The Canada Revenue Agency (CRA) has announced several important updates for 2025. These changes reflect inflation adjustments and policy updates, impacting tax brackets, contribution limits, and benefits. Here’s what you need to know to plan your finances effectively.
Updated Federal Tax Brackets for 2025
The federal income tax brackets for 2025 have been indexed to an inflation rate of 2.7%. The new brackets are as follows:
– 15% on income up to $57,375
– 20.5% on income over $57,375 up to $114,750
– 26% on income over $114,750 up to $177,882
– 29% on income over $177,882 up to $253,414
– 33% on income above $253,414
These changes provide more room in each bracket, slightly reducing the tax burden for inflation-adjusted incomes.
Basic Personal Amount (BPA)
The BPA, the income you can earn tax-free, increases to $16,129 in 2025, up from $15,000 in 2023. Higher-income earners, however, will see a gradual reduction in this benefit for incomes above $177,882, with a complete phase-out for incomes over $253,414.
Canada Pension Plan (CPP) Contributions
For 2025:
- The maximum pensionable earnings rise to $71,300.
- Employee and employer contribution rates remain at 5.95%, with a maximum contribution of $4,034.10 each.
- Self-employed individuals pay 11.9%, with a maximum contribution of $8,068.20.
Additionally, for earnings between $71,300 and $81,200, a secondary CPP contribution rate of 4% applies, adding to overall retirement savings.
Employment Insurance (EI) Premiums
EI premiums increase slightly:
- Employee contribution rate: 1.64% (1.31% in Quebec)
- Maximum insurable earnings: $65,700
- Maximum contribution: $1,077.48 ($860.67 in Quebec)
TFSA and RRSP Contribution Limits
- TFSA: The contribution limit for 2025 remains at $7,000, reflecting inflation adjustments. Unused room from previous years can be carried forward.
- RRSP: The limit increases to $32,490, up from $31,560 in 2024. Contributions are capped at 18% of your 2024 earned income or the maximum limit.
Other Notable Updates
- Old Age Security (OAS): The repayment threshold rises to $93,454. Any income above this reduces OAS payments.
- Prescribed Interest Rates: The CRA’s prescribed interest rate drops to 4%, affecting taxable benefits and loans, while refund interest increases to 6%.
These updates are essential for budgeting and tax planning. Whether you’re preparing for retirement, saving through TFSAs, or calculating your tax liability, understanding these changes ensures you stay ahead.
If you have any questions regarding CRA tax updates, feel free to contact finnection via email at info@finnection.ca or call us at (647) 795-5462
Disclaimer: Above information is subject to change and represent the views of the author. It is shared for educational purposes only. Readers are advised to use their own judgement and seek specific professional advice before making any decision. Finnection Inc. is not liable for any actions taken by reader based on the information shared in this article. You may consult with us before using this information for any purpose.