2025 Tax Updates

1. 1. Personal Income Tax Changes (2025)
   • Federal Tax Brackets: As of recent years, the tax brackets have been adjusted slightly for inflation. These brackets determine the rates at which your income is taxed.
     • Federal Tax Rates:
       • 15% on income up to $53,359
       • 20.5% on income between $53,359 and $106,717
       • 26% on income between $106,717 and $165,430
       • 29% on income between $165,430 and $235,675
       • 33% on income over $235,675
     • These rates are for federal tax, but provinces also have their own income tax rates that vary by region.
   • Tax Bracket Adjustments for Inflation: As inflation rises, the CRA typically adjusts the income tax brackets slightly, allowing for a little more income to be taxed at lower rates.
   • Climate Action Incentive: The federal government introduced this as part of its carbon tax program. As of 2025, some provinces are still receiving this rebate, which helps offset the cost of carbon pricing. The incentive amount may be updated or adjusted based on income.
   2. Changes to Corporate Tax (2025)
   • Corporate Tax Rates: The small business tax rate remains relatively stable. For 2025, the rate for Canadian-controlled private corporations (CCPCs) on their first $500,000 of active business income is 9% at the federal level, which is a lower rate than personal income tax.
   • Tax on Passive Income: The tax rate on passive income (income earned from investments or savings, as opposed to active business income) for corporations could remain at 50%. Corporate owners who retain earnings in their businesses may face higher taxes on passive income earned in their corporations, depending on the amount and nature of the income.
   3. Tax Credits and Deductions
   • Basic Personal Amount: The Basic Personal Amount (the amount you can earn tax-free) has increased to $15,000 (federal) in recent years for low-income earners, and this threshold will likely continue to rise incrementally, but for 2025, it is expected to remain close to that amount.
   • Charitable Donations: There have been minor adjustments to the rules for charitable donation tax credits, encouraging more people to donate. The CRA provides enhanced tax credits for donations above a certain threshold (e.g., a higher rate of credit for donations over $200).
   • Family-Related Tax Benefits: The CRA has also been refining family-related benefits like the Canada Child Benefit (CCB) and others to address inflation, and these may continue to increase in 2025.
   4. Potential Changes and Upcoming Announcements
   • Taxation of Wealthier Canadians: There is potential for tax increases for high-income individuals and corporations, especially in response to rising wealth inequality. These could include changes to the capital gains tax, dividend taxation, and income tax rates for high earners.
   • Carbon Tax and Environmental Taxes: As part of Canada’s climate strategy, there could be changes to the carbon pricing structure or environmental taxes that could influence various industries and personal tax obligations.

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The team at Monika Gupta CPA Professional Corp is here to provide expert guidance and support on navigating the complexities of Savings and Pension Planning. Should you require further assistance or information, feel free to reach out to us at info@cpamg.ca or call us at +1 416-748-1329.