Free Canadian Income Tax Calculator
How much tax will I pay? Use our free Canadian Income Tax Calculator 2025 to find out instantly. Enter your salary to see your federal and provincial tax payable, CPP and EI contributions, and take-home pay — calculated using the latest CRA tax rates.
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Choose the financial year and your residency status for an accurate calculation.
Enter Income
Start by entering your salary and any other taxable income you've received.
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Instantly view your estimated tax, net income, and a full breakdown.
Tax Calculator
2025 CRA Tax Rates • Middle-Class Tax Cut Applied
Pay Breakdown by Period
| Period | Gross Pay | Tax + CPP/EI | Net Pay |
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See how your income compares to other Canadians based on Statistics Canada data.
Income Distribution
2025 Middle-Class Tax Cut Savings
Equivalent to 3 weeks of groceries
• Lowest federal tax rate reduced from 15% to 14% (effective 14.5% for 2025)
• Applies to first $57,375 of taxable income
• Maximum annual savings: $420 per individual
• Two-income families can save up to $840
Where your $13,116 in federal tax goes (Budget 2025)
Personalized tax-saving suggestions based on your calculation.
Disclaimer: These recommendations are for informational purposes only and should not be considered as professional financial advice.
Canada Income Tax Rates 2025-26
The 2025 tax year runs from 1 January to 31 December. Provincial taxes are additional.
Tips to Maximise Your Tax Return
General strategies Canadians can consider to legally reduce their taxable income.
Maximize Your RRSP Contributions
Contributing to your Registered Retirement Savings Plan reduces taxable income dollar-for-dollar. The 2025 contribution limit is 18% of earned income up to $32,490.
Don't Forget Your TFSA
While Tax-Free Savings Account contributions aren't deductible, all growth and withdrawals are tax-free. The 2025 annual limit is $7,000 with lifetime room accumulating since 2009.
Claim the Home Office Deduction
If you work from home, use the simplified method ($2/day up to $500) or the detailed method to claim actual expenses proportionally.
Track Medical Expenses
Medical expenses exceeding 3% of net income (or $2,759, whichever is less) qualify for a non-refundable tax credit. Include prescriptions, dental, vision, and travel for medical care.
Maximize Charitable Donations
Donations to registered charities qualify for a 15% federal credit on the first $200 and 29% on amounts above. Consider bundling donations across years to exceed the $200 threshold.
Claim Moving Expenses
If you moved at least 40km closer to a new job or school, you can deduct moving costs including transportation, storage, temporary accommodation, and legal fees.
Canada Income Tax News & Updates
The recent changes, policy discussions, and key updates on income tax in Canada.
Middle-Class Tax Cut: 14% Lowest Rate Now Applies Full Year
The Carney government's middle-class tax cut is now in full effect. The lowest federal income tax rate has dropped from 15% to 14%, applying to all income up to $58,523. This is the first full year at the lower rate after a mid-year adjustment in 2025.
2026 Federal Tax Brackets
- $0 - $58,523: 14% (was 15% before July 2025)
- $58,524 - $117,045: 20.5%
- $117,046 - $181,440: 26%
- $181,441 - $258,482: 29%
- $258,483+: 33%
Maximum Savings
Up to $420 per person or $840 per couple in annual tax savings for 2026.
Indexation Factor
Brackets indexed by 2% for 2026 (down from 2.7% in 2025).
Capital Gains Inclusion Rate Increase Cancelled - Stays at 50%
Prime Minister Carney cancelled the proposed capital gains inclusion rate increase. The rate remains at 50% (one-half) for all taxpayers, instead of the previously proposed 66.67% (two-thirds) on gains over $250,000 for individuals.
Key Details
- Inclusion Rate: Remains at 50% for all capital gains
- Cancelled Proposal: Two-thirds rate on gains over $250,000 will NOT proceed
- LCGE Maintained: Lifetime Capital Gains Exemption increased to $1,250,000 (still in effect)
- Principal Residence: Exemption unchanged - home sales remain tax-free
- Entrepreneurs' Incentive: Status uncertain following cancellation
What This Means
Only 50% of capital gains are taxable, regardless of amount. No change for most Canadians.
AMT Warning
High-income earners may still face Alternative Minimum Tax on large capital gains.
CRA No Longer Mailing Paper Tax Packages - Must Request or Download
The CRA will no longer automatically mail income tax packages to paper filers. Starting January 20, 2026, Canadians must order, download, or print their 2025 tax package online or by phone. Approximately 93% of returns are now filed electronically.
How to Get Your Tax Package
- Online: Download and print from canada.ca/taxes-forms (available Jan 20, 2026)
- Phone: Call CRA at 1-855-330-3305 (SIN required)
- Delivery Time: Up to 10 business days if requesting by mail
- Some Schedules Removed: Schedules 3, 6, 9, 12 must be requested separately
- SimpleFile: Eligibility questionnaire available Feb 23, 2026
Free Tax Clinics
Volunteers at free tax clinics can help those with modest income and simple tax situations.
Online Benefits
E-filing is faster - refunds processed in as little as 8 business days with direct deposit.
