Personal Tax Changes in Canada for 2025

By:

Tax Rush

On

08/02/2025

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0 min

Summary:

As we enter 2025, several important tax updates are affecting Canadians, from income tax brackets to CPP contributions and savings limits. Staying informed about these changes can help individuals maximize their refunds, plan their finances efficiently, and avoid unexpected tax liabilities.

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1. Federal Income Tax Brackets Adjusted for Inflation

To account for a 2.7% inflation increase, the federal income tax brackets for 2025 are:

  • 15% on income up to $57,375

  • 20.5% on income between $57,375.01 and $114,750

  • 26% on income between $114,750.01 and $177,882

  • 29% on income between $177,882.01 and $253,414

  • 33% on income above $253,414

2. Increase in Basic Personal Amount (BPA)

The BPA, which is the amount of income not subject to federal tax, has increased to $16,129 for 2025. This amount gradually reduces for individuals with net incomes exceeding $177,882, reaching zero at $253,414.

3. Canada Pension Plan (CPP) Contribution Enhancements

As part of a multi-year enhancement plan, CPP contributions have been adjusted:

  • Contribution Rate: Remains at 5.95% for employees and employers.

  • Year’s Maximum Pensionable Earnings (YMPE): Increased to $71,300, resulting in a maximum annual contribution of $4,034.10 for both employees and employers. Self-employed individuals will contribute a total of $8,068.20.

  • Second CPP Contribution Tier: Earnings between $71,300 and $81,200 are subject to an additional 4% contribution rate, with a maximum contribution of $396 for employees and $792 for self-employed individuals.

4. Employment Insurance (EI) Premium Adjustments

  • Employee Contribution Rate: Increased to 1.64% on insurable earnings up to $65,700, resulting in a maximum contribution of $1,077.48.

5. Capital Gains Tax Changes Deferred

Initially, the government proposed increasing the taxable portion of capital gains from 50% to two-thirds for gains exceeding $250,000. However, the implementation of this change has been deferred to January 1, 2026.

6. Tax-Free Savings Account (TFSA) Contribution Limit

The TFSA contribution limit for 2025 remains at $7,000, reflecting adjustments for inflation.

7. Registered Retirement Savings Plan (RRSP) Contribution Limit

The RRSP contribution limit has increased to $32,490 for 2025, up from $31,560 in 2024.

8. Old Age Security (OAS) Clawback Threshold

The OAS repayment threshold has been raised to $93,454 for 2025.

These changes are part of the federal government's annual adjustments to tax and benefit amounts, ensuring alignment with economic conditions and inflation.