1. Middle-Class Tax Cut: Personal Income Tax Rate Reduction

• From July 1, 2025, the federal lowest personal income tax rate drops from 15% to 14%, benefiting nearly 22 million Canadians.

• Since the cut starts mid‑year, the effective rate for 2025 is 14.5%, with the full 14% rate applying in 2026 and beyond.

• This is expected to save up to $420 per person or $840 per couple annually, with total savings of over C$27 billion over five years.

• Federal non‑refundable tax credits (like the basic personal amount) will also use this lowest rate, reducing their value slightly, which partially offsets overall government revenue loss.

2. Indexed Tax Parameters: Inflation Adjustments

• 2025 federal tax brackets have been increased by approximately 2.7% indexation, raising threshold levels across the board.

• The Basic Personal Amount (BPA) is now C$16,129 for most individuals ($14,538 for top earners due to phase‑out).

• The RRSP annual contribution limit has been raised to C$32,490 (from C$31,560 in 2024).

• Employment Insurance (EI) maximum insurable earnings rose to C$65,700, while the premium rate dipped to 1.64%, reducing employee costs slightly.

3. Capital Gains Inclusion Rate Remains Stable

• A previously proposed increase in capital gains inclusion rate—from 50% to 66.67% for gains above C$250,000—will not proceed in 2025, meaning the default rate remains 50% for all.

4. Digital Services Tax (DST): Repealed Before Implementation

• Canada had enacted a 3% digital services tax retroactive to January 1, 2022, targeting large firms with over €750M global revenue and significant Canadian revenue.

• The tax was scheduled to apply from June 30, 2024, with payments due June 30, 2025.

• However, facing U.S. retaliation and trade pressure, Canada repealed the DST on June 30, 2025, just before its collection was set to begin.

5. Environmental Taxes: Federal Carbon Tax Removed

• Former Prime Minister Justin Trudeau resigned in January 2025; Mark Carney took office in March and immediately scrapped the federal consumer carbon tax as of April 1, 2025.

6. Corporate Tax: Provincial Rate Revisions

• At the federal level, no major changes in corporate tax rates yet for 2025.

• Prince Edward Island has lowered its general and M&P corporate tax rate from 16% to 15% effective July 1, 2025.