2026 Federal Tax Bracket Changes: What's New for Canadians

For 2026 there are two changes to the federal income tax system: the usual inflation indexation (a 2.0% factor this year) and the first full year of the 14% lowest bracket rate, down from 15%. Here is what changed and what it means for your tax bill.

2026 Federal Tax Brackets

Income Range	Federal Rate
$0 – $58,523	14%
$58,523 – $117,045	20.5%
$117,045 – $181,440	26%
$181,440 – $258,482	29%
Over $258,482	33%

2025 Federal Tax Brackets (for comparison)

Income Range	Federal Rate
$0 – $57,375	14.5%*
$57,375 – $114,750	20.5%
$114,750 – $177,882	26%
$177,882 – $253,414	29%
Over $253,414	33%

*The rate cut took effect partway through 2025 (July 1, 2025), producing a blended 14.5% effective rate for the 2025 tax year. 2026 is the first year the full 14% applies.

The Two Changes Explained

1. The lowest rate is now 14%

The federal government cut the bottom-bracket rate from 15% to 14%, phased in mid-2025 and fully effective for 2026. Because the first bracket covers income every taxpayer earns, this benefits nearly all Canadians who owe federal tax — the Department of Finance estimates over $27 billion in savings across five years.

2. Indexation of 2.0%

All indexed bracket ceilings and credit amounts rose by the 2026 indexation factor of 2.0%, reflecting CPI growth:

• First bracket ceiling: $57,375 → $58,523
• 20.5% bracket ceiling: $114,750 → $117,045
• 26% bracket ceiling: $177,882 → $181,440
• 29% bracket ceiling: $253,414 → $258,482

Note that the upper thresholds are also indexed — there is no longer a fixed $220,000 top-bracket threshold; that figure has been replaced by the indexed $258,482 entry point for the 33% rate.

Basic Personal Amount (BPA) for 2026

The Basic Personal Amount — the income every Canadian can earn before paying federal tax — rose to $16,452 in 2026, up from $16,129 in 2025. It is made up of a base amount of $14,829 plus an additional $1,623 supplement.

The BPA now generates a federal credit at the new 14% rate:

$16,452 × 14% = $2,303.28

High-income BPA phase-out

The enhanced BPA supplement phases out for taxpayers with net income in the 29% bracket, dropping to the base amount for the highest earners. This phase-out has applied since the enhanced BPA was introduced in 2020.

Other Indexed Amounts for 2026

Amount	2025	2026
Basic Personal Amount (max)	$16,129	$16,452
Lowest bracket rate	14.5% (blended)	14%
First bracket ceiling	$57,375	$58,523
33% bracket entry	$253,414	$258,482

Practical Impact: $80,000 Income Example

For someone earning $80,000 in Ontario in 2026:

Federal calculation:

• First $58,523 × 14% = $8,193.22
• Remaining $21,477 × 20.5% = $4,402.79
• Gross federal tax = $12,596.01
• Less BPA credit: $16,452 × 14% = $2,303.28
• Federal tax ≈ $10,292.73

That is lower than the equivalent 2025 figure, mainly because the bottom-bracket rate fell from a blended 14.5% to 14% and the brackets widened with indexation.

Why Indexation Matters

Without annual indexation, inflation would push taxpayers into higher brackets even when their real purchasing power is unchanged — “bracket creep.” Canada has indexed federal brackets since 2000, preventing automatic tax increases the government never legislated.

Planning Takeaways

1. RRSP contributions still save tax at your marginal rate — but note the bottom bracket is now 14%, so deductions that drop you into the lowest band save slightly less than before.
2. Pension income splitting remains valuable for shifting income between brackets.
3. Year-end timing: deferring income into the next year captures slightly wider brackets once the CRA announces the following year’s indexation.

For the broader explainer on how progressive brackets work, see How Canadian Income Tax Brackets Work.

Calculate your exact 2026 federal plus provincial tax with the income tax calculator.

Sources

• CRA — Tax rates and income brackets for individuals
• CRA — Income tax rates and income thresholds (payroll)