Biggest Tax Changes for Tax Year 2025 Canada

1. Middle-Class Tax Cut: Lower Personal Income Tax

• The lowest federal personal income tax rate is being cut from 15% to 14%, effective July 1, 2025. Because it starts mid-year, the effective rate for the full 2025 year is 14.5%.

• This cut benefits about 22 million Canadians, especially those in the lower and middle brackets, and could save individuals up to ~$420 and couples up to ~$840 in 2026.

• Most non-refundable tax credits will continue to be calculated using the lowest tax rate.

2. Tax brackets have changed to account for inflation

Every year, the government updates Canadian tax brackets to help people keep up with higher prices caused by inflation.

Below are the federal tax brackets for 2025. Important: The government lowered the tax rate for the lowest income group from 15% to 14%. Since this change started on July 1, 2025, the average tax rate for this group for the year is 14.5%.

Bracket	Tax Rate
First $57,375	14.5% (effective)
$57,376–$114,750	20.5%
$114,751–$177,882	26%
$177,883–$253,414	29%
Over $253,414	33%

Because of these changes, if your income stayed the same and you were just over a higher tax bracket last year, you may now fall into a lower tax bracket and pay less tax in 2025.

Provinces and territories also update their tax brackets every year. You can check the 2025 income tax rates.

3. Repeal & Other Federal Measures

• The Underused Housing Tax (UHT) is eliminated starting with the 2025 year, meaning no returns or payments for UHT will be required for 2025 or later.

• A Top-Up Tax Credit was introduced alongside the middle-class rate cut to align how tax credits are calculated above the first bracket (details to be finalized).

4. Deferred/Not Implemented Changes

• Capital gains inclusion rate change (raising the taxable portion from 50% to ~66.7% for gains above $250,000) was proposed but deferred until January 1, 2026 and not implemented for 2025.

5. Provincial & Other Notes

• In addition to federal changes, provincial tax brackets and credits are indexed each year (vary by province), and carbon/green taxes (e.g., B.C. carbon price) are also adjusted—be sure to check your province’s 2025 changes.

6. Higher RRSP contribution limit

If you have an RRSP, you can save more for retirement in 2025. You can contribute up to 18% of your 2024 income, to a maximum of $32,490 in 2025 (up from $31,560 in 2024).

• Any unused RRSP room carries forward to future years

• Your investments grow tax-free inside the RRSP

• You pay tax only when you withdraw the money

For TFSA:

• The 2025 TFSA limit is $7,000, same as 2024 (and also 2026)

• There is no deadline to contribute

• Unused TFSA room carries forward

• TFSA investment growth and withdrawals are tax-free

7. New Old Age Security (OAS) income limits

OAS payments are reduced if your income is too high.

For the 2025 tax year:

• If your income is over $93,454, you may need to repay part of your OAS

• If you are 65–74 and earn over $152,062, you will not receive OAS

• If you are 75 or older and earn $157,923 or more, you will not receive OAS

8. Higher CPP contributions

CPP contributions increased again in 2025 as part of the government’s plan to improve retirement benefits.

• CPP retirement payments are expected to increase by about 50% over time

• Contribution rates increased every year from 2019 to 2025

CPP income limits for 2025:

• First limit (YMPE): $71,300

• Second limit (YAMPE): $81,200

If you earn above $71,300:

• Employees pay 4% on income between $71,300 and $81,200

• Self-employed individuals pay 8%

Self-employed workers should save extra money for CPP at tax time.

9. Canada Disability Benefit (new in 2025)

The Canada Disability Benefit (CDB) started in June 2025.

• Up to $2,400 per year ($200 per month)

• For Canadians aged 18 to 64 with disabilities

• Amount depends on family income

• Must qualify for the Disability Tax Credit (DTC)

• Must have filed last year’s tax return

• Payments are available retroactively to July 2025

• The government plans to make this benefit tax-free

• It will not reduce other federal benefits

10. Last Canada Carbon Rebate payment

The federal government ended the carbon tax at the gas pump in 2025.

• The final Canada Carbon Rebate was paid in April 2025

• It was based on your 2024 tax return

• No rebate payments will be issued for tax returns filed after October 30, 2026

11. Digital News Subscription Tax Credit ended

Starting in 2025, you can no longer claim the Digital News Subscription Tax Credit.

• Previously gave a 15% tax credit, up to $75 per year

• Self-employed individuals may still deduct subscriptions as a business expense, if used for work

12. New GST Rebate for First-Time Home Buyers

Starting in 2025, the government added a new GST rebate to help first-time home buyers who buy a new home.

• If you buy a newly built home priced up to $1 million, you do not pay GST on the purchase.

• If the home price is between $1 million and $1.5 million, you still get a rebate, but it is smaller.

• This rebate can save you up to about $50,000.

• To qualify:

  • At least one buyer must be a first-time home buyer

  • The home must be new or newly built

  • The home must be your main place to live

• The rebate applies only if you signed the purchase agreement on or after May 27, 2025.