CRA Tax Changes Coming in 2025: The Canada Revenue Agency (CRA) has introduced a suite of important tax changes for 2025, and they could directly affect your paycheck, investments, and long-term financial planning. From updated federal and provincial tax brackets to a new second tier in Canada Pension Plan (CPP) contributions and a proposed hike in the capital gains inclusion rate, Canadians across all income levels need to be informed. Whether you’re an employee, self-employed, or an employer managing payroll, now is the time to prepare. Let’s explore what these tax changes mean, why they matter, and what you can do today to stay ahead.
CRA Tax Changes Coming in 2025
The CRA’s 2025 tax changes represent a major shift in how Canadians will see deductions from their paychecks and how they manage their investments. With inflation adjustments to tax brackets, new CPP contributions for higher earners, and a looming increase in capital gains tax, financial planning has never been more important. Take time now to understand how these changes affect your personal and professional finances. Whether you earn $40,000 or $400,000, planning ahead can help you optimize deductions, improve retirement outcomes, and make the most of Canada’s evolving tax system.
| Change | Details |
|---|---|
| Federal Tax Brackets | Adjusted for inflation; new brackets include: 15% up to $57,375; 20.5% up to $114,750; 26% up to $177,882; 29% up to $253,414; 33% beyond. |
| Basic Personal Amount (BPA) | Ranges from $14,538 to $16,129 depending on income level. |
| CPP Enhancements | New second earnings ceiling (YAMPE) at $81,200. CPP contributions: 4% on income between $71,300 and $81,200 for employees, 8% for self-employed. |
| Capital Gains Inclusion Rate | Proposed increase from 50% to 66.67% on gains over $250,000 annually for individuals, and for all capital gains by corporations and trusts. Effective Jan 1, 2026. |
| Provincial Changes | Manitoba BPA reduced for high incomes. Nova Scotia introduces indexing. PEI increases BPA to $14,250 and modifies brackets. |
Understanding the CRA Tax Changes Coming in 2025
Federal income tax brackets are indexed annually to account for inflation. For 2025, all five federal brackets have shifted upward by 2.7%. This helps maintain your purchasing power and ensures your income isn’t unfairly taxed at a higher rate due solely to inflation.
Here are the new federal tax rates:
- 15% on income up to $57,375
- 20.5% on income from $57,376 to $114,750
- 26% on income from $114,751 to $177,882
- 29% on income from $177,883 to $253,414
- 33% on income over $253,414
Additionally, the Basic Personal Amount (BPA)—the amount you can earn tax-free—has increased to a maximum of $16,129. However, high-income earners may receive a reduced BPA, down to a minimum of $14,538.
CPP Enhancements: New Second Contribution Tier
The Canada Pension Plan is being enhanced again in 2025 to provide better retirement benefits. A new tier has been added:
- Year’s Maximum Pensionable Earnings (YMPE): $71,300
- Year’s Additional Maximum Pensionable Earnings (YAMPE): $81,200
What does this mean?
If you earn above $71,300, you’ll now contribute an extra 4% (CPP2) on earnings between $71,300 and $81,200. Self-employed Canadians will contribute 8%, as they pay both employer and employee portions.
This enhancement aims to provide greater retirement security for mid- to high-income earners.
Provincial Tax Changes
Manitoba
Manitoba is reducing its Basic Personal Amount (BPA) for individuals with net income between $200,000 and $400,000. The BPA will phase out completely by $400,000, resulting in higher taxes for high-income earners.
Nova Scotia
Nova Scotia is implementing annual indexing of its provincial tax brackets and non-refundable tax credits, helping to reduce the impact of inflation on your provincial taxes.
Prince Edward Island (PEI)
PEI has raised its BPA from $13,500 to $14,250. Tax brackets have also been adjusted for inflation, offering some relief for middle-income families.
Capital Gains Tax: A Look Ahead to 2026
A big change is coming, but not until January 1, 2026. The federal government is proposing to:
- Increase the capital gains inclusion rate from 50% to 66.67%
- Apply the higher rate to:
- Individuals with over $250,000 in annual capital gains
- All capital gains earned by corporations and most trusts
This will have a major impact on investors, business owners, and real estate owners planning to sell valuable assets.
Tax planning opportunities include using Tax-Free Savings Accounts (TFSA), Registered Retirement Savings Plans (RRSPs), or spreading out gains over multiple years to stay under the threshold.
Practical Steps: What Should You Do Now?
- Review Your Pay Stub in January 2025
Check how new federal and provincial tax rates and CPP changes are affecting your net pay. - Use the CRA’s Payroll Deductions Online Calculator
Access the calculator here: CRA PDOC - Consider Preemptive Tax Planning
If you anticipate large capital gains, meet with a tax advisor before 2026 to explore spreading gains or using available deductions. - Stay Informed
Bookmark official CRA updates or subscribe to alerts: CRA Newsroom - Employers Should Update Payroll Software
Ensure payroll systems reflect updated tax tables and CPP formulas starting in January 2025.
Canada’s $4,100 CRA Payment for May 2025 – Eligibility, Payment Date, and Fact Check
Canada CRA Benefit Payments Coming in May 2025 – Check Your Eligibility, Payment Dates, and Facts
Surprise $680 Payment from the CRA in 2025 – Are You Eligible to Get it?
Frequently Asked Questions (FAQs)
Q1: Will my paycheck be smaller in 2025?
If your income is above $71,300, you may see a slightly lower net paycheck due to the new CPP2 contribution. For most Canadians, the tax bracket changes will either offset this or have a minimal impact.
Q2: How much extra CPP will I pay?
If you earn $80,000, you will pay 4% on $8,700 (the amount between YMPE and YAMPE), which equals $348 annually. Self-employed? You’ll pay $696.
Q3: What is the capital gains inclusion rate?
Currently 50%, it’s proposed to rise to 66.67% for capital gains above $250,000 starting in 2026. Only gains above this threshold are affected for individuals.
Q4: Will provincial changes affect everyone?
Not necessarily. Only residents in affected provinces (like Manitoba, Nova Scotia, and PEI) will see direct provincial tax changes.
Q5: Can I avoid the higher capital gains tax?
Not avoid, but you can mitigate it. Strategies include staggering asset sales over time, using registered plans like RRSPs and TFSAs, or applying capital losses to offset gains.
