Source: Department of Finance Canada
May 2025
The Canadian government is implementing a significant federal tax cut designed to provide financial relief primarily for the middle class. This initiative will directly benefit approximately 22 million Canadians, allowing them to keep more of their earnings through reduced paycheque deductions or when filing their 2025 tax returns.
Here’s what you need to know about this important change:
- Federal Rate Reduction: The lowest federal marginal personal income tax rate is being lowered from 15% to 14%.
- Effective July 1, 2025: This tax rate change takes effect mid-year.
- Broad Impact: The reduction applies to the first $57,375 of taxable income for 2025, meaning individuals at various income levels will see a benefit on this portion of their earnings.
- Significant Savings: This measure is projected to save Canadians over $27 billion in taxes over five years, starting in 2025-26. A two-income couple could see up to $840 in annual savings by 2026, with individuals saving up to $420.
- How it Works: For the 2025 tax year, a blended rate of 14.5% will apply. The Canada Revenue Agency (CRA) is updating payroll source deduction tables so that tax withheld from paycheques will be reduced starting July 1, 2025. Those not subject to source deductions will realize the benefit when they file their 2025 tax returns.
To ensure you maximize these and other tax benefits, contact On My Own Business Solutions for expert personal and corporate tax services. Call us at 506-378-1133 or email OnMyOwnBusinessSolutions@gmail.com for details.
Source: https://www.canada.ca/en/department-finance/news/2025/05/delivering-a-middle-class-tax-cut.html
