As of July 1, 2025, the Government of Canada officially implemented a federal middle-class tax cut that will benefit 22 million Canadians. Whether you’re an employee, a small business owner, or a self-employed professional, this change will affect how much income tax you pay, and more importantly, how much you keep.
But what does this mean for your wallet? And how can you make sure you’re not leaving money on the table?
Let’s break it down with help from the tax experts at Accounting Montreal.
What Changed in the Federal Tax System?
Effective mid-year in 2025, the lowest federal income tax rate dropped from 15% to 14%.
That means:
- For the first $57,375 of your taxable income, your tax rate is now 14% instead of 15%.
- Because the change kicked in halfway through the year, the blended tax rate for 2025 is approximately 14.5%.
- This change will apply to your 2025 tax return, filed in spring 2026.
According to the Government of Canada projections, a two-income family could save up to $840 per year. That’s money back in your pocket to spend on groceries, childcare, student loan payments, or even a rainy-day fund.
Why This Matters More Than You Think
Tax savings are great, but how you report your income and claim deductions and credits will determine whether you see that savings or not.
And here’s where many Canadians go wrong:
- They don’t adjust payroll withholdings.
- They miss eligible deductions (like RRSPs, medical expenses, or home office costs).
- They file late or incorrectly, leaving refunds unclaimed.
With Accounting Montreal, you can avoid those costly mistakes.
Who Benefits Most?
This tax cut primarily benefits:
- Employees and salaried professionals under $100,000
- Small business owners who draw T4 salaries
- Seniors on fixed income
- Families with children using income-splitting strategies
Want to make the most of the changes? Ask about:
- RRSP optimization
- Tax-sheltered investment planning
- Payroll tax adjustments
- Reviewing your withholdings
- Advance tax planning for next year
Other 2025 Federal Tax Adjustments You Should Know
- Basic personal amount (the portion of income you can earn tax-free) increased to $14,538–$16,129, depending on your income bracket.
- All federal tax brackets were indexed by 2.7%, meaning thresholds have shifted to keep up with inflation.
- These changes could affect which credits you qualify for, including GST credit, CCB, and medical tax credits.
Let our advisors walk you through what you qualify for based on your 2025 income.
Québec Tax Situation: No Rate Cut (Yet)
While the federal government slashed the lowest rate, Québec’s tax rates remain the same for 2025, though they were indexed by 2.85% to keep pace with inflation.
That means if you’re living and working in Québec, your combined federal and provincial tax savings may be partially offset, but strategic tax planning can still result in net savings.
Accounting Montreal can help you navigate this dual-jurisdiction tax system with confidence.
For the official government release on the tax cut:
👉 Federal Middle-Class Tax Cut Announcement – Government of Canada
Ready to Maximize Your 2025 Tax Savings?
Whether you’re a salaried employee, gig worker, business owner, or retiree, this tax cut is an opportunity to rethink your strategy.
Let Accounting Montreal help you:
✅ Calculate your updated tax burden
✅ Maximize your refunds
✅ Plan ahead for next year
✅ Optimize payroll for your small business
✅ Avoid surprise CRA balances come tax season
📅 Book your free consultation today and let our experienced advisors help you turn this tax break into real financial freedom.
