As Canadians enter the new year, several changes in federal policies are set to impact their finances. Here are the most significant updates:
Income Tax Brackets
For 2025, the federal income tax brackets have been adjusted to account for inflation, increasing by 2.7 per cent. This follows a 4.7 per cent increase in 2024. The new tax brackets are as follows:
15 per cent for earnings up to $57,375
20.5 per cent for earnings between $57,375.01 and $114,750
26 per cent for earnings between $114,750.01 and $177,882
29 per cent for earnings between $177,882.01 and $253,414
33 per cent for earnings above $253,414.01[1][4][5].
Tax-Free Savings Account (TFSA)
The TFSA contribution limit for 2025 remains at $7,000, matching the 2024 amount. This increase brings the total contribution room for someone who has never contributed and has been eligible since the TFSA’s introduction in 2009 to $102,000[2][5].
Canada Pension Plan (CPP)
CPP contribution amounts are set to increase. The earning ceiling for first-tier earners will rise to $71,300 from $68,500 in 2024, and the second earnings ceiling will jump to $81,200 from $73,200. These changes are part of a multi-year pension revamp that began in 2019 to provide enhanced benefits for retirees[1][4].
Capital Gains Tax
Proposed changes to the capital gains tax, though not yet finalized, could significantly impact those selling assets. If implemented, the changes will apply to capital gains from June 24, 2024, and will tax two-thirds of gains exceeding $250,000, up from the current 50 per cent for gains up to $250,000. This may require careful planning for asset sales[4].
Registered Retirement Savings Plans (RRSP)
The RRSP contribution limit for 2025 will increase to $32,490 from $31,560 in 2024, plus any unused contribution room from previous years. Canadians can contribute to their RRSPs until March 3, 2025, for the 2024 fiscal year[4].
Basic Personal Amount
The basic personal amount, on which no federal income tax is paid, will range from $14,538 to $16,129 for the 2025 tax year, up from the 2024 range of $14,256 to $15,705. This adjustment benefits those with lower incomes by providing a higher basic personal tax credit[4].These changes aim to mitigate the impact of inflation on Canadians’ finances and provide additional savings and retirement benefits. However, the proposed capital gains tax changes may require careful financial planning.
