exemptions that can help newcomers lower their tax bills.

Tax Break for Selling Your Home in Canada

When you sell a capital asset, such as a home, you usually need to pay taxes on the profit, known as a capital gain. Specifically, the gain is calculated as the difference between what you sold the asset for and what you initially paid for it. For instance, if you bought a business for $50,000 and later sold it for $250,000, you’d have a capital gain of $200,000. Consequently, with the current 50% inclusion rate, you would be taxed on $100,000 of this gain. If your tax rate is 50%, your tax bill would amount to $50,000.

However, there is an important exception: if you sell your principal residence (your main home) and it has been your home for the entire period of ownership, you typically won’t owe any taxes on the gain. In other words, as long as you’ve lived in the home throughout the time you owned it and qualify for the exemption, any profit from its sale will generally be tax-free. To benefit from this, you must declare the property as your principal residence on your annual tax return.

Lifetime Capital Gains Exemption in Canada

Canadian tax law provides a ‘lifetime capital gains exemption’ for profits from selling certain types of property. Specifically, this includes:

• Shares in a small business corporation
• Farm or fishing property
• Related reserves and trusts

Each individual can benefit from this exemption, provided they meet the qualifications.

For 2023, the exemption amount is $971,190. Therefore, if you use the full exemption, you can reduce your taxable income by $485,595 (which is half of the exemption amount). Consequently, if you’re in the 50% tax bracket, this could save you over $200,000 in taxes.

How do you avoid capital gains tax on rental property in Canada?

If you’re planning to sell rental property in Canada, you can’t avoid paying capital gains tax on 50% of the profit. However, timing your sale can be beneficial. If you’re close to the end of the tax year, consider postponing the sale until after the new year. This way, you can delay recognizing the capital gain and push the tax payment to the next year.

On the other hand, if your income varies, you might not want to wait. Selling in a year when your income is lower could mean you pay less tax on the capital gains because of a lower tax rate. Another strategy is to offset the gain from the property by selling another asset at a loss in the same year. This can reduce or even cancel out the tax you owe on the capital gains.”

How to Determine If You’re a Canadian Tax Resident

The CRA looks at several factors to decide if you’re a Canadian tax resident, including:

• How much time you spend in Canada
• Whether you have a home in Canada
• Whether you have a spouse, common-law partner, or dependents in Canada
• Personal property you own in Canada
• Economic connections to Canada
• Health insurance coverage in Canada
• Canadian government ID

This list isn’t complete. Even if you leave Canada, you might still be considered a Canadian resident if you keep strong ties to the country.

Protect Yourself from Tax Scams

Be especially cautious if someone approaches you with offers to help you avoid paying income taxes. While tax reduction strategies are legal and based on current laws, tax avoidance or evasion is illegal. Unfortunately, scams promising to reduce your taxes are common. Always consult with a reputable tax professional before making any decisions.