Published: December 18, 2025
Last Updated: December 18, 2025
Individual tax planning and business tax planning are ongoing processes, not a “set-it-and-forget-it” task. As 2025 draws to a close, now is a great time to review your tax strategy for the upcoming year and take final steps to minimize your 2025 tax liability. Please note that this article is only a summary of key tax changes for the year, and you should always consult with an experienced Canadian tax lawyer for tailored advice.
1. Reduction of the Lowest Federal Personal Income Tax Rate
The Federal Government announced a reduction in the lowest federal personal marginal tax rate from 15% to 14%, effective July 1, 2025. This change will benefit individuals in the lowest income brackets.
2. First-Time Homebuyer GST/HST Relief
A legislative proposal is in place to offer first-time homebuyers a GST rebate for new homes. Under this proposal, the GST will be eliminated on home purchases up to $1 million, and reduced for homes priced between $1 million and $1.5 million. Stay tuned for updates on this initiative.
3. Changes to the CRA’s Voluntary Disclosure Program
The CRA’s Voluntary Disclosure Program (VDP) allows taxpayers to correct errors or disclose previously omitted information in exchange for penalty waivers, interest relief, and immunity from prosecution. Key updates to the program, effective October 1, 2025, include:
- Eligibility now extends to those prompted by an education letter or other CRA communication.
- Interest relief for the general stream increases from 50% to 75%, while the limited stream now provides 25% relief.
- The VDP application form (Form 199) has been simplified.
- For non-compliance relating to foreign income, include documents for the past 10 years; for Canadian income, 6 years; and for GST/HST issues, 4 years.
4. Increase in the Basic Personal Amount
In 2025, the federal Basic Personal Amount (BPA) is $16,129 for individuals with net income up to $177,882. Once net income exceeds $177,882, the BPA is gradually reduced until it reaches $14,538 at a net income of $253,414. The BPA functions as a non-refundable tax credit that allows taxpayers to earn income up to that amount without paying federal income tax on that portion (before considering other credits and taxes).
5. Automatic Tax Filing for Low-Income Individuals
The CRA is developing and in some cases piloting services that invite eligible lower-income taxpayers with simple tax situations to use Canada’s automatic tax filing (or semi-automatically), in order to help them access benefits such as the Canada Child Benefit, GST/HST Credit, and disability tax credits — benefits they can lose if they fail to file the required tax return. However, this program is not yet fully implemented for all low-income Canadians, and individuals must still meet eligibility, accept the invitation or provide consent, and/or use the designated simplified service.
6. Changes to Business Tax Filings
The T619 form, used for electronic information returns, has been updated to simplify filing. Online validation systems now identify discrepancies before submission, and multiple return types have been consolidated into a single filing process.
7. Tax-Free Savings Account (TFSA)
A Canadian resident aged 18 and above can open a TFSA. Contributions are not tax-deductible and must be made by the end of the calendar year, but earnings and withdrawals are tax-free. Withdrawals can be made at any time.
The TFSA contribution limit for 2025 is $7,000. If you were 18 and a Canadian resident continuously since 2009 and have not made any contributions to a TFSA, your accumulated contribution limit now stands at $102,000.
8. Canada Pension Plan Income Sharing
Canadians can now share their Canada Pension Plan (CPP) retirement pension with a spouse or common-law partner to optimize tax savings. An application to the CRA is required.
9. Increase in the Year’s Maximum Pensionable Earnings for CPP Contributions
In 2025, the Year’s Maximum Pensionable Earnings increases to $71,300 (from $68,500 in 2024). This is the maximum income level at which CPP contributions are required. Once income reaches this threshold, contributions are capped. CPP contributions are made at a rate of 5.95% by both the employer and the employee. If the worker is self-employed, the individual must contribute on behalf of both the employer and the employee, effectively doubling the contribution.
10. Increase in the Year’s Additional Maximum Pensionable Earnings for CPP2 Contributions
The Year’s Additional Maximum Pensionable Earnings limit for additional CPP contributions increases to $81,200 in 2025, up from $73,200 in 2024. Additional CPP contributions are made at a rate of 4% by both the employer and the employee. As with regular CPP contributions, self-employed individuals will contribute double.
11. Registered Retirement Savings Plan (RRSP)
A Canadian resident can open an RRSP and hold it until the age of 71. While there is no minimum age requirement, some financial institutions may require clients to be of the age of majority. Contributions, up to the deduction limit, are tax-deductible. The contribution deadline is 60 days after the end of the calendar year. For 2025, the contribution deadline is March 2, 2026, as March 1 falls on a Sunday.
The deduction limit for 2025 is the lower of $32,490 or 18% of your earned income from the previous year (2024), up to a maximum of $180,500. Unused contribution room from previous years can be carried forward, subject to adjustments for pensions and other factors.
