March 22, 2026
2025 Federal Tax Bracket Changes: What's New for Canadians
Canada's 2025 federal income tax brackets have been inflation-indexed. See the updated thresholds, the increased Basic Personal Amount, and how 2025 compares to 2024.
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Every year, the Canada Revenue Agency adjusts federal income tax brackets and key credits for inflation. For 2025, the indexation factor is 2.7%, reflecting the CPI increase from October 2023 to October 2024. Here is what changed and what it means for your tax bill.
2025 Federal Tax Brackets
| Income Range | Federal Rate |
|---|---|
| $0 – $57,375 | 15% |
| $57,375 – $114,750 | 20.5% |
| $114,750 – $158,468 | 26% |
| $158,468 – $220,000 | 29% |
| Over $220,000 | 33% |
2024 Federal Tax Brackets (for comparison)
| Income Range | Federal Rate |
|---|---|
| $0 – $55,867 | 15% |
| $55,867 – $111,733 | 20.5% |
| $111,733 – $154,906 | 26% |
| $154,906 – $220,000 | 29% |
| Over $220,000 | 33% |
The top bracket threshold of $220,000 is not indexed and remains the same each year.
How the Thresholds Moved
Compared to 2024, all indexed brackets shifted upward by approximately 2.7%:
- 15% bracket ceiling: $55,867 → $57,375 (+$1,508)
- 20.5% bracket ceiling: $111,733 → $114,750 (+$3,017)
- 26% bracket ceiling: $154,906 → $158,468 (+$3,562)
- 29% bracket ceiling: both years capped at $220,000 (not indexed)
That means if your income stayed roughly the same in 2025 vs 2024, less of it falls into the higher brackets — a modest tax reduction without any policy change.
Basic Personal Amount (BPA) for 2025
The Basic Personal Amount — the income every Canadian can earn tax-free at the federal level — increased to $16,129 in 2025, up from $15,705 in 2024.
The BPA generates a non-refundable federal tax credit of:
$16,129 × 15% = $2,419.35
This credit is subtracted from your gross federal tax before you owe anything. A higher BPA means a larger credit and slightly less tax owed for nearly every Canadian.
High-income BPA phase-out
Taxpayers with net income above $173,205 in 2025 begin to lose the enhanced BPA, with the credit phasing back down to a minimum base amount at around $246,752. This phase-out has applied since 2020 when the enhanced BPA was introduced.
Other Indexed Amounts for 2025
Several other federal amounts also increased with the 2.7% indexation factor:
| Amount | 2024 | 2025 |
|---|---|---|
| Basic Personal Amount | $15,705 | $16,129 |
| Age amount (65+) | $8,790 | $9,028 |
| Disability amount | $9,872 | $10,138 |
| Spouse/dependant amount | $15,705 | $16,129 |
| Medical expense threshold | $2,635 | $2,759 |
| Capital gains annual exemption (individuals) | $250,000 (proposed) | See 2025 update |
Practical Impact: $80,000 Income Example
For someone earning $80,000 in Ontario in 2025:
Federal calculation:
- First $57,375 × 15% = $8,606.25
- Remaining $22,625 × 20.5% = $4,638.13
- Gross federal tax = $13,244.38
- Less BPA credit: $16,129 × 15% = $2,419.35
- Federal tax = $10,825.03
In 2024, the same income would have produced approximately $11,020 in federal tax. The 2025 indexation saves roughly $195 for this earner.
Why Indexation Matters
Without annual indexation, inflation would push taxpayers into higher brackets even if their real (inflation-adjusted) purchasing power remained the same — a phenomenon sometimes called “bracket creep.” Canada has indexed its federal brackets since 2000, preventing automatic tax increases when the government has not legislated any.
What Hasn’t Changed for 2025
- Federal tax rates themselves: 15%, 20.5%, 26%, 29%, and 33% are unchanged
- Top bracket threshold: still $220,000
- Dividend tax credit rates: federal eligible and non-eligible rates remain the same
- Capital gains inclusion rate: remains 50% for individuals on the first $250,000 (see the separate 2025 capital gains article for proposed changes above that threshold)
Planning Takeaways
- RRSP contributions save tax at your marginal rate. Check whether your income crosses a bracket threshold to gauge the exact benefit.
- Pension income splitting with a spouse remains valuable — shifting income between brackets reduces combined household tax.
- Year-end income deferral: If you can defer year-end income (e.g., a December bonus paid in January 2026), you benefit from slightly wider 2026 brackets once the CRA announces next year’s indexation.
Sources
Use our calculators to apply these concepts to your own income. Tax information is for general guidance only — consult a CPA for advice specific to your situation.
Tax rates and thresholds sourced from the Canada Revenue Agency (CRA). Last verified for the 2025 tax year.