2025 is packed with tax changes in Canada that you need to understand! By understanding these updates, you’ll maximize your tax savings and keep more of that hard-earned money in your pocket! I’ll break down the changes into these four key categories:
1. Investment & Real Estate Changes
RRSP
In 2025, the Registered Retirement Savings Plan (RRSP) contribution limit has increased to $32,490, up from $31,560 in 2024. The contribution limit allows you to contribute up to 18% of your 2024 earned income, capped at this new maximum. This means those earning $180,500 or more will reach the maximum contribution limit, so for anyone earning below that, your maximum contribution will be 18% of your income.
Home Buyers’ Plan
Related to the RRSP, is the HBP. This is a pretty big change. The HBP withdrawal limit is now increased from $35,000 to $60,000 per person, or $120,000 per couple, for an RRSP down payment withdrawal towards a home. Also, the repayment grace period was extended from 2 years to 5 years for withdrawals made between 2022 and 2025, giving buyers more time before starting RRSP repayments.
Example:
Alex and Jamie, first-time homebuyers, each withdraw $60,000 from their RRSPs for a combined $120,000 down payment, reducing their mortgage and easing costs. With the extended 5-year grace period, they have more time to manage finances before repayments start.
Tax-Free Savings Account (TFSA)
In 2025, the annual Tax-Free Savings Account (TFSA) contribution limit remains at $7,000, which is the same increase as the 2024 limit, for a total of $102,000 if you have qualified since the 2009 inception of the TFSA.
Remember, any unused contribution room carries forward indefinitely, allowing you to catch up in future years.
I go over this topic in way more depth on another 2025 TFSA limit video I made, so check that out to learn more!
First Home Savings Account (FHSA)
The First Home Savings Account (FHSA) is a registered plan designed to help first-time homebuyers in Canada save up to $40,000 tax-free toward purchasing their first home. You can contribute up to $8,000 per year, and any unused contribution room can be carried forward, provided you have opened an FHSA.
To open an FHSA, you must be a first-time homebuyer, meaning you have not owned a home in the current or previous four calendar years. I previously owned property, but I sold it over 4 years ago so I qualify for FHSA.
Why Open an FHSA As Early As Possible?
Opening an FHSA by December 31, 2025, lets you gain $8,000 in contribution room for 2025 and another $8,000 on January 1, 2026, for $16,000 total. Delay, and you lose valuable contribution room.
Pro Tip: Even If you don’t use the funds in your FHSA to purchase a home, you can transfer the unused balance to your (RRSP) or (RRIF) after 15 years without affecting your RRSP contribution room.
Combined with the Home Buyer Plan (HBP), a couple can now save up to $200,000 for their purchase, which I outline in another video on the channel.
Capital Gains Inclusion Rate Adjustments
This is one of the biggest changes we’ll see this year, and it’s something that requires careful planning around:
- For Individuals:
- The first $250,000 of your net capital gains in a year is taxed as before, with 50% of the gains being taxable.
- Any net capital gains over $250,000 in the same year now have a higher inclusion rate, with 66.67% of those gains being taxable.
Example:
Meet Jason, who made $300,000 in net capital gains this year:
- The first $250,000 is taxed at the usual rate, so 50% of that ($125,000) is added to his taxable income.
- The remaining $50,000 is taxed at the new higher rate, so 66.67% of that (about $33,335) is added to his taxable income.
- In total, Jason would have $158,335 added to his taxable income from these capital gains.
Note: It’s not as bad as it seems. These changes are mainly aimed at individuals with substantial capital gains. Most Canadians, who typically have less than $250,000 in capital gains annually, won’t be affected by the increased rate. I’ll discuss capital gains changes for business owners later in this video, which will be more impactful for them.
2. Tax Changes That Affect Households
Federal Income Tax Brackets
In 2025, the Canada Revenue Agency adjusted federal income tax brackets upward by 2.7% to account for inflation. This is good news because this adjustment helps prevent “bracket creep,” where inflation pushes income into higher tax brackets, resulting in higher taxes without an actual increase in real income.
