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6 Canadian Tax Changes in 2025

Canada-tax-changes-2025

As of January 2025, Canada has enacted several noteworthy tax reforms that could affect individuals and corporations. Here are five significant updates:

1. New personal income tax brackets for 2025

The progressive tax system in Canada progressively raises taxes according to the total amount earned during the year. To account for inflation, the tax brackets from the prior year will be raised by 2.7% for 2025. They are as follows:

  • 15% on income up to $57,375
  • 20.5% on income between $57,375 and $114,750
  • 26% on income between $114,750 and $177,882
  • 29% on income between $177,882 and $253,414
  • 33% on income over $253,414

2. Increased Basic Personal Amount (BPA)

Anyone can claim the basic personal amount (BPA), a non-refundable tax credit. In 2025, the federal BPA is $16,129. You won’t be taxed if your yearly income is this amount or less; if it’s more, the BPA might lower your tax liability.

3. Modified Capital Gains Tax

The taxable capital gains inclusion rate has been modified for 2025. Gains over $250,000 are now subject to a two-thirds inclusion rate, while gains under that amount are still subject to 50% tax. Both individuals and corporations that realize significant capital gains are impacted by this change.

4. Modified Capital Gains Tax 2025

The taxable capital gains inclusion rate has been modified for 2025. Gains over $250,000 are now subject to a two-thirds inclusion rate, while gains under that amount are still subject to 50% tax. Both individuals and corporations that realize significant capital gains are impacted by this change.

5. Higher limits for RRSPs

The Canadian Registered Retirement Savings Plan (RRSP) contribution cap was raised from $31,560 in 2024 to $32,490 in 2025. This change improves people’s financial planning options by enabling them to make larger tax-deferred contributions to their retirement funds.

6. Reduced EI Premium Rates

The employee premium rate dropped from $1.66 in 2024 to $1.64 per $100 of insurable earnings. The rate at which employers contribute is $2.30 per $100 or 1.4 times the rate paid by employees.

In 2024, the Increased Maximum Insurable Earnings (MIE) was $63,200; now, it is $65,700. This implies that earnings up to this new maximum are now used to calculate employer and employee EI contributions. Thus, the maximum annual employer premium is $1,508.47, up from $1,468.77, and the maximum annual employee premium is $1,077.48, up from $1,049.12 in 2024.

Even though the deadline is still a few months away, it’s a good idea to start gathering your paperwork and listing any deductions you may have made over the year.

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