The Canada Revenue Agency (CRA) has announced updated federal income tax brackets for 2025, reflecting inflation-driven adjustments to ensure fair taxation across all income levels according to the Financial Post.
While the federal tax rates remain unchanged, income thresholds for each tax bracket have increased to account for a 2.7% indexation adjustment.
These updates, effective January 1, 2025, impact tax calculations, credits, and benefits, reducing the tax burden for many Canadians.
Below is a comprehensive breakdown of the 2025 federal tax brackets, credits, and benefit adjustments, with explanations of their implications for taxpayers.
Federal Income Tax Brackets for 2025
Under Canadaโs progressive tax system, income is taxed in tiers, with each portion taxed at the rate corresponding to its bracket.
For example, income up to $57,375 is taxed at 15%, while only the income above this amount is taxed at 20.5%, and so on for higher brackets.
This ensures a fair system where those earning higher incomes only pay elevated rates on the income exceeding specific thresholds.
Impact of Inflation on Tax Brackets
Tax Rate
2025 Threshold
2024 Threshold
2023 Threshold
2022 Threshold
15%
$57,375
$55,867
$53,359
$50,197
20.5%
$114,750
$111,733
$106,717
$100,392
26%
$177,882
$173,205
$165,430
$155,625
29%
$253,414
$246,752
$235,675
$221,708
The federal tax brackets are adjusted annually for inflation based on the Consumer Price Index (CPI).
In 2025, the CRA implemented a 2.7% indexation increase, a decrease from the 4.7% adjustment applied in 2024.
The Consumer Price Index (#CPI) rose 2.9% on a year-over-year basis in March 2024, up from a 2.8% gain in February. ๐ https://t.co/6rOpPdvfhf pic.twitter.com/yov2cTMPIH
โ Statistics Canada (@StatCan_eng) April 16, 2024
These adjustments ensure that rising wages due to inflation do not push taxpayers into higher tax brackets unnecessarily.
The gradual increases in thresholds over the years reflect efforts to keep taxation fair and in line with economic realities.
Key Updates to Non-Refundable Tax Credits
Credit Type
2025 Amount
2024 Amount
2023 Amount
2022 Amount
Basic Personal Amount (BPA)
$16,129
$15,705
$15,000
$14,398
Spouse/Common-Law Partner Amount
$16,129
$15,705
$15,000
$14,398
Age Amount (65+)
$9,028
$8,790
$8,396
$7,898
Disability Amount
$10,138
$9,872
$9,428
$8,870
The Basic Personal Amount (BPA), available to all taxpayers, has risen to $16,129 for 2025.
This increase means that more income is shielded from taxation, benefiting all Canadians.
Similarly, the Spouse/Common-Law Partner Amount has been adjusted to match the BPA, ensuring equitable support for families.
The Age Amount and Disability Amount have also been increased, offering enhanced financial relief for seniors and individuals with disabilities, reflecting the CRAโs commitment to supporting vulnerable groups.
Updates to CRA Benefits for 2025
Canada Child Benefit (CCB)
The Canada Child Benefit (CCB) provides financial support to families with children, with maximum amounts increasing to $7,997 for children under six and $6,748 for those aged 6 to 17 in 2025.
The income thresholds for benefit phase-outs have also been adjusted, ensuring families with moderate incomes can still receive partial benefits.
Goods and Services Tax (GST) Credit
The GST credit helps offset the consumption tax burden for lower-income households. For 2025, eligible adults can receive up to $349, while children qualify for up to $184.
These increases ensure that this credit continues to provide meaningful support to individuals and families who need it most.
Canada Workers Benefit (CWB)
Description
2025 Amount
2024 Amount
Minimum working income threshold
$3,000
$3,000
Maximum benefit for single individuals (no children)
$1,633
$1,590
Maximum benefit for families
$2,813
$2,739
Phase-out starts (single individuals, no children)
$26,855
$26,149
Phase-out starts (families)
$30,639
$29,833
Secondary earner exemption
$16,386
$15,955
The Canada Workers Benefit (CWB) is a refundable tax credit designed to support low-income workers.
In 2025, the maximum benefit for single individuals has increased to $1,633, while families can receive up to $2,813.
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Adjustments to phase-out thresholds mean that more low-income earners can qualify for higher benefits.
The secondary earner exemption has also risen, encouraging workforce participation in dual-income households.
Other Key Updates for 2025
Other updates include adjustments to the Canada Employment Amount and Disability Supplement, which provide additional tax relief to working Canadians and individuals with disabilities.
The Medical Expense Tax Credit threshold has also increased slightly, ensuring that eligible medical costs continue to receive proper tax treatment.
The Tax-Free Savings Account (TFSA) limit remains at $7,000, allowing Canadians to save and invest tax-free.