Comparison of Federal Income Tax Brackets:
| Tax Rate | 2024 Income Bracket | 2025 Income Bracket |
| 15% | Up to $55,867 | Up to $57,375 |
| 20.5% | $55,868 to $111,733 | $57,376 to $114,750 |
| 26% | $111,734 to $173,205 | $114,751 to $177,882 |
| 29% | $173,206 to $246,752 | $177,883 to $253,414 |
| 33% | Over $246,752 | Over $253,414 |
Example: Impact on an $80,000 Income
Tax Savings: $13,327.32 (2024) – $13,244.38 (2025) = $82.94
This adjustment results in a modest tax saving of approximately $82.94 for someone earning $80,000, as more of their income is taxed at the lower 15% rate.
Basic Personal Amount (BPA)
In 2025, Canada’s Basic Personal Amount (BPA) has increased to $16,129, up from $15,705 in 2024. This adjustment allows individuals to earn more income before being subject to federal income tax, effectively reducing taxable income for all Canadians.
It’s important to note that the BPA enhancement is gradually reduced for taxpayers with net incomes above $177,882 and is fully phased out at incomes over $253,414.
Registered Education Savings Plan (RESP)
In 2025, the Canadian government increased the Educational Assistance Payment (EAP) withdrawal limits for Registered Education Savings Plans (RESPs):
- Full-Time Students: The EAP withdrawal limit during the first 13 weeks of enrollment in a qualifying educational program increased from $5,000 to $8,000.
- Part-Time Students: The EAP withdrawal limit during the same period increased from $2,500 to $4,000.
These adjustments allow students to access more funds early in their studies, helping to cover initial expenses such as tuition and textbooks.
Also, the annual EAP threshold has been updated slightly, from $28,122 to $28,881:
| Year | Annual EAP Limit |
| 2024 | $28,122 |
| 2025 | $28,881 |
Goods and Services Tax (GST) Holiday
The Canadian government has implemented a temporary freeze on sales taxes for essential goods from December 14, 2024, to February 15, 2025. This measure, pending parliamentary approval, is intended to provide short-term financial relief to consumers during the holiday season and into the new year. If implemented, it would reduce the cost of essential items, offering timely support to Canadians facing financial pressures.
Employment Insurance (EI) Premiums
Very small change – The EI premium rate for employees has decreased to $1.64 per $100 of insurable earnings in 2025, down from $1.66 in 2024. For a worker earning $50,000 annually, this reduction translates to annual savings of approximately $10. Not exactly life-changing money, but it’s better than nothing!
Tax credits
Tax credits can change slightly each year, so it’s important to review the latest updates to maximize your savings. For example, the Canada Child Benefit has increased to $7,997 per child under six and $6,748 per child aged six to 17. Similarly, the Medical Expense Tax Credit (METC) has updated its federal threshold: you can now claim eligible medical expenses exceeding the lesser of $2,833 or 3% of your net income.
There is a whole list of the tax credits here on the Government of Canada website, so see which ones you’re eligible for to make sure you’re taking advantage of what you qualify for.
3. Pension Tax Changes
a. Canada Pension Plan (CPP) Contributions
The Canada Pension Plan (CPP) now has two levels of contributions, with updated thresholds and rates:
- Regular CPP: Applies to income up to the Year’s Maximum Pensionable Earnings (YMPE), now $71,300 (up from $68,500 in 2024). Contributions are calculated after a $3,500 basic exemption.
- CPP2: Applies to additional earnings between the YMPE and the new Year’s Additional Maximum Pensionable Earnings (YAMPE), now $81,200 (up from $73,200 in 2024). This benefits higher-income earners.
Contribution Rates
- Regular CPP: 5.95% for employees and employers (11.90% for self-employed).
- CPP2: 4.00% for employees and employers (8.00% for self-employed).