New Personal Support Worker Tax Credit - Up to $1,100 Annually
A new refundable tax credit for personal support workers provides 5% of eligible earnings up to a maximum of $1,100 per year. The credit is available for tax years 2026 to 2030.
Key Details
- Credit Amount: 5% of eligible earnings, maximum $1,100/year
- Full Credit: Available to those earning $22,000+ annually
- Duration: 2026 to 2030 tax years (temporary)
- Eligible Employers: Hospitals, nursing homes, residential care facilities, home health care
- Exclusions: BC, Newfoundland and Labrador, Northwest Territories (have separate wage programs)
Who Qualifies
PSWs providing one-on-one care for health, well-being, safety, autonomy, and comfort.
Refundable Credit
You receive the full amount even if you owe no tax - paid as a refund.
CPP Maximum Pensionable Earnings Increased to $74,600
The Year's Maximum Pensionable Earnings (YMPE) for CPP has increased to $74,600 for 2026. The second earnings ceiling (YAMPE) for CPP2 has increased to $85,000, continuing the CPP enhancement that began in 2019.
2026 CPP Contribution Details
- YMPE (First Ceiling): $74,600 (up from $71,300 in 2025)
- YAMPE (Second Ceiling): $85,000 (up from $81,200 in 2025)
- Basic Exemption: $3,500 (unchanged)
- Employee Rate: 5.95% on earnings up to YMPE
- Maximum Employee Contribution: $4,230.45 (up from $4,034.10)
- CPP2 Rate: 4% on earnings between $74,600 and $85,000
- Maximum CPP2 Contribution: $416 each (employee/employer)
Self-Employed
Rate: 11.9% (base) + 8% (CPP2). Maximum combined: $8,460.90 + $832
CPP Benefits Increase
CPP payments increased 2% in January 2026 to match inflation.
TFSA Limit Stays at $7,000, RRSP Limit Rises to $33,810
The TFSA annual contribution limit remains at $7,000 for the third consecutive year. The RRSP contribution limit has increased to $33,810 for 2026. Canadians eligible since 2009 now have a cumulative TFSA room of $109,000.
2026 Registered Account Limits
- TFSA Annual Limit: $7,000 (unchanged from 2024 and 2025)
- TFSA Cumulative Room: $109,000 (if eligible since 2009)
- RRSP Dollar Limit: $33,810 (up from $32,490 in 2025)
- RRSP Contribution: 18% of previous year's earned income, up to limit
- RESP Lifetime Limit: $50,000 (unchanged since 2007)
- ALDA Dollar Limit: $180,000
TFSA Penalties
1% monthly tax on over-contributions. Check room in CRA My Account (updated spring 2026).
RRSP Deadline
Contributions for 2025 tax year must be made by March 2, 2026.
Basic Personal Amount Increases to $16,452 - Earn More Tax-Free
The federal Basic Personal Amount (BPA) has increased to $16,452 for 2026, meaning Canadians can earn this amount before paying any federal income tax. The BPA provides a non-refundable tax credit of up to $2,303.
2026 Personal Amounts
- Maximum BPA: $16,452 (for net income up to $181,440)
- Minimum BPA: $14,829 (for net income of $258,482+)
- Tax Credit Value: Up to $2,303 (14% × $16,452)
- Age Amount (65+): $9,208 maximum
- Disability Amount: $10,341
- Canada Caregiver Credit: $8,773 for infirm dependants 18+
High Income Phase-Down
BPA reduced for income between $181,440 and $258,482.
Provincial BPA Varies
Alberta has the highest at $22,769. BC is $13,216.
Middle-Class Tax Cut Passes: Lowest Rate Drops from 15% to 14%
Parliament unanimously adopted the Carney government's middle-class tax cut, reducing the lowest federal income tax rate from 15% to 14%. The rate was 14.5% for the second half of 2025 and takes full effect in 2026.
Key Details
- 2025 Rate: 14.5% (blended rate due to mid-year implementation)
- 2026 Rate: 14% (full year effect)
- Applies To: First $57,375 of taxable income in 2025
- 5-Year Savings: Over $27 billion in tax relief for Canadians
- Status: ✅ Passed unanimously by Parliament
Who Benefits Most
Majority of relief goes to lower and middle income Canadians in the first two brackets.
Automatic
Employers updated PAYG withholding from July 2025. No action required.
Capital Gains Inclusion Rate Increase Deferred to January 1, 2026
Finance Minister LeBlanc announced the deferral of the proposed capital gains inclusion rate increase from June 25, 2024 to January 1, 2026. The CRA reverted to administering the 50% inclusion rate for all of 2024 and 2025.
Key Changes
- Deferral: Proposed increase delayed from June 25, 2024 to January 1, 2026
- Current Rate: 50% inclusion rate applies to all capital gains before Jan 1, 2026
- LCGE Increase: Lifetime Capital Gains Exemption increased to $1,250,000 (effective June 25, 2024)
- CRA Relief: Late-filing penalties waived until June 2, 2025 for T1 filers
- Note: This was later CANCELLED by PM Carney in March 2025
For Corporations
Continue using existing forms with 50% inclusion rate until further notice.
