Tax relief is coming soon to middle-class Canadians this July.
Delivered by the federal government, the proposal to grant tax relief to Canadians is now moving forward to ease off some of the weight of growing living costs in Canada by reducing personal income tax rates.
WHO IS AFFECTED?
The Department of Finance Canada announced that this tax relief will affect nearly 22 million Canadians. Reducing the tax rate applied to the “first $57,375 (in 2025) of an individual’s income, regardless of their income level”, middle-class Canadians should expect to collectively be delivered over $27 billion in tax savings.
Most of the total tax relief will go toward “those with incomes in the two lowest tax brackets.” Nearly half of this will be going toward those in the first bracket.
Basically, if you make $57,375, your bracket will be receiving 45% of the share of tax relief. To those who make $57,375 to $114,750, your share is 41%. The three highest brackets gain 9%, 3%, and 2%, respectively, of the tax relief share.
SAVINGS
The maximum amount of tax savings is expected to be $420 per person, with couples saving $840 in 2026. Finance Canada adds that, “as a result of this measure, hardworking Canadians will save over $27 billion over five years, starting in 2025-26.”
As the tax cut will begin halfway through 2025, the full-year tax rate for 2025 will be 14.5%. Following that, 2026 and future years will be 14%.
The Canada Revenue Agency will be updating its source deduction tables for the July to December 2025 period so that pay administrators can reduce tax withholdings. Meaning that, by July 1, “individuals with employment income and other income subject to source deductions could have tax withheld at 14 per cent.” Otherwise, your tax relief will come when you file your 2025 tax returns in spring 2026.
