As the new year begins, Canadians face various financial changes, from higher Canada Pension Plan (CPP) contributions to adjustments in tax brackets and BC Hydro fees. Here’s a breakdown of the key updates you need to know to plan your finances effectively.
Table of Contents
Higher Tax Brackets for 2025
To offset inflation, income tax brackets will increase by 2.7% in 2025. This adjustment prevents “bracket creep,” where inflation pushes individuals into higher tax brackets without an actual increase in purchasing power.
New Federal Tax Rates for 2025:
- 15%: Earnings up to $57,375
- 20.5%: $57,375.01 to $114,750
- 26%: $114,750.01 to $177,882
- 29%: $177,882.01 to $253,414
- 33%: Over $253,414
According to Brian Quinlan, CPA at Allay LLP, “These adjustments are good news for taxpayers as they mitigate the impact of inflation.”
Increased Basic Personal Amount
The basic personal amount — the income on which no federal tax is paid — is increasing for 2025.
- New Range: $14,538 to $16,129
- 2024 Range: $14,256 to $15,705
Those with lower incomes benefit from a higher personal tax credit.
Canada Pension Plan (CPP) Contributions
Workers will notice slightly higher CPP deductions in 2025, continuing a phased enhancement started in 2019.
Updated Contribution Ceilings:
- First-tier Earnings Ceiling: $71,300 (up from $68,500 in 2024)
- Second-tier Earnings Ceiling: $81,200 (up from $73,200 in 2024)
These increases aim to provide greater retirement benefits. For those contributing since 2019, higher CPP payouts will be available upon retirement.
Capital Gains Tax Changes
One of the most impactful changes in 2025 involves capital gains taxes. Starting with gains realized after June 24, 2024, a larger portion of profits will be taxable for gains exceeding $250,000.
Key Updates:
- Gains up to $250,000: 50% taxable
- Gains over $250,000: Two-thirds taxable
Quinlan advises strategic planning: “If you’re considering selling assets, you may want to split the sale across multiple years to minimize tax impact.”
RRSP Contribution Limits
The 2025 Registered Retirement Savings Plan (RRSP) contribution limit is increasing to $32,490, up from $31,560 in 2024. Canadians can contribute until March 3, 2025, and carry forward unused contribution room.
Check your unused contribution room via your CRA online account or last year’s Notice of Assessment.
Changes Impacting British Columbians
BC Hydro Rate Increase
Starting April 2025, BC Hydro rates will increase by 6.4%, affecting utility bills for households across the province.
Home-Flipping Tax
As of January 1, 2025, the B.C. home-flipping tax applies to properties sold within two years of purchase. Exceptions include divorce, job loss, or significant household changes. Revenue from this tax will go toward affordable housing initiatives.
BC Resident Eligible for $400 Rent Tax Credits in 2025: Find out if you are Eligible
Home Accessibility Tax Credit 2025: Eligibility, Amount & How to Claim
Understanding 2025 Tax Brackets A Guide for Retirees
Final Thoughts
With these updates, Canadians can expect higher costs alongside tax adjustments to ease inflation’s impact. Planning for these changes, whether by adjusting retirement contributions or timing asset sales, will be critical to managing your finances in 2025.
Leave a Reply