2025 Official Figures Released by the Canada Revenue Agency (CRA)
- Olu Olu
- Nov 21, 2024
- 3 min read
Updated: Mar 30
The Canadian government has announced adjustments to various federal tax and benefit amounts for 2025, primarily due to inflation. Here are the key changes:
Income Tax Brackets
All federal income tax brackets have been increased by 2.7% to account for inflation.
What it means: If your income stays the same, you will pay less taxes (see BPA below). And as your income increases, you are likely to save more taxes compared to year 2024.
Why it matters: This adjustment helps protect your purchasing power and ensures that you're not paying more taxes just because of salary increase to cover inflation.
Basic Personal Amount (BPA)
This amount has been increased to $16,129 (from $15,000 in 2024).
What it means: This is a tax deduction that reduces your taxable income. You basically do not pay federal taxes on this first portion of your income subject to CRA's phase-out thresholds.
Why it matters: A higher basic personal amount means you'll pay less income tax on your earnings. This is good!
Note that the provincial taxes are managed separately from the federal taxes. For example, in Manitoba, the BPA was $15,780 for 2024 while it is estimated to increase to $16,206 for 2025 (updated as at April 2024).
Canada Pension Plan (CPP) and Employment Insurance (EI)
The maximum CPP contribution will be $4,034.10 for each of the employee and employer portions while the premium rate for EI is $1,077.48 ($860.67 for Quebec) on 2025 maximum insurable earnings of $65,700.
What it means: You're better covered for inflation when you become eligible for either EI or CPP.
Why it matters: This change affects both employees and self-employed individuals. It means you'll be paying more into these programs in 2025, and you may also be eligible for higher benefits in the future.
Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP)
The annual contribution limit for TFSA was maintained at $7,000 while the RRSP limit has been adjusted to $32,490.
What it means: These changes affect your capacity to save for retirement and other financial goals.
Why it matters: A high contribution limit means you can save more money in your TFSA and RRSP tax-free or tax-deferred respectively.
Old Age Security (OAS)
The income threshold for OAS clawback has increased to $93,454.
What it means: You may fair better financially if you're eligible for OAS benefits.
Why it matters: This change means you can earn more income before your OAS benefits are reduced.
Prescribed Interest Rate
The prescribed interest rate (also called base rate) for the first quarter of 2025 will be 4%.
What it means: This rate is used to calculate interest on various tax-related amounts, such as tax refunds and overpayments.
Why it matters: A high interest rate means you'll earn high interest on tax refunds and also pay high interest on tax debts. For example, If you owe the CRA money and the rate the CRA charges is 4% higher than the base rate, this puts the interest rate on tax debts, penalties, insufficient instalments, unpaid income tax, CPP contributions and EI premiums at 8% come Jan. 1, 2025. So, try not to be a CRA debtor!
CONCLUSION
Understanding these changes is crucial for effective financial planning. By being aware of the adjustments to tax brackets, contribution limits, and benefit thresholds, you can start planning your finances more effectively.
Remember, it's always a good idea to consult with a financial advisor to get personalized advice tailored to your specific circumstances. This is mainly because the above figures can only show you part of the bigger picture - there are many rules, regulations and tax laws that you will need to consider to customize your own plan. We're always here to help - book a free session today!
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