2025 Canadian Tax Measures: What You Need to Know

As we enter 2025, Canadians can expect several tax adjustments that may affect individuals, business owners, and entrepreneurs. While many of these measures are focused on providing support to businesses and offsetting costs for households, there are also some key changes to contributions and credits that could impact your finances. At StiplifyBooks, we specialize in helping Canadians with their tax, bookkeeping, and accounting requirements, ensuring you’re equipped to navigate these changes.

1. GST/HST Holiday: A Seasonal Break

From December 14, 2024, to February 15, 2025, Canadians can benefit from a GST/HST holiday. This tax measure affects specific goods and food items, offering a temporary relief to shoppers during the winter months. For more details on the goods included and the terms of this holiday, check out the Government of Canada’s official page on GST/HST.

2. Capital Gains Tax Changes

In the 2024 Federal Budget, the capital gains inclusion rate was set to increase for individuals earning over $250,000 per year. The taxable percentage for capital gains on amounts above this threshold has increased from 50% to 66%. Additionally, capital gains earned by corporations and trusts will now be taxed at the higher 66% rate, compared to the previous 50%.

This change has been provisionally enforced by the Canada Revenue Agency (CRA) since June 25, 2024, and will be fully implemented once the legislation passes through Parliament. The new capital gains inclusion rate is expected to impact individuals with large investments in properties, stocks, or mutual funds. Learn more about how this affects you by visiting the Canada Revenue Agency’s Capital Gains Tax Page.

3. Canadian Entrepreneurs’ Incentive: Capital Gains Relief

For business owners operating as Canadian Controlled Private Corporations (CCPCs), the Canadian Entrepreneurs’ Incentive provides a major tax break. Announced in the 2024 budget, this incentive reduces the inclusion rate on capital gains to one-third for business owners. Starting in 2025, it will be phased in over five years, with the exemption reaching a lifetime maximum of $2 million by 2029. This incentive is designed to help business owners save on taxes when selling their businesses.

This tax relief could have significant implications for Canadian entrepreneurs. The CRA has already begun enforcing this change, even though enabling legislation is still pending. For more details on tax rates and exemptions, consult the Government of Canada’s page on Business Taxation.

4. Canada Pension Plan (CPP) Contributions: A Higher Ceiling

Starting in 2025, Canadians will experience the second year of enhanced Canada Pension Plan (CPP) contributions. The maximum earnings ceiling for CPP contributions has increased from $68,500 in 2024 to $71,300 in 2025. This will affect both employees and employers, as they each contribute 5.95% of the earnings up to the ceiling.

Additionally, a second ceiling for higher-income earners will apply. For 2025, individuals earning between $71,300 and $81,200 will contribute at a lower rate of 4%. For more information on CPP contribution rates and limits, visit the Canada Pension Plan Official Site.

5. Carbon Tax Increase: Price on Emissions

On April 1, 2025, the price of carbon will increase from $80 to $95 per tonne in provinces where the federal backstop applies. This increase will directly affect the price of fuels, such as gasoline and propane. For example, the carbon charge on gasoline will rise by 3 cents per litre, bringing the total charge to 20 cents per litre.

However, many households will receive a carbon tax rebate through the federal government’s rebate program, which returns 90% of the carbon tax revenue to households. Only higher-income households are expected to pay more in carbon tax than they receive in rebates. For more information, visit the Government of Canada’s Carbon Pricing Page.

6. Income Tax Bracket Adjustments

In 2025, the federal income tax brackets will rise by 2.7%, reflecting inflation adjustments. The new tax brackets will be:

• 15% on income up to $57,375
• 20.5% on income between $57,376 and $114,750
• 26% on income between $114,751 and $177,882
• 29% on income between $177,883 and $253,414
• 33% on income above $253,415

These adjusted thresholds are designed to ensure that inflation does not push individuals into higher tax brackets unnecessarily. For a complete breakdown of the federal tax rates, visit the Canada Revenue Agency’s Income Tax Page.

7. Employment Insurance (EI) Premiums: Increased Maximum

Starting January 1, 2025, the maximum insurable earnings for Employment Insurance (EI) premiums will increase to $65,700 from $63,200. As a result, the new maximum annual EI contribution for a worker will be $1,077.48, up from $1,049.12 in 2024. For more details on EI premiums and eligibility, check the Employment Insurance Information Page.

8. Tax-Free Savings Account (TFSA) Limit

The annual contribution limit for the Tax-Free Savings Account (TFSA) will remain at $7,000 in 2025. The TFSA allows Canadians to save money tax-free, with contributions growing without being taxed, and withdrawals being exempt from income tax. To stay updated on TFSA contribution limits, visit the Canada Revenue Agency’s TFSA Page.

As these changes take effect, it’s important to stay informed and make sure your tax filings are up-to-date. At StiplifyBooks, we can assist you with tax preparation, bookkeeping, and accounting services to ensure you are compliant with all new tax measures and help you maximize available credits and deductions. Contact us today to discuss your specific needs!

For further details on these tax measures, please visit the relevant official Canadian government websites mentioned above.