New year, new tax measures — what to expect in 2025
As we move into the new year, Canadians can expect to see some changes to existing tax measures, although these changes are not expected to have a significant impact on individuals. Daniel Rogozynski, a tax expert from the University of Waterloo’s School of Accounting and Finance, has stated that 2025 will largely be a “status quo year” when it comes to taxes.
One of the most noticeable tax changes for Canadians will be the GST/HST holiday, which provides consumers with a break on the cost of essential goods for a two-month period. This measure took effect on December 14 and will run until February 15, 2025, impacting a specific list of goods and food items. While this tax break will cost the federal government $1.46 billion and provinces with harmonized sales taxes $1.26 billion, it may end up being absorbed by the federal government if provinces choose not to waive compensation.
Another significant change is the increase in the capital gains tax inclusion rate, which has been raised from 50 to 66 percent on capital gains above $250,000 per year for individuals. Additionally, all capital gains earned by corporations and trusts will now be taxed at the two-thirds rate. This change, which was introduced in the 2024 budget, is already being enforced provisionally by the Canada Revenue Agency.
The Canadian Entrepreneurs’ Incentive is another tax measure that is being implemented despite the lack of parliamentary approval. This incentive reduces the inclusion rate on a lifetime maximum of $2 million in capital gains for business owners set up as Canadian Controlled Private Corporations. The program will be phased in over five years, starting in 2025.
Furthermore, the Canada Pension Plan (CPP) contribution requirements have been enhanced for the second year in a row. The maximum CPP contributions individuals have to pay are determined by two ceilings, with the first ceiling set at $71,300 and the second at $81,200 in 2025.
Other changes for 2025 include an increase in the price of carbon from $80 to $95 a tonne in provinces where the federal backstop applies, adjustments to federal income tax bracket thresholds, an increase in the maximum insurable earnings ceiling for Employment Insurance, and the maintenance of the annual Tax-Free Savings Account (TFSA) contribution limit at $7,000.
Overall, while there are some adjustments to existing tax measures in 2025, the impact on individuals is expected to be minor. Canadians should be aware of these changes and how they may affect their finances in the coming year.
