What changed under Bill C-4
Bill C-4, Making Life More Affordable for Canadians Act, received Royal Assent on March 12, 2026. Key provisions include:
- Lowest federal personal income tax rate lowered from 15% to 14%, effective July 1, 2025, affecting taxable income in the first bracket (about $57,375 in 2025). For the 2025 tax year, the lowest rate is 14.5% full-year due to mid-year change. (canada.ca)
- First-time homebuyers’ GST rebate: Elimination of GST on new homes up to $1 million; reduced GST for homes priced between $1 million and $1.5 million. Applies generally to purchase agreements entered on or after March 20, 2025, before 2031. (canada.ca)
How to plan to benefit
For employees & pay withholding
- Because the rate drop is effective mid-year, payroll withholding tables are adjusted starting July 1, 2025 for the lower 14% rate on first bracket income. Employers should confirm their payroll systems use the updated T4032 tables. (canada.ca)
- Anyone whose income is in first bracket should see higher net pay after withholding adjustments; those in mid- or higher brackets will see indirect impact via credit rates.
For homebuyers
- If you’re a first-time homebuyer planning to purchase a newly built home, aim to have the agreement of purchase and sale entered on or after March 20, 2025 to get full GST rebate benefits. Agreements signed earlier may not qualify. (canada.ca)
- Homes priced over $1 million and up to $1.5 million get partial GST relief. Above that, rebates may not apply. Plan your budget accordingly.
Examples
Example 1: Single filer in first tax bracket
Emma earns $50,000 (taxable), with standard deductions. Under the old 15% rate, paying tax on first $57,375. With cut to 14% (from July 1), she saves roughly 1% on the portion of income in first bracket over that date (2025 rate 14.5% full-year). For 2026, full 14% rate applies to the bracket. Over the year, this change translates to several hundred dollars in savings.
Example 2: Couple buying a new home
Mike and Sara intend to buy a newly built house listed at $950,000. If their purchase agreement is from after March 20, 2025, they pay no GST on the purchase price. If it were between $1,000,000 and $1,400,000, the rebate would reduce the GST accordingly, saving them significantly at closing.
Strategic considerations & caveats
- Credit rate reductions: Many non-refundable credits (e.g. medical expenses, disability) are scaled by the first tax rate. Lowering that rate means these credits are worth slightly less in most cases. However, in many situations, the overall savings from the rate cut will more than offset this. $ Evaluate your specific mix of credits. $ (canada.ca)
- Timing matters: If purchases or agreements are just around the thresholds, delaying or accelerating to meet the effective dates might make a difference.
- Documentation: Keep clear records of purchase agreements, dates, and proof of eligibility for GST rebate. Also track pay statements to ensure withholding reflects new tables.
Action checklist
- Review your 2025 income situation to see how much falls into the first bracket.
- Confirm purchase agreements for homes happen after March 20, 2025 if you’re aiming for GST rebate.
- Monitor CRA communications for updated forms reflecting lower credit rates.
- Consult with tax professional if you claim large non-refundable credits to assess net effect.
These measures under Bill C-4 offer concrete savings, especially for those in the lower tax brackets or first-time homebuyers. By aligning your plans with the effective dates and thresholds, you can make sure you’re getting the full benefit.