Canada's 2025 federal income tax brackets are out — Here's how much you'll pay this year
The New Year is here, and you might be wondering how much of your hard-earned money this year will go to taxes.
The Canada Revenue Agency (CRA) has released Canada's income tax brackets for 2025, and there are a few things you'll want to know about how these changes might affect your income this year. Whether you're a seasoned taxpayer or new to the game, understanding these brackets can help you plan ahead.
Canadian federal income tax brackets work on a progressive system. This means the more you earn, the higher the percentage of tax you'll pay — but only on the portion of your income that falls within each bracket. (This might sound complicated, but we'll break it down with an example below!)
Each year, the CRA indexes various benefits and credits and the federal tax brackets to inflation based on Consumer Price Index data from Statistics Canada. For 2025, they've gone up by 2.7% — a modest increase compared to 2024, when they went up 4.7%, and 2023, when they rose by 6.3%.
Here's everything you need to know about the new federal income tax brackets and basic personal amount for 2025, as well as what this all means for your taxes.
2025 federal tax brackets
Here's what the CRA has shared for the income Canadians earn in 2025:
- 15% on the first $57,375 of taxable income
- 20.5% on the portion of taxable income over $57,375 up to $114,750
- 26% on the portion of taxable income over $114,750 up to $177,882
- 29% on the portion of taxable income over $177,882 up to $253,414
- 33% on taxable income over $253,414
Keep in mind that these rates only cover federal taxes, so you'll also have to pay taxes to the province or territory you live in, which come with their own sets of brackets.
These tax brackets are based on your 2025 income, meaning they'll be relevant to the tax return you file in spring 2026.
2025 basic personal amount
On top of the tax brackets, there's also the basic personal amount (BPA), which reduces the amount you need to pay taxes on as a non-refundable credit. For 2025, the BPA has also increased by 2.7% and now ranges from $14,538 to $16,129, depending on your income level.
Here's how it works:
- If your income is $177,882 or lower, you qualify for the maximum BPA of $16,129.
- If your income is $253,414 or higher, the BPA is reduced to $14,538.
- If your income falls in between, your BPA will be adjusted gradually.
This ensures everyone benefits from a reduction in their taxes owed, with lower earners benefiting the most. Combined with deductions and credits, this can significantly lower how much tax you owe. It also means if you earn $16,129 or less per year, you won't need to pay any federal taxes at all, since the credit offsets any tax liability.
Example: How much federal tax would you pay on $140K in 2025?
When we calculate the federal tax on $140,000, we get:
- 0% on the first $16,129 (BPA) = $0
- 15% on the next $41,246 ($57,375 - $16,129) = $6,186.90
- 20.5% on the next $57,375 ($114,750 - $57,375) = $11,761.88
- 26% on the remaining $25,250 ($140,000 - $114,750) = $6,565
Therefore, someone earning $140,000 this year would owe around $24,513.78 in federal taxes, before considering additional deductions, credits or provincial taxes.
A quick recap of 2024 brackets
For the upcoming tax season beginning next month, you'll be filing a tax return for your 2024 income. Here's a reminder of the 2024 brackets:
- 15% on the first $55,867 of taxable income
- 20.5% on income over $55,867 up to $111,733
- 26% on income over $111,733 up to $173,205
- 29% on income over $173,205 up to $246,752
- 33% on income over $246,752
And here's the 2024 basic personal amount:
- For incomes $173,205 or lower, you'll get the maximum BPA of $15,705.
- For incomes $246,752 or higher, the BPA is reduced to $14,156.
- If your income falls in between, your BPA will be adjusted gradually.
As you can see, the thresholds have moved slightly between the years, which could actually end up saving you money on your taxes if you don't get a raise this year.
Taxes might not be fun, but knowing where you stand can help you plan your finances and maybe even save a bit. Keep an eye on your income and deductions — as well as any benefits and credits you might be eligible for — to make the most of your hard-earned money!
This article has been updated since it was originally published on November 27, 2024.
