Kurt Woock
Beth Buczynski
A new year means new tax brackets. It also means changes to other tax-related limits that could affect your bank account.
1. New Canada federal income tax brackets
| 2025 income tax bracket | Tax rate | 2024 tax bracket maximums | Increase in 2025 |
|---|---|---|---|
| $0 – $57,375 | 15% | $55,867 | $1,508 |
| $57,376 – $114,750 | 20.5% | $111,733 | $3,017 |
| $114,751 – $177,882 | 26% | $173,205 | $4,677 |
| $177,883 – $253,414 | 29% | $246,752 | $6,662 |
| $253,415 and above | 33% |
There’s a tax rate associated with each income tax bracket, but that doesn’t mean all of your earnings are taxed at the rate in your bracket. For example, if you earn $100,000, you “fall” in the bracket with the 20.5% rate, but you’ll actually be subject to an income tax of 15% on the first $57,375 you earn, and 20.5% on the remaining $43,625.
In addition to federal tax brackets changing, some provincial tax brackets may change, too.
2. Basic personal amount increases
The basic personal amount (BPA) is a non-refundable tax credit that anyone can claim.
Back in 2019, the Government of Canada announced that it would increase the federal BPA annually until it reached $15,000 for 2023. After 2023, the BPA was set to increase based on inflation. As such, the federal BPA for 2025 is $16,129. If your annual income is equal to or less than this amount, you will not be taxed; if your income is higher, the BPA may reduce the tax you owe.
High income earners don’t get the full increased BPA. There is an income test and the BPA is reduced for individuals in higher tax brackets. Taxpayers in the top bracket will have a BPA of $14,538 for 2025.
Keep in mind, there are also provincial BPAs that vary by province or territory.
3. Higher limits for RRSPs
The limit for RRSP (registered retirement savings plan) contributions is $32,490 in 2025.
For comparison, the limit in 2024 was $31,560.
Each dollar you contribute to a RRSP lowers your taxable income by a dollar.
4. EI premium rate dips, max earnings rise
| 2025 | 2024 | |
|---|---|---|
| Maximum earnings (earnings beyond this aren’t subject to the EI premium) | $65,700 | $63,200 |
| Rate | 1.64% | 1.66% |
| The most you’ll pay in a year (if your earnings equal or exceed the maximum earnings amount) | $1,077.48 | $1,049.12 |
If you’re employed, you pay an employment insurance (EI) premium. In return, you may receive benefits if you lose your job, become ill or care for a newborn.
Your employer deducts a portion of your earnings, up to a limit, to pay the premium. Your employer also pays an additional amount directly.
5. Capital gains inclusion rate changes (maybe)
If you sell a capital asset, like a stock or a vacation home, a portion of the profit or loss becomes part of your taxable income for that year. This is called the capital gains inclusion rate.
The 2024 Federal Budget changed the capital gains inclusion rate, making 2025 the first full year this change will be in effect.
| Before the rule change | After the rule change | |
|---|---|---|
| Individuals with annual capital gains of more than $250,000. | 50% of the gains become taxable income. | 66.67% of the capital gains become taxable income. |
| Individuals with annual capital gains of $250,000 or less. | 50% of the gains become taxable income. | 50% of the gains become taxable income (no change). |
Complicating matters, this change is caught in legislative limbo, and there’s a chance it doesn’t become law. Some investors may try to optimize their taxes under the assumption that the change does become law while others may be betting that the change reverts. Only one group can be correct.
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