Significant tax changes in Canada for 2025 include a federal income tax rate cut, updates to the Canada Pension Plan (CPP), adjustments to the capital gains inclusion rate, and the end of the consumer carbon tax. The Canada Revenue Agency (CRA) will also index tax brackets and certain non-refundable tax credits to account for inflation. 

Personal income tax

  • Federal tax rate reduction: The lowest federal tax rate, which applies to taxable income up to $57,375, will be reduced from 15% to 14%.
    • This change is effective July 1, 2025, which results in a blended federal rate of 14.5% for the 2025 tax year.
    • For 2026 and future tax years, the rate will be a full 14%.
  • Tax bracket indexing: Federal tax brackets will be indexed by 2.7% for 2025 to keep pace with inflation.
    • The first federal tax bracket for 2025 is up to $57,375 (14.5% blended rate).
  • Basic Personal Amount (BPA): The BPA, the maximum amount of income an individual can earn tax-free, is increasing. For 2025, the maximum BPA will range from $14,538 to $16,129, depending on the taxpayer’s net income. 

Carbon tax and rebates

  • Consumer carbon tax eliminated: As of April 1, 2025, the federal consumer fuel charge was eliminated in the provinces where it was in effect, following an announcement in March 2025.
  • Final Canada Carbon Rebate: The final Canada Carbon Rebate (formerly the Climate Action Incentive) payment was issued starting on April 22, 2025, to those who had filed their 2024 tax return by the April 2 deadline. 

Capital gains

  • Capital gains inclusion rate: The government canceled the previously announced increase to the capital gains inclusion rate. The rate will remain at 50%, not rising to 66.67%.

Registered savings plans

  • Tax-Free Savings Account (TFSA): The annual TFSA dollar limit for 2025 is $7,000, unchanged from 2024. Unused contribution room from previous years is carried forward.
  • Registered Retirement Savings Plan (RRSP): The RRSP contribution limit for 2025 is $32,490, an increase from the 2024 limit of $31,560. 

Canadian Pension Plan (CPP)

  • Benefit enhancements finalized: The multi-year CPP enhancement concludes in 2025 with the final adjustments to the second earnings ceiling, known as the Year’s Additional Maximum Pensionable Earnings (YAMPE). The YAMPE will be 14% higher than the first earnings ceiling in 2025 and subsequent years, and will be subject to a different contribution rate.
  • New benefits: Effective January 1, 2025, several changes took effect, including:
    • New child’s benefits for dependent children of disabled or deceased contributors attending school part-time.
    • A top-up to the death benefit for the estates of contributors who die without a spouse or partner.
  • Extended benefits: The eligibility for the Disabled Contributor’s Child’s Benefit (DCCB) will be extended even after the parent reaches age 65. 

Employment Insurance (EI)

  • Temporary measures for long-tenured workers: A temporary measure has been introduced to give long-tenured workers up to 20 extra weeks of EI benefits for claims starting between June 15, 2025, and April 11, 2026.
  • Extended temporary measures: The government has extended the following temporary EI measures until April 11, 2026:
    • The one-week waiting period for all EI benefits is waived.
    • Rules regarding separation payments are suspended, allowing workers to receive both severance and EI benefits.
  • Maximum insurable earnings (MIE): Effective January 1, 2025, the MIE, which determines the maximum weekly benefit rate, has increased to $65,700.
  • Maximum weekly benefit: For claims starting on or after December 29, 2024, the maximum weekly EI benefit rate increases to $695.