It’s that time of the year when you reflect on your financial spending throughout the year and prepare for the new year. To make this time more interesting, the Canada Revenue Agency (CRA) has declared some major changes to the taxes you pay for different reasons like CPP, Capital gains, Tax credits, TFSA contribution room, and many more.
In this blog, we’ve explained everything you need to know about the tax changes for 2025. Therefore, be ready for both the good news and the unexpected setbacks as well! Overall, you can see two major domains:
- Some areas have tax increments.
- While others show an impressive reduction.
Let’s start with the good news and make you a little happy for the 2025 tax season.
Tax-free savings account limit:
According to the Canada Revenue Agency, the maximum TFSA contribution limit for everyone will be $7,000 in 2025. This means that there’s no significant change, as the TFSA limit is only adjusted when the total impact of annual inflation adjustments following 2009 (the year the TFSA was established) is sufficient to raise the limit to the next $500 increment.
To open a Tax-Free Savings Account in Canada, you do not need to be a permanent resident. The only requirement is to be at least 18 years old and a Canadian resident at the time you apply for it.
The RRSP limit:
The RRSP (Registered Retirement Savings Plan) is your saved money which you get after your official retirement. As per the current 2024 RRSP plan, each year your contribution room increases by 18%. It means if you earn $100,000, you’ll save $18,000.
However, the good news is, for 2025 the RRSP plan has been increased. The new RRSP limit for 2025 is now $32,490 which is $930 more than the last year 2024.
This increment is only applicable if you earn a salary worth $180,000. For the rest of the people, only 18% of your salary from 2024 is subjected to the RRSP account.
Tax changes for home buyers:
The 2025 tax updates will help you buy a house in Canada. Strategies for buying a house and paying taxes have significantly improved.
Two major updates include:
- An increase in the amount you can withdraw from your RRSP
- An extended repayment period for your RRSP withdrawal
By 2024, the tax-free amount you could withdraw from your RRSP account was $35,000. However, in 2025, this amount has increased to $60,000—a huge advantage for Canadians looking to buy their dream home.
Moreover, the CRA offers another huge benefit: an expanded period for repaying the amount withdrawn from the RRSP account.
- Before 2025: You had to start paying back after two years of buying your home.
- Starting in 2025: You can start paying back after five years of buying your home.
Isn’t that amazing?
4. First-Home Savings Account (FHSA)
Your FHSA combines the best benefits of both the TFSA and RRSP accounts. All the money you put into your FHSA is tax-deductible and lowers your tax bill.
- Annual contribution limit: $8,000
- Lifetime contribution limit:$40,000
One important note: You can only access these benefits if you already have an FHSA or open one before December 31, 2024.
CPP Deductions:
According to the CRA, both the employee and employer CPP rates will remain at 5.95% in 2024. However, the maximum contribution limit is increasing.
- If you make less than $68,000, there’s no change in your CPP.
- If you earn over $68,000, you’ll pay slightly more.
- If you earn above $81,000, your maximum CPP contribution will be $4,430.
- If you are self-employed, you must pay both employer and employee contributions (11.9%), with a maximum of $8,068.20.
Federal tax brackets for 2025:
There have been notable adjustments in Canada’s federal tax brackets for 2025.
- First bracket (15%): Income up to $57,375 (increased by $1,500 from 2024).
- Second bracket (20.5%): Income between $57,375 and $114,750 (increased by $3,000).
- Third bracket (26%): Income between $114,750 and $177,882 (increased by $4,600).
Additionally, the Basic Personal Amount (BPA)—the amount of income you can earn tax-free—has been adjusted:
- If you earn $173,205 or less, your BPA is $15,705.
- If you earn $246,752 or more, your BPA is $14,156.
7. Capital Gains Tax
For 2025, capital gains taxes are increasing:
- Previously (2024): You paid taxes on 50% of your capital gains.
- Now (2025): You will pay taxes on 67% of capital gains—but only if your total gains exceed $250,000.
Key takeaway: Selling your primary residence is still tax-exempt, but the new tax rules apply if you sell a second property (such as a cottage or farm).
8. Short-Term Rentals
If you own a short-term rental property (like an Airbnb) in a province where it is prohibited, the CRA is imposing stricter regulations starting in 2025.
- If your rental property is non-compliant, you will face double taxation or even higher penalties.
- If you bring your property into compliance by December 31, 2024, you may still claim tax deductions.
Important Dates & Events to Remember
- February 28, 2025: Last day to claim charitable donations for 2024 tax returns.
- March 3, 2025: RRSP contribution deadline.
- April 30, 2025: Tax filing deadline for 2025.
- June 16, 2025: Deadline for self-employed Canadians to file taxes.
9. Canada Carbon Rebate eligibility expansion:
The Canada Carbon Rebate (CCR) is the re-branded name for the previously known Climate Action Incentive Payment (CAIP). It provides rural supplements for people living in smaller communities, specifically rural areas in Canada.
If you or your relatives belong to this category, there’s good news for you. The eligibility criteria for including people in the census metropolitan areas from the census rural areas have been expanded. Now, 30,000 people shall be selected based on their eligibility starting from April 2025.
Conclusion
Before you stress out about these tax updates, grab a cup of coffee and look at the bigger picture. While some areas provide relief (like RRSP and homebuyer benefits), others require more payments (like CPP and capital gains taxes).If you find tax planning confusing, consider seeking professional guidance.Numeracy Accounting Solutions is here to help—feel free to reach out for expert assistance!