As we enter 2025, there are several updates to federal policies that could influence Canadians’ financial planning. While some adjustments are routine, others may require more strategic preparation, especially with significant changes such as those affecting the capital gains tax. Below is an overview of the key changes you need to know.
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Changes to Canadian Tax Brackets in 2025
To account for inflation, Canadian income tax brackets will increase by 2.7% in 2025. This adjustment helps ensure Canadians are not pushed into higher tax brackets solely due to inflation.
Here are the federal tax brackets for 2025:
- 15%: Income up to $57,375
- 20.5%: Income between $57,375.01 and $114,750
- 26%: Income between $114,750.01 and $177,882
- 29%: Income between $177,882.01 and $253,414
- 33%: Income above $253,414
Brian Quinlan, a chartered professional accountant at Allay LLP, emphasizes the benefit of these adjustments:
“Even if you have the exact same income as last year, you’ll pay less tax because less of your earnings are taxed at a higher rate.”
Basic Personal Amount for 2025 Taxes
The basic personal amount—the income level at which you do not pay federal taxes—has also increased. For 2025, it ranges from $14,538 to $16,129, depending on your income level. This is up from $14,256 to $15,705 in 2024.
Canadians with lower incomes benefit from a higher basic personal amount, reducing their tax burden further.
Updates to Canada Pension Plan Contributions
Workers and employers will see higher Canada Pension Plan (CPP) contributions in 2025 due to ongoing adjustments aimed at enhancing retirement benefits.
Key updates include:
- First-tier earnings ceiling: Rising to $71,300 (from $68,500 in 2024)
- Second-tier earnings ceiling: Increasing to $81,200 (from $73,200 in 2024)
These changes are part of a multi-year enhancement plan that began in 2019, designed to provide retirees with better financial support. By 2025, the program will be fully implemented, with limits increasing in line with wage growth moving forward.
Anyone contributing to the CPP since 2019 will qualify for higher payouts during retirement based on income earned during this period.
Capital Gains Tax Changes in 2025
Significant changes to the capital gains tax are expected in 2025, marking the first full year of their implementation.
Key highlights:
- Gains up to $250,000: Taxed at 50%
- Gains over $250,000: Taxable portion increases to two-thirds
Brian Quinlan advises Canadians to carefully plan asset sales to minimize tax impact:
“Instead of selling assets with a $300,000 gain in one year, consider spreading the sale over multiple years to reduce your tax burden.”
These changes apply to any capital gains realized after June 24, 2024.
RRSP Contribution Deadline and Limit
Canadians can contribute to their Registered Retirement Savings Plans (RRSPs) for the 2024 fiscal year until March 3, 2025.
The contribution limit for 2025 is $32,490, up from $31,560 in 2024. Remember to check your unused contribution room from your CRA account or last year’s notice of assessment.
CRA 2025 Updates: 5 Key Tax Changes That Will Impact Canadians
New OAS Payments Details in 2025: What Seniors Need to Know About the Latest Adjustments
CPP Payments to Rise by 2.7% in 2025: What Retirees Need to Know
How Early Retirees Can Boost Their Pension by Up to 56%: Higher CPP Benefits
Important Dates to Watch in 2025
Consumer Price Index (CPI) Release Dates
Stay informed on inflation trends with these key release dates:
- January 21 (for December 2024)
- February 18 (for January 2025)
- March 18 (for February 2025)
- [Additional dates throughout the year]
Bank of Canada Interest Rate Announcements
Mark your calendar for these key dates:
- January 29
- March 12
- April 16
- June 4
- [Additional dates through December 10]
By staying informed and planning ahead, Canadians can make the most of these federal policy changes in 2025. Be sure to consult a financial advisor or tax professional to optimize your financial strategy for the year.
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