How Contributions Compare: 2024 vs. 2025
| Income | 2024 Contributions | 2025 Contributions | Difference |
| $60,000 | $3,338.25 | $3,338.25 | No change |
| $70,000 | $3,867.50 | $3,956.75 | +$89.25 |
| $80,000 | $3,867.50 | $4,382.10 | +$514.60 |
| $90,000 | $3,867.50 | $4,430.40 | +$562.90 |
Key Insights
- Lower earners (below $71,300): Minimal or no changes in contributions.
- Higher earners (up to $81,200): Noticeable increases due to CPP2 contributions, someone earning $80,000 will pay over $500 more in CPP in 2025.
- Why it matters: These higher contributions translate into larger retirement benefits.
While paying more now might sting, think of it as an investment in your future retirement income.
I go into this in way more detail in a recent video of mine about CPP enhancements, so check that out!
Old Age Security (OAS) Repayment Threshold
For the 2024 income year, the Old Age Security (OAS) repayment threshold is $90,997. If your net world income exceeds this amount, . This repayment is calculated as 15% of the income exceeding the threshold.
Recovery Tax Period:
- July 2025 to June 2026: Based on your 2024 income.
Example Calculation:
- Net Income (2024): $100,000
- Excess Income: $100,000 – $90,997 = $9,003
- Repayment Amount: 15% of $9,003 = $1,350.45
In this scenario, you would repay $1,350.45 during the period from July 2025 to June 2026.
Note: The OAS recovery tax is deducted monthly from your OAS payments during the specified period.
Age Amount Credit
The Age Amount Credit is a non-refundable tax credit for Canadians aged 65 or older, designed to reduce federal income tax. For the 2025 tax year, the maximum age amount is $9,028, increased from $8,790 in 2024.
Eligibility for the full credit applies if your net income is $45,522 or less. The credit is reduced by 15% of net income exceeding this threshold and is fully eliminated when net income reaches around $100K
4. Tax Changes That Affect Business Owners
Capital Gains Tax for Business Owners
In 2025, Canada’s capital gains tax structure for corporations has been revised. Previously, 50% of a corporation’s capital gains were included in taxable income. Under the new rules, this inclusion rate has increased to 66.7%.
Example:
- ABC corp realizes a capital gain of $200,000.
- With the 66.7% inclusion rate, $133,400 (66.7% of $200,000) is added to the corporation’s taxable income.
Note this is different than the changes for individuals, as the new 66.7% inclusion rate starts at dollar $1, while for individuals it starts at dollar $250,000. This will require more careful planning for business owners, and we have already begun planning for this with our business clients.
Lifetime Capital Gains Exemption (LCGE)
The LCGE allows individuals to exclude a portion of capital gains from taxation upon the sale of qualified small business corporation shares. As of 2025, the LCGE limit has increased to $1.25 million, up from $1,016,836 in 2024.
Source:
Example: Selling a qualified small business for $1,200,000 could result in all of the capital gains being exempt from tax, depending on the individual’s available LCGE limit.
Pro tip: The LCGE applies to each individual, so if multiple shareholders dispose of shares, each can potentially claim the exemption on their respective gains. We have helped a lot of our clients implement this strategy.
Canadian Entrepreneurs Incentive (CEI)
The CEI aims to support entrepreneurs by reducing the capital gains inclusion rate to one-third (33.3%) on a lifetime maximum of $2 million in eligible capital gains. This incentive is being phased in, with the limit increasing by $400,000 annually, reaching $2 million by 2029.
Example: A small business owner selling their enterprise with a $100,000 taxable capital gain would include only $33,300 in taxable income under the CEI, compared to $66,700 without the incentive, resulting in big tax savings.
Financial planning is all about staying ahead of the curve, and these updates are a great reminder to revisit your strategy. From minimizing taxes to growing your investments, small adjustments now can lead to major wins later.
At Blueprint Financial, we specialize in crafting strategies that help Canadians stay ahead. Reach out to learn how we can support your goals, and remember to like and subscribe to our Youtube Channel for more expert financial advice. Check out the planning services we offer, and book a free consultation when ready!
