Canada’s federal government has lowered the lowest personal income tax rate from 15% to 14%, starting July 1, 2025. Nearly 22 million Canadians will benefit; two-income families could save up to $840 annually by 2026. For the full year 2025, the blended rate is about 14.5%, transitioning to 14% in 2026 and after.
Federal Tax Brackets for 2025
- Up to $57,375: currently 15%, drops to 14%.
- Higher brackets remain unchanged up to 33% for incomes over $253,414.
Case Scenarios: Real Impacts on Canadians
Scenario A: Single worker earning $50,000/year
- Current (15%): $7,500 federal tax on first bracket.
- Blended 2025 (≈14.5%): about $7,250.
- Annual saving: ≈ $250 in 2025; $500 in full 2026 .
Scenario B: Two‑income couple, combined $120,000
- Most income falls in first and second bracket; half of tax relief goes to bracket one, ~41% to the second.
- Estimated saving in 2025: $400–500.
- By 2026, combined household savings could reach C$700–840.
Scenario C: Lower‑income senior relying on tax credits
- Savings modest: roughly $50–140 per person, depending on taxable income and credits used .
Trade-Off: Fewer savings on non‑refundable tax credits
- Credits such as Basic Personal Amount, Disability, Caregiver, Age, Tuition, Employment, etc. are calculated at the lowest rate. When that rate drops, these credits become slightly less valuable.
- Example: BPA of $15,000 is worth $2,250 under 15%, but only $2,100 under 14%—a $150 reduction in credit value.
What This Means for You
- Mid‑year income will be taxed at 15% (Jan–Jun) then 14% (Jul–Dec)—CRA updated payroll tables will reflect the change starting July 1.
- Nearly half of the tax relief benefits earners in the first bracket (≤ $57,375); those earning up to $114,750 receive about 85% of total tax relief.
- Average family in Canada may save approximately C$280/year, with critics noting the effect on low‑income Canadians can be minimal.
How Accounting Montreal Can Maximize Your Benefit
At Accounting Montreal, we go beyond calculations; we help tailor your tax planning strategy for maximum results.
✓ Personalized Run‑through of Scenarios
We can model your 2025 and 2026 tax savings based on your income mix, deductions, and location (e.g., Quebec specifics).
✓ Strategic Planning to Offset Credit Reductions
Since reduced credit value can offset some benefit, our team will help you optimize RRSP or charitable donations and the timing of income to reclaim value.
✓ Payroll Adjustment for Small Businesses
If you’re self‑employed or run a small firm, we’ll align your payroll withholding to reflect the new rate mid‑year, avoiding large balances due at filing.
✓ Integrated CRA + Revenu Québec Filing
Living in Quebec means two tax returns; we handle both seamlessly and identify Quebec‑specific credits like QPIP and Quebec abatement that work with the federal cut.
Unlock the Real Value of the Tax Cut
| Your Situation | Likely Tax Savings |
|---|---|
| Single, $50K income | ~$250 (2025), ~$500 (2026) |
| Two‑income couple, combined $120K | $400–$800 annually |
| Low‑income senior relying on credits | $50–$140 annually |
But credits may lose value under the lower federal rate; proper planning can recover this lost ground.
For official Government information on the tax cut:
Government of Canada: Delivering a middle‑class tax cut
Don’t let this tax change pass you by. At Accounting Montreal, our expert team will help you:
- Accurately estimate the impact of the tax cut on your income tax return
- Optimize your deductions and credits to mitigate reduced credit value
- Adjust payroll withholding appropriately mid‑year
- Navigate both CRA and Québec filing requirements
Take control of your 2025 tax outcome and position yourself for smarter tax planning into 2026 and beyond.
Contact Accounting Montreal today and turn the federal tax cut into a genuine financial benefit. Let’s work together to help you keep more of your hard-earned money.
