9 Biggest Tax Changes for Tax Year 2025

1. Introduction of the “middle-class tax cut”

Did you notice a small bump in your paycheque this summer? To help Canadians cope with the rising cost of living, on July 1 the federal government reduced the tax rate for the lowest tax bracket from 15% to 14%. (In 2025, the lowest bracket applies to your first $57,375 of income.) Because this tax change happened mid-year, the effective tax rate in 2025 for the lowest income bracket is 14.5%. The full-year rate for 2026 onward will be 14%. According to Ottawa, this so-called “middle-class tax cut” will benefit nearly 22 million Canadians, saving individuals up to $420 per year and a two-income family up to $840 a year. (This measure is part of Bill C-4, currently before Parliament.)

Everyone welcomes a tax cut, but there was one small hiccup with this one. Because the first marginal tax rate also applies to most non-refundable tax credits, such as the Basic Personal Amount, Tuition Amount, or Medical Expenses, it means some Canadians might end up losing more in value than they save in tax. To remedy this, the 2025 Federal Budget introduced a temporary, non-refundable Top-Up Tax Credit. This credit will keep the 15% tax rate for non-refundable credits claimed beyond the lowest tax-bracket threshold, and it will be in effect for the 2025 to 2030 tax years.

2. The Basic Personal Amount is higher

The Basic Personal Amount (BPA) is a non-refundable tax credit that all individual taxpayers can claim—it's essentially how much income you can earn tax-free. For 2025, the federal government has increased the maximum BPA to $16,129. Each province and territory also has a BPA.

3. Tax brackets have changed to account for inflation

Every year, the government adjusts the Canadian tax brackets to help maintain taxpayers' buying power as the prices of goods continue to increase.

Below are the new federal tax brackets for 2025. (Note: The federal government cut the tax rate for the lowest bracket from 15% to 14%. The cut took effect mid-year, on July 1, so the effective tax rate for the lowest bracket is 14.5%.)

• 14.5% up to $57,375, plus
• 20.5% over $57,375 up to $114,750, plus
• 26% over $114,750 up to $177,882, plus
• 29% over $177,882 up to $253,414, plus
• 33% over $253,414

The upshot of the tax bracket changes is that if you were just over the edge of one last year and your income hasn't changed, then there's a chance you could save some money if you slide into a lower bracket this year. The provinces and territories adjust their income brackets annually, too—check their 2025 income tax rates on the CRA's website.

4. A rise in the RRSP annual contribution limit

If you have a Registered Retirement Savings Plan (RRSP), you can contribute up to 18% of your previous year's income, to a maximum of $32,490 in the 2025 tax year, up from $31,560 in 2024. Any unused contribution room carries forward indefinitely. Investment growth is tax-free—but withdrawals are taxable.

If you have a Tax-Free Savings Account (TFSA), the annual contribution limit for 2025 is $7,000, the same as it was for 2024. (It will also be $7,000 in 2026.) There's no deadline for TFSA contributions, though, so any unused contribution room you have carries forward into the new year. (See all the TFSA limits going back to 2009, when the account was introduced.) Investment growth in a TFSA is tax-free, as are TFSA withdrawals.

5. New OAS limit amounts

Old Age Security (OAS) is an income-tested benefit designed to provide retirees with a source of income to support their retirement. Put another way, the higher your income, the less OAS you may qualify for. However, the income threshold changes from year to year.

For the 2025 tax year, if your taxable income was over $93,454, you would need to repay some of your OAS in the recovery period from July 2026 to June 2027. If you're 65 to 74 and your taxable income was over $152,062, or you're 75 or over and your taxable income was $157,923 or more, you will not receive any OAS payments.

6. Canada Pension Plan maximum contributions have increased

For the seventh straight year, your Canada Pension Plan (CPP) contributions have gone up. Here's why: In 2019, the Canada Revenue Agency (CRA) started rolling out the CPP enhancement, a long-term plan to increase retirement income for working Canadians. The CPP enhancement will eventually boost the maximum CPP retirement pension by about 50%, providing more financial security for retirees. To support this plan, the government has raised annual CPP contribution rates every year from 2019 to 2025. If you're self-employed, you pay both the employer and employee portions of the CPP, so consider setting aside a little extra for tax time.

There's more. CPP has two “earnings ceilings.” The first earnings ceiling, officially called the Year's Maximum Pensionable Earnings (YMPE), is the eligible income on which workers make CPP contributions. In 2025, the first earnings ceiling is $71,300.

On Jan. 1, 2024, the government introduced a second earnings ceiling, the Year's Additional Maximum Pensionable Earnings (YAMPE). This is used to determine additional CPP contributions—referred to as CPP2—for workers who earn higher wages. Canadians whose earnings exceed the first earnings ceiling must make CPP2 contributions up to the second earnings ceiling. In 2025, the second earnings ceiling is $81,200.

How much money are we talking? If you're an employee, you contribute 4% of the amount you earn between the first and second earnings ceilings. If you're self-employed, you contribute 8%.

7. Launch of the Canada Disability Benefit

Applications for the much-anticipated Canada Disability Benefit (CDB) opened in June 2025. This new federal benefit is for working-age Canadians (aged 18 to 64) with disabilities, who will receive up to $2,400 per year (maximum $200 per month), based on their adjusted family net income. (The benefit amount will rise with inflation.) To qualify, you must be a Canadian resident who is certified to receive the Disability Tax Credit (DTC), and you must have filed your previous year's tax return. (Payments are retroactively available back to July 2025.) Receiving the CDB won't affect your eligibility for other federal benefits, and the federal government has said it plans to table legislation to make the CDB tax-exempt.

8. The last Canada Carbon Rebate payment

In March 2025, the federal government ended pollution pricing at the gas pump, along with the tax-free Canada Carbon Rebate payments meant to help individuals and families in applicable provinces offset the added cost. The final rebate payment went out in April to individuals who filed a 2024 tax return. If you're behind on your tax filing, take note: the 2025 federal budget calls for no more Canada Carbon Rebate payments “made in respect of tax returns, or adjustment requests, filed after October 30, 2026.”

9. End of the Digital News Subscription Tax Credit

As of 2025, you can no longer claim this non-refundable tax credit, which previously offered taxpayers a 15% credit, up to $75 per year, for buying subscriptions to Qualified Canadian Journalism Organizations (QCJOs). If you're self-employed, you might still be able to claim digital subscriptions as a business expense, if you use them to keep up with industry news.

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