The coming year will see some changes to existing tax measures, but those changes are expected to have only a minor impact on individuals.
Daniel Rogozinski of the University of Waterloo's School of Accounting and Finance told CBC News that 2025 will be a “status year” for most taxes.
“There's not much because they can't really do much,” he said. “You can't cut taxes because they're borrowing all this money, and they can't really spend a ton of extra money because they're borrowing all this money.”
Rogozinski said the tax change is likely to lead to Canadians taking notice of the GST/HST holiday, which will give consumers a two-month break on the prices of some essential goods.
That measure took effect on December 14, runs until February 15, 2025 and affects a specific list of goods and food items.
The Parliamentary Budget Officer says the tax break will cost the federal government $1.46 billion and the harmonized sales tax will cost the provinces $1.26 billion — but all of that could end up on the federal government's books if the provinces decide not to waive compensation for the federal government's measure. .
“It's not really going to change people's economics that much and it's not going to change Canada's economics, other than spending money that we don't have,” Rogozinski said.
“I think if you really look at the GST thing, it's a sugar high for two months.”
Capital gains
In the 2024 budget, the federal government increased the capital gains tax inclusion rate – the taxable percentage – from 50 to 66 per cent for individuals on capital gains above $250,000 per year.
It has also announced that all capital gains earned by corporations and trusts will be taxed at two-thirds rate instead of 50% rate.
Capital gain is the difference between the cost of an asset – an investment property, stock or mutual fund – and its total sales price.
The amendment was tabled in an appendix to the budget but is yet to be passed by Parliament.
The Canada Revenue Agency (CRA) began temporarily implementing the change on June 25 and will continue until legislation is passed or the new government ends the measure.
Next year will be the first full year for the new capital gains inclusion rate.
Before Parliament adjourned on December 17, the House of Commons was busy debating the question of privilege which prevented MPs from proceeding with ordinary work such as passing legislation.
“It's a function of a dysfunction, if you will, of the system right now, that they're not able to pass legislation to effect what they want to do from a policy standpoint,” Rogozinski said.
Encouraging Canadian Entrepreneurs
Another tax measure implemented by the CRA is incentives for Canadian entrepreneurs, despite the fact that Parliament has not passed enabling legislation.
Also announced in the 2024 budget, the stimulus reduces the inclusion rate from two-thirds to one-third on a maximum $2 million lifetime capital gain for business owners established as Canadian controlled private corporations.
The program is phased in over five years, at a rate of $400,000 per year in 2025, rising to $2 million annually by 2029.
“The world of taxation for people with capital gains is going to be very complicated,” Rogozinski said.
“If you have capital gains on shares of a business, it's much, much more complicated than it used to be because of these different regulations that are all kicking in at the same time.”
CPP maximum contribution
The new year will be the second year of enhanced Canada Pension Plan contribution requirements. Under those rules, two ceilings are used to determine the maximum CPP contributions individuals must pay.
The first ceiling is now $71,300, rising from $68,500 in 2024. For an employee to work out the maximum contribution, once the $3,500 exemption is met, a contribution rate of 5.95 percent must be applied to the first ceiling maximum.
This means that in 2025, the first ceiling maximum contribution for an employee is $4,034.10. The employer pays a matching amount for a total maximum contribution of $8,068.20 per employee.
The second ceiling in 2025 is $81,200, up from $73,200 in 2024.
To work out the maximum CPP contribution under the second ceiling, employees must take the difference between $71,300 and $81,200, which is $9,900, and multiply that amount by the lower contribution rate of four percent to get $396. Employers contribute a matching amount of this amount.
Other notable changes in 2025
In provinces where the federal backstop takes effect on April 1, 2025, the price of carbon will go from $80 to $95 per tonne.
The backstop does not apply to Quebec, British Columbia and the Northwest Territories because they have their own carbon pricing systems that meet federal standards.
In provinces that use the federal backstop, a carbon price is applied to emitting fuels through fuel charge rates. Varies from fuel to fuelBased on the amount of CO2-equivalent emissions produced when they burn.
On April 1, provinces and territories using the federal backstop will see gasoline fuel duty at the pump drop from 17 cents per liter to 20 cents per liter in 2024, while propane fuel duty will increase from 12 cents to 14 cents per litre. .
90 percent of the government revenue from the carbon tax is returned to households through the rebate program. Another 10 percent is directed to programs that help businesses, schools, municipalities and other grant recipients reduce their fossil fuel consumption.
The Parliamentary Budget Officer A recent study by and Two University of Calgary professors Almost all households concluded that they would gain more from carbon tax credits than they would pay in direct and indirect costs.
Since only households in the highest income quintile consume more, they are assumed to pay more than they receive.
Income Taxes, EI Premiums and TFSAs
As of January 1, the federal income tax bracket threshold in Canada will increase by 2.7 per cent across all brackets, following a 4.7 per cent increase in 2024 and a 6.3 per cent increase in 2023. There is also a basic personal exemption amount Adjusted to account for inflation.
Provinces have their own provincial income tax brackets, but the federal thresholds for 2025 will now be:
- From zero to $57,375, taxed at 15 percent.
- $57,376 to $114,750, taxed at 20.5 percent.
- From $114,751 to $117,882, it is taxed at 26 percent.
- From $117,883 to $253,414, taxed at 29 percent.
- $253,415 and up, taxed at 33 percent.
With inflation now returning to the target range of one to three percent, the income tax threshold has also been reduced. Before the inflation spike in 2022, the income tax threshold was raised by 1 percent in 2021 and 2.4 percent in 2022.
The maximum insurable earnings limit for employment insurance will increase from $63,200 to $65,700 on January 1, 2024. This means the new maximum annual EI contribution for a single worker will increase from $1,049.12 to $1,077.48 in 2024.
Annual tax-free savings account contributions will remain at $7,000 in 2025.