Principal Residence
Principal Residence Exemption unchanged - home sales remain completely tax-free.
First Home Savings Account: $8,000 Annual Limit, $40,000 Lifetime
The FHSA continues to help first-time home buyers save tax-free. Contributions are tax-deductible like an RRSP, and qualifying withdrawals are tax-free like a TFSA. Unused contribution room carries forward up to $8,000.
FHSA Key Features
- Annual Limit: $8,000 per year
- Lifetime Limit: $40,000 total
- Carryforward: Unused room carries forward, max $8,000 extra per year
- Tax Deduction: Contributions are tax-deductible (reduces taxable income)
- Tax-Free Growth: Investment earnings grow tax-free
- Tax-Free Withdrawal: Qualifying withdrawals for home purchase are tax-free
- Account Duration: Maximum 15 years or until age 71
Eligibility
Must be a first-time home buyer (not lived in owned home in past 4 years), age 18+, Canadian resident.
Over-Contribution
1% monthly tax on excess amounts. Track room carefully!
Home Buyers' Plan Limit Increased to $60,000 from $35,000
The RRSP Home Buyers' Plan withdrawal limit was increased to $60,000 per person (from $35,000), meaning couples can now withdraw up to $120,000 tax-free for a first home purchase. Combined with FHSA, first-time buyers can access up to $200,000+.
Key Changes
- New Limit: $60,000 per individual (was $35,000)
- Couples: Up to $120,000 combined withdrawal
- Effective: Withdrawals made after April 16, 2024
- Repayment Period: 15 years to repay to RRSP
- Grace Period Extended: 5 years before repayments start (for withdrawals Jan 2022 - Dec 2025)
Combine with FHSA
Use both HBP ($60k) + FHSA ($40k) for same home = $100,000 per person.
Repayment Rule
Minimum 1/15 annually. Missed payments added to taxable income.
TFSA Annual Limit Increased to $7,000
The TFSA contribution limit increased from $6,500 to $7,000 for 2024, reflecting inflation indexation. This brought the cumulative contribution room to $95,000 for Canadians eligible since 2009.
TFSA History
- 2024: $7,000 (increased from $6,500)
- 2023: $6,500
- 2019-2022: $6,000
- 2016-2018: $5,500
- 2015: $10,000 (one-time increase)
- 2009-2012: $5,000 (original limit)
Withdrawals
Withdrawals added back to contribution room in the following year.
No Trading
Day trading or business activity in TFSA may be taxed as business income.
CPP2 Enhancement Begins: Second Earnings Ceiling Introduced
The second phase of CPP enhancement (CPP2) began in 2024, introducing a second earnings ceiling. Employees now pay an additional 4% on earnings above the standard CPP maximum, up to the new higher ceiling.
CPP Enhancement Timeline
- 2019-2023: First enhancement phase - rate increased from 4.95% to 5.95%
- 2024: CPP2 introduced - second ceiling set 7% above YMPE
- 2025+: Second ceiling set 14% above YMPE
- CPP2 Rate: 4% on earnings between first and second ceilings
- Tax Treatment: CPP2 contributions are deductible (not a credit)
Why CPP2
Increases future retirement benefits for higher-income Canadians.
Self-Employed
Pay both employee and employer portions (8% on CPP2 earnings).
First Home Savings Account (FHSA) Introduced
The federal government launched the FHSA, a new registered plan combining the best features of RRSPs and TFSAs. First-time home buyers can save up to $40,000 with tax-deductible contributions and tax-free withdrawals for a home purchase.
FHSA Features at Launch
- Annual Contribution: Up to $8,000
- Lifetime Limit: $40,000
- Tax Deductible: Contributions reduce taxable income (like RRSP)
- Tax-Free Growth: Investment earnings not taxed (like TFSA)
- Tax-Free Withdrawal: Qualifying withdrawals for home purchase not taxed
- No Repayment: Unlike HBP, no repayment required
Eligibility
Canadian resident, age 18+, first-time home buyer (not owned home in past 4 years).
If Not Used
Can transfer to RRSP/RRIF tax-free without affecting RRSP room.
TFSA Limit Increased to $6,500 After Four Years at $6,000
The TFSA annual contribution limit increased to $6,500 for 2023, the first increase since 2019. The limit had remained at $6,000 from 2019 to 2022 due to low inflation during that period.
Key Details
- 2023 Limit: $6,500 (up from $6,000)
- Cumulative Room: $88,000 (if eligible since 2009)
- Why Increase: Inflation indexation reached $500 threshold
- Indexation Rule: Limit increases in $500 increments only
Room Accumulates
TFSA room starts accumulating at age 18 (or 2009, whichever is later).
Track Your Room
Use CRA My Account or calculate manually. Don't rely on CRA until spring updates.
Frequently Asked Questions
Everything you need to know about income tax in Canada.
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About this calculator
This calculator provides an estimate based on official CRA federal tax rates. Provincial taxes vary. We don’t store your data. This is not financial advice. For official information, please refer to the Canada Revenue Agency.