Financial Changes in Canada 2025

Here are some key financial changes in Canada to be aware of in 2025:

1. Tax Brackets:

   • The income tax brackets will increase by 2.7% to adjust for inflation, following a 4.7% increase in 2024.

   • For 2025, the federal tax rates are:

     • 15% for earnings up to $57,375

     • 20.5% for earnings between $57,375.01 and $114,750

     • 26% for earnings between $114,750.01 and $177,882

     • 29% for earnings between $177,882.01 and $253,414

     • 33% for earnings above $253,414

   • This adjustment ensures that inflation doesn't push you into a higher tax bracket, which means you’ll pay less tax even if your income remains the same as in 2024.

2. Basic Personal Amount:

   • The basic personal amount will increase to a range of $14,538 to $16,129, depending on your income, up from $14,256 to $15,705 in 2024. Those with lower incomes receive a higher basic personal tax credit.

3. Canada Pension Plan (CPP) Contributions:

   • As part of the multi-year pension revamp, CPP contribution limits will increase:

     • The first-tier earnings ceiling will rise to $71,300 from $68,500 in 2024.

     • The second-tier ceiling will increase to $81,200 from $73,200 in 2024.

   • After 2025, increases will align with wage growth, and those who contributed from 2019 onward will be eligible for higher CPP payouts.

4. Capital Gains Tax:

   • Proposed changes to capital gains tax will take effect in 2025.

   • The tax rate on capital gains over $250,000 will increase. Currently, 50% of capital gains are taxable, but that portion will rise to two-thirds for gains exceeding $250,000.

   • It's important to plan the timing of asset sales as the new higher tax rates will apply to gains from June 24, 2024, onward.

5. Registered Retirement Savings Plans (RRSP):

   • The contribution limit for RRSPs will increase to $32,490 for 2025, up from $31,560 in 2024. You can contribute until March 3, 2025, and carry forward unused contribution room from previous years.

It's crucial to stay informed about these changes, especially if you’re considering asset sales or planning retirement savings.