Earnings within an RRSP are tax-deferred until withdrawal. While withdrawals can be made at any time, they will be included in your taxable income for the year in which they are taken. If you do not hold the RRSP until age 71, it is advisable to make withdrawals in a year when your income is lower to minimize the tax impact.
12. Registered Retirement Income Fund (RRIF)
Once you turn 71, you can convert your RRSP into an RRIF, where earnings continue to grow tax-deferred. However, no new contributions can be made. While there is no maximum withdrawals for RRIF, there are minimum annual withdrawal requirements, and excess withdrawals are subject to withholding tax. If you don’t convert your RRSP by age 71, the funds will be considered “deregistered” and taxed as income.
13. Maximum Employment Insurance (EI) Premiums
The maximum annual insurable earnings for EI premiums rises to $65,700 for 2025, up from $63,200 in 2024. The corresponding EI premium is 1.64% (1.31% in Quebec), capping the maximum EI payment at $1,077.48 in Canada or $860.67 in Quebec.
14. Increase in the Income Recovery Threshold for Old Age Security (OAS)
In 2025, seniors with net income over $93,454 (up from $90,997 in 2024) will see a reduction in their OAS benefits. Seniors can either limit their income or defer their OAS payments for up to five years to avoid reductions.
15. Fuel Charge Rate Reduction to Zero
Effective April 1, 2025, fuel charges under the Greenhouse Gas Pollution Pricing Act—previously the price component of carbon taxes—will be reduced to zero, effectively eliminating these charges. This means there will no longer be a requirement to register, report, or pay fuel charges for activities conducted after March 31, 2025. As a result, Canada’s carbon tax rebates for individuals and small businesses will also be abolished
16. Scientific Research and Experimental Development (SR&ED) Tax Changes
Proposed changes to the Scientific Research and Experimental Development (SR&ED) tax program aim to provide more Canadian-Controlled Private Corporations (CCPCs) with access to the enhanced 35% refundable Investment Tax Credit (ITC). The annual expenditure limit that disqualifies a CCPC and its associated companies from the enhanced ITC will increase from $3 million to $4.5 million, allowing these companies to claim up to $1.575 million annually in refundable ITC.
Additionally, the taxable capital threshold for the previous year—at which a CCPC’s annual expenditure limit for the enhanced ITC begins to decrease—is proposed to rise from $10 million to $15 million. The threshold at which the limit is fully eliminated will also increase, from $50 million to $75 million.
Under these proposed changes, eligible Canadian public corporations will be able to claim the enhanced 35% refundable ITC, with some additional qualifications. The reforms will also give CCPCs the option to choose a gross revenue calculation over a taxable capital calculation to determine their eligibility for refundable ITCs. This adjustment will benefit new businesses that have accumulated capital assets but have not yet started generating significant revenues.
17. Canada Worker’s Benefits (CWB)
The Canada Worker’s Benefit (CWB) is a refundable tax credit that supports workers with low to moderate income. In 2025, the maximum basic amount for the CWB has increased to $1,590 for single individuals and $2,739 for families, with inflation-indexed increases also announced. The income thresholds for eligibility have also been raised, allowing more low-income earners to qualify. Additionally, phase-in and phase-out rates for the basic amount have been adjusted, from 26% to 27% and 12% to 15%, respectively.
A new secondary earner exemption has been introduced, allowing a lower-earning spouse to exclude up to $14,000 of income when calculating the family’s net income. The phase-out rates for individuals with disabilities have also been increased.
18. First Home Savings Account (FHSA)
A Canadian resident aged 18 or older who is a first-time homebuyer can open an FHSA. The account can be held for up to 15 years, until the age of 71, or until the first home is purchased—whichever comes first. Contributions are tax-deductible like RRSPs, and both earnings and qualified withdrawals are tax-free like TFSAs. A withdrawal is considered qualified when used to purchase your first home; otherwise, it will be taxable.
The FHSA combines some of the best features of both RRSPs and TFSAs. However, contributions are subject to lower limits: $8,000 annually, with a total lifetime limit of $40,000. Couples can combine their accounts, allowing them to save up to $80,000.
19. Registered Education Savings Plan (RESP)
A Canadian resident can open a RESP, contribute for up to 31 years, and must close the account within 35 years. An RESP is used to fund post-secondary education for a beneficiary, who can be the account holder’s child or grandchild, someone else’s child, or even the subscriber themselves.
While contributions to an RESP are not tax-deductible, earnings grow tax-deferred, and withdrawals are taxed in the hands of the beneficiaries, except it is a withdrawal of the subscriber’s contributed portion. An RESP can have multiple beneficiaries, and a beneficiary can have multiple RESPs. However, each beneficiary has a lifetime contribution limit of $50,000 across all their RESPs combined, so it’s important to keep track of contributions for your child’s RESP.
