Toronto 
The newly announced federal income tax reduction is now in effect. The measure will reduce the lowest personal income tax rate, with savings aimed primarily at middle- and lower-income earners.
The revised tax rate will apply to the first $57,375 of taxable income in 2025.
The tax cut lowers the lowest marginal personal income tax rate from 15% to 14%.
For this year, the rate will be 14.5 per cent due to its mid-year implementation. In 2026 and beyond, the rate will be set at 14 per cent. This change is expected to benefit approximately 22 million Canadians, with the maximum annual tax savings reaching $420 per individual and $840 per couple.
The Canada Revenue Agency (CRA) has announced that updated payroll deduction tables will take effect from July through December 2025. This will allow employers to reduce income tax withholdings to the new rate of 14 per cent for eligible income. Individuals not seeing the adjustment in their withholdings will instead realize the savings upon filing their 2025 tax returns in spring 2026.
Credit: Department of Finance Canada
According to the news release, nearly half of the total benefits, 45 per cent, will be allocated to individuals earning $57,375 or less. Another 41 per cent will be directed to those earning between $57,375 and $114,750. Only 2 per cent of the savings will go to those with annual incomes exceeding $253,414.
Over a five-year period starting in 2025–26, this initiative is projected to return more than $27 billion to Canadian taxpayers.
