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Understanding Canada's New Tax Brackets for 2025
Dated: November 22 2024
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Understanding Canada's New Tax Brackets for 2025
The Canadian government has updated the federal tax brackets for 2025 to account for a 2.7% inflation rate. These changes are effective January 1, 2025. Here’s the breakdown:
- 15%: Up to $57,375
- 20.5%: $57,376 to $114,750
- 26%: $114,751 to $177,882
- 29%: $177,883 to $253,414
- 33%: Above $253,414
The Basic Personal Amount (BPA), which is the income you can earn without paying federal tax, will increase to $16,129. However, higher earners with incomes above $177,882 will see a phased reduction, with the enhanced BPA fully eliminated at incomes exceeding $253,414.
Additional Updates
- Canada Pension Plan (CPP): The maximum pensionable earnings for 2025 are set at $71,300. Contribution rates remain at 5.95% for employees and employers, and 11.9% for self-employed individuals.
- Tax-Free Savings Account (TFSA): The annual contribution limit will remain at $7,000.
- Employment Insurance (EI): The maximum insurable earnings increase to $65,700, with a 1.64% employee contribution rate (1.31% in Quebec).
These changes reflect efforts to account for inflation and adjust thresholds to maintain equity. Keep in mind that provincial tax brackets vary and are also subject to regional inflation factors.
For detailed information, refer to:
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