20. Registered Disability Savings Plan (RDSP)
An RDSP can be opened for a Canadian resident under the age of 60 who is eligible for the Disability Tax Credit. While contributions are not tax-deductible, earnings and withdrawals are tax-free in the hands of the beneficiary.
There is no annual contribution limit or deadline, but there is a lifetime contribution limit of $200,000 per beneficiary. Contributions can only be made until the end of the year in which the beneficiary turns 59. A beneficiary can only have one RDSP at any given time.
21. Canada Greener Homes Loan
The Canada Greener Homes Loan offers up to $40,000 in interest-free financing to help Canadians retrofit their homes for improved energy efficiency. It is available only at the pre-retrofit stage for a principal residence owned by the applicant and is not applicable to newly built homes.
Please note that the Canada Greener Homes Grant is now closed to new applicants for the year. In 2025, the Canada Greener Homes Affordability Program was introduced to complement this initiative.
Here is the summary of all the registered accounts discussed above.
| TFSA | RRSP | RRIF | FHSA | RESP | RDSP | |
| Purpose | Saving | Retirement | Retirement | First home purchase | Education | Disability |
| Contribution | Not tax-deductible | Tax-deductible | No contribution | Tax-deductible | Not tax-deductible | Not tax-deductible |
| 2025 Contribution room | $7,000
|
Lower of $32,940 and 18% of 2024 earned income | Not applicable | $8,000 | No limit | No limit |
| Accumulated contribution limit | $102,000 (subject to conditions) | No limit | Not applicable | $40,000 | $50,000 per beneficiary for all RESPs combined | $200,000 per beneficiary |
| Contribution deadline | December 31, 2025 (year-end) | March 2, 2026 (60 days after year-end) | Not applicable | December 31, 2025 (year-end) | Contributable for 31 years | End of the year in which the beneficiary turns 59 |
| Earnings | Tax-free | Tax-deferred | Tax-deferred | Tax-free | Tax-deferred | Tax-free |
| Withdrawal | Tax-free | Taxable | Taxable | Tax-free | Taxable | Tax-free |
| Withdrawal limit | Up to available fund | Up to available fund | Minimum annual withdrawal
(excess withdrawal subject to withholding tax) |
Up to available funds | Up to available fund | Up to available fund |
| Withdrawal deadline | No deadline | At age 71 | Until fund runs out | Earliest of: 15 years, until age 71, or until first home purchase | After 35 years | Depends on the issuer |
Upcoming tax deadlines
| Date | Deadline |
| December 31, 2025 | Contributions to TFSA and FHSA |
| March 2, 2026 | Contribution to RRSP |
| March 31, 2026 | Income tax return filing for trusts and estates |
| April 30, 2026 | Income tax return filing for individuals (without self-employment income) |
| June 15, 2026 | Income tax return filing for sole proprietorships (individuals with self-employment income)
(The filing deadline for corporations is 6 months after the fiscal year-end.) |
Tax brackets and rates for 2025
The federal tax brackets and rates for individuals in 2024 are:
| Tax bracket | Rate |
| Up to $57,375 | 14.5% |
| 57,375 – 114,750 | 20.5% |
| 114,750 – 177,882 | 26% |
| 177,882 – 253,414 | 29% |
| 253,414 and above | 33% |
The federal tax rates for general corporations in 2025 are:
| Manufacturing & processing income | Active business income | Investment income | |
| General corporate rate | 38% | 38% | 38% |
| Federal abatement | (10%) | (10%) | (10%) |
| Manufacturing & processing deduction | (13%) | Not applicable | Not applicable |
| General reduction | Not applicable | 13% | 13% |
| Gross federal rate | 15% | 15% | 15% |
The federal tax rates for Canadian-controlled private corporations (CCPCs) in 2025 are:
| Small business income (up to the first $500,000) | Active business income | Investment income | |
| General corporate rate | 38% | 38% | 38% |
| Federal abatement | (10%) | (10%) | (10%) |
| Small business deduction | (19%) | Not applicable | Not applicable |
| General reduction | Not applicable | (13%) | Not applicable |
| Refundable tax | Not applicable | Not applicable | 10.7% |
| Gross federal rate | 9% | 15% | 38.7% |
We hope this issue of year-end tax tips has been helpful to you. Remember, this is only a summary of some of the most significant tax changes of the year. Please always consult with experienced Canadian tax lawyers when planning your taxes. On behalf of Rotfleisch & Samulovitch Professional Corporation, we wish you a joyous holiday and a happy new year!
DISCLAIMER: This article just provides broad information. It is only up to date as of the posting date. It has not been updated and may be out of date. It does not give legal advice and should not be relied on. Every tax scenario is unique to its circumstances and will differ from the instances described in the article. If you have specific legal questions, you should seek the advice of a Canadian tax lawyer.
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