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MAJOR CHANGES IN CANADIAN TAX NUMBERS FOR 2025

It’s that time of the year when you reflect on your financial spending throughout the year and get prepared for the new year. To make this time more interesting, the Canada Revenue Agency (CRA) has declared some major changes in the taxes you pay for different reasons like CPP, Capital gains, Tax credits, TSFA contribution room, and many more.

In this blog, we’ve explained everything you need to know about the tax changes for 2025. Therefore, be prepared for both the good news and the unexpected setback as well! Overall, you can see 2 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 limit for the TFSA for everyone will be $7000 in 2025. It 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 highest $500 increment. 

To open a Tax-free Savings Account in Canada, you do not need to be a permanent resident of it. The only requirement for you to open a TFSA is to be at least 18 years old and living in Canada by the time you apply for it.

  • The RRSP limit:

The RRSP (Registered Retired 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. And that 18% has been significantly increased by another 14% making it a total of 32%.

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:

If you want to buy a house in Canada, the 2025 tax strategy will help you make it happen. There a massive changes (Improved strategy) for buying a house and paying the tax subsequently. 

  • First, the amount you can withdraw from your RSP. 
  • Second, the time period after you start paying back your withdrawn RSP amount.

By 2024, the tax-free amount you could withdraw from your RSP account was only $35,000. However, by 2025, you can withdraw an amount of $60,000. This is such a huge benefit Canadians can benefit from to buy their dream home.

Moreover, another huge benefit offered by CRA is the expanded time period to pay back your withdrawn amount from the RSP account.

By 2024, you had to start paying back after 2 years of buying your dream home. But for 2025, you can start paying back after 5 years of buying your dream home.

Isn’t it amazing?

  • First-Home Savings Account:

Your FHSA gives you the combined best benefits of both the TSA and RSP accounts. All the money you put into your FHSA is tax-deductible and lowers your tax bills. Major changes observed in this domain are:

The annual limit is set to $8000.

The lifetime limit is set to $40,000.

One thing to be noted is that you can only access these benefits if you already have an FHSA or you create one for yourself before December 31, 2024.

Now let’s move on to the things nobody wants to talk about. The increment in the taxes for CPP deductions and the Federal Tax Brackets. Moreover, the Capital gains tax has also been increased, so let’s take a look at the whole scenario.

  • CPP Deductions:

According to the Canada Revenue Agency, both the employee and the employer’s Canada Pension Plan rates will be the same at 5.95% in 2024. However, the maximum limit of CPP is increasing. It means that the higher you get paid, the more money gets out of your paycheck and enters your CPP. Let’s make it more understandable:

  • If you make less than $68,000, there’s no change in your CPP.
  • If you make above $68,000, you’ll pay slightly higher than usual.
  • However, if you make above $81,000, the maximum amount of CPP for you will be $4430.
  • If you are a self-employed individual, you’ll pay double the amount (your half and your employer’s half)
  • Federal tax brackets for 2025:

There has been significant expansion in the Federal tax brackets as well for 2025.

  • The lowest of the first tax bracket has been increased by $1500 as compared to 2024. It means people making $0 – $57,375 will pay a 15% tax.
  • The second tax bracket has been increased by $3000 as compared to 2024. It means people making an income > $57,375 and < $114,750 will pay a 20.5% tax. 
  • The third tax bracket has been increased by $4600 as compared to 2024. It means people making an income between $114,750 and $177,882 will pay a 26% tax.
  • Capital gains tax:

For 2025, the taxes for capital gains and corporations are significantly increased. In 2024, when you sold any real estate property, you’d pay taxes only on 50% of your total profit. However, for 2025 it has been increased to 67%.

Before you get stressed out, it’s only applicable to those who have capital gains above $250,000 in a single year. Moreover, selling your first property/home will not have any impact on the tax changes. But if you are selling your second property such as a cottage or a farm, this tax increment will be applicable.

  • Based on the new updates, in a corporation, all the capital gains will face a 67% tax inclusion rate whether it is stocks or any other properties.  
  • If you are an entrepreneur, you can access a lifetime capital gains exemption if you are eligible for it. If you sold your business, the first $1.25 million would be tax-free!! (This is a huge difference of 25% as compared to 2024).

CONCLUSION:

Before you get stressed out of all these tax updates, grab yourself a cup of coffee and think with a wider perspective. If you are receiving relief at one end such as RRSP and Home buyers plan, you have to pay more at another point such as CPP and Federal tax.

Therefore, if you consider your tax expenses a little stressful and confusing, it’sa better to collaborate with experienced professionals for rightful guidance. If you require such assistance, feel free to contact us anytime. Team Numeracy Accounting Solutions is here to help you out.