There are a few changes in federal policies that could affect Canadians’ finances in the new year.
Brian Quinlan, a chartered professional accountant with Allay LLP, says many of the changes are routine. These include inflation-based adjustments to what tax bracket you fall into or what your TFSA contribution room looks like.
Other changes — such as the capital gains tax changes that will be in effect for their first full year in 2025 — may need more planning.
Here’s a list of changes to be aware of:
Tax brackets
For 2025, income tax brackets are increasing by 2.7 per cent in the new year to prevent higher prices from pushing Canadians into higher tax brackets. That comes after a 4.7 per cent increase in 2024.
For 2025, federal tax is 15 per cent for earnings up to $57,375; 20.5 per cent between $57,375.01 and $114,750; and 26 per cent between $114,750.01 and $177,882.
The tax rate is 29 per cent for earnings between $177,882.01 and $253,414, while anything more than that is taxed at 33 per cent.
“You’re not paying more tax simply because of inflation, so (the adjustment) is good news for us all,” Quinlan said.
“Even if you have the exact same amount of income in 2024 versus 2023, you will pay less tax because less is taxed at a higher rate,” he added.
Basic personal amount
For the 2025 tax year, the basic personal amount — on which you do not pay federal income tax — ranges from $14,538 to $16,129, depending on your overall income.
That’s up from 2024 figures, which range from $14,256 to $15,705. Those with lower incomes have a higher basic personal tax credit.
Canada Pension Plan
Some Canadian workers will see a little more taken off their paycheques because of a rising CPP contribution amount.
A multi-year pension revamp began in 2019 as both the Quebec Pension Plan and CPP began phasing in enhanced benefits intended to provide greater financial support for retirees. Individual contributions — and the employer’s matching portion — ticked upward as the plan was implemented.
As of 2024, there are now two additional earnings ceilings beyond the base level, with higher income workers paying an additional premium on earnings within in a second tier before maxing out.
The earning ceiling for first-tier earners will go up to $71,300 in the new year from $68,500 in 2024. The second earnings ceiling will jump to $81,200 from $73,200 in 2024.
After 2025, the program will have been fully implemented and the base, first-tier and second-tier limits will increase in line with wage growth rather than with the larger jumps seen in recent years.
Anyone who worked and contributed to CPP from 2019 onward is eligible for a higher CPP payout upon retirement for income from that period.
Capital gains tax
There’s some uncertainty here as the legislation hasn’t yet passed, but the proposed changes to the capital gains tax are significant.
Quinlan said the changes require “serious thinking” for people considering selling assets in the new year, as it should be the first full year where a higher tax rate for gains over $250,000 is in effect.
Timing your sale of the assets is important, Quinlan said.
“As opposed to selling assets with a huge $300,000 gain in one year, you may want to sell some in one year and some in the following year,” he said.
Once in effect, the changes will apply to any capital gains from June 24, 2024.
Under the new rules, a larger portion of an individual’s capital gains — the profit made on the sale of assets — are considered taxable.
Previously, the government taxed 50 per cent of capital gains. While that amount stands for capital gains up to $250,000, it’s being increased to two-thirds for gains in excess of $250,000.
Registered Retirement Savings Plans
For the 2024 fiscal year, Canadians can contribute to their registered retirement savings accounts until March 3.
The threshold for registered retirement savings will go up to $32,490 in the new year, from the previous $31,560, plus any contribution room from the previous years.
You can find the amount of your unused contribution room on last year’s notice of assessment from the Canada Revenue Agency or your CRA online account.
This report by The Canadian Press was first published Jan. 1, 2025.
