30 Jun Middle Class Tax Cut

The Government of Canada has announced a personal income tax cut, as promised in its election platform.

What’s Changing?

Starting July 1, 2025, the lowest federal income tax rate will be reduced from 15% to 14%.

• For the 2025 tax year, this results in a blended rate of 14.5%.
• In 2026 and beyond, the full 14% rate will apply.

This tax cut affects income earned within the lowest federal tax bracket, which currently applies to earnings up to $57,374.

How Much Will You Save?

The Government has stated that two-income households could save up to $840 per year once the cut is fully implemented in 2026.

However, the actual savings depend on the tax credits you claim in a given year. The lowest federal income tax rate is used to calculate the value of many non-refundable tax credits. The Government’s estimates assume each individual claims only the basic personal amount.

If you also claim other tax credits, such as those for dependents, pension income, age amount, medical expenses, tuition, or disability, you may see lower tax savings than advertised, since the value of those credits will also be reduced due to the lower rate.

Changes for Employers

The Canada Revenue Agency has updated the payroll deduction tables effective July 1, 2025. Be sure to use the updated tables for any payroll processed on or after that date.

Not sure where to start or want to get the most out of your tax return? Contact Clearline CPA.