What Changed?
- Starting July 1, 2025, the lowest federal marginal personal income tax rate will be reduced from 15% to 14%. (canada.ca)
- However, because this happens halfway through the tax year, the effective rate for the full 2025 taxation year will be 14.5%. (canada.ca)
- Most non-refundable tax credits will use this new lower rate when relevant. (canada.ca)
Who Benefits Most
- Low- to middle-income earners who fall within the first federal tax bracket (up to ~$57,375 in 2025) will see the greatest impact. (canada.ca)
- For many single individuals, the reduction can translate into $300–$400+ in tax savings for the full year. Two-income households could see savings approaching $800. (canada.ca)
What To Do Before Filing
Payroll withholdings
Employers should have begun using the updated rate for pay periods from July 1, 2025, onward. That means more money in your paycheck if your employer updates properly. (canada.ca)
Tax credits and deductions
Since non-refundable tax credits get calculated using the first marginal rate itself, you’ll see slightly enhanced value from any credit you’re eligible for. Review your claimed credits to make sure you’re maximizing them. (canada.ca)
Filing your return in 2026
When you file your 2025 return (spring 2026), the blended rate for that first bracket will be 14.5%, not 15% or 14%. Double-check pay slips and any forms to ensure accurate withholding. (canada.ca)
Examples
| Scenario | Income | Savings Estimate |
|---|---|---|
| Single person earning $30,000 in 2025 | ~$30,000 | Approximately $113 saved vs. the old rate (half-year effect) |
| Two-income household with both earners in first bracket | Combined $55,000 | Savings could approach $400–$450 total, depending on credits |
Bottom Line
The drop from 15% to 14% at the federal level for the first income tax bracket is a key affordability measure, benefitting millions of Canadians. Make sure your withholding is up to date, and evaluate your tax or credit claims accordingly when filing your 2025 return.