It's a new year. What financial changes take effect in 2025?

In 2025, there will be some changes in the financial policies of the Canadian federal government that could affect the financial situation of Canadians. These changes are explained below:

Tax brackets

The tax brackets for 2025 have been increased by 2.7% to avoid the impact of rising inflation on tax payments.

The federal tax rates for various incomes are as follows:

15 percent for earnings up to $57,375
20.5 percent for incomes between $57,375.01 and $114,750
26 percent for incomes between $114,750.01 and $177,882
29 percent for incomes between $177,882.01 and $253,414
33 percent for incomes above $253,414

These changes mean you won't pay more tax due to inflation. If your income in 2025 is the same as in 2024, you will pay less tax.

Personal amount exempt from tax

For the 2025 tax year, the Basic Personal Amount, based on which no federal tax is paid, ranges from $14,538 to $16,129. This amount will be higher for lower incomes.

Canada Pension Plan (CPP)

Canada Pension Plan (CPP) premiums will increase for some workers.

Income ceiling for Tier 1: Increases from $68,500 in 2024 to $71,300 in 2025.
The income cap for the second tier will increase from $73,200 in 2024 to $81,200 in 2025.

These changes are part of a multi-year plan that began in 2019 and aims to increase retirement benefits.

Capital Gains Tax

The proposed changes to the capital gains tax are significant, although they have not yet been finalized.

Up to $250,000, 50% of capital gains will be taxable.
For earnings above $250,000, two-thirds (instead of 50%) is taxed.

These changes will be effective from June 24, 2024 onwards.

Registered Retirement Savings Accounts (RRSPs)
The contribution limit for registered retirement accounts will increase to $32,490 in 2025, up from $31,560 last year.
The contribution deadline for the 2024 tax year will be March 3, 2025.

These changes can affect your financial decisions and long-term planning, especially when it comes to selling assets and planning for retirement.

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