Tax Changes in Canada for 2025: What You Need to Know
As we enter 2025, significant tax updates are shaping how Canadians manage their finances. Staying informed about these changes can help individuals and businesses effectively plan for the year ahead. Below, we outline the most important tax changes for 2025:
UPDATES
Ashley
2/5/20252 min read
1. Canada Pension Plan (CPP) Contributions
In 2025, CPP contributions have risen for individuals earning $85,000, with combined employer and employee contributions now totaling $8,860—a 71% increase from 2018 levels. This increase supports enhanced retirement benefits.
2. Carbon Tax Increase
The federal carbon tax has increased by $15 per tonne, now at $95 per tonne as of April 2025. This measure aligns with Canada’s environmental commitments.
3. Capital Gains Tax Inclusion Rate
A notable change this year is the increase in the capital gains tax inclusion rate from 50% to 67% for gains exceeding $250,000. While the sale of a primary residence remains exempt, gains from selling secondary properties such as cottages or farms are affected.
4. Tax-Free Savings Account (TFSA) Contribution Limit
The TFSA annual contribution limit has been adjusted to $7,000, providing Canadians with more opportunities for tax-free investment growth.
5. Registered Retirement Savings Plan (RRSP) Contribution Limit
For 2025, the RRSP contribution limit has been increased to $30,780, helping Canadians save more for their retirement.
6. First Home Savings Account (FHSA)
The FHSA, introduced to assist first-time homebuyers, allows annual contributions of up to $8,000 (with a lifetime limit of $40,000). Contributions are tax-deductible, and withdrawals for a first home purchase are tax-free.
7. Federal Tax Bracket Adjustments
Federal tax brackets have been adjusted to reflect inflation, ensuring Canadians are not unfairly pushed into higher tax brackets due to income increases.
8. Temporary GST/HST Exemptions
To ease the cost of living, select items, including children’s clothing, diapers, and print books, are temporarily exempt from GST/HST until February 15, 2025.
9. Charitable Donations Deadline Extension
The deadline to make charitable donations eligible for the 2024 tax year has been extended to February 28, 2025, offering taxpayers extra time to support their favorite causes.
10. Stricter Rules for Short-Term Rentals
From January 2025, stricter tax rules apply to short-term rental properties in regions where such rentals are prohibited. Penalties or doubled tax rates may apply to non-compliant owners.
Plan Ahead for a Tax-Savvy 2025
Navigating these changes may seem complex, but they present opportunities for careful tax planning. Whether it’s maximizing RRSP or TFSA contributions or understanding how new tax rules impact your investments, consulting with a tax professional can help you optimize your financial decisions.
Stay informed to make 2025 a successful year for your finances!
