Federal Budget 2025 Highlights

Key Changes to Tax Rates, Credits, and Registered Accounts

Tax Depot provides this summary of the Federal Budget 2025 announcements to help you understand how recent changes could impact your financial planning and tax situation.

Official Budget Document

Personal Income Tax Changes

Tax Brackets and Rates

The government has announced the following changes to personal income tax brackets and rates for the 2025 tax year:

Income Bracket	2024 Rate	2025 Rate	Change
$0 – $53,359	15%	15%	No change
$53,360 – $106,717	20.5%	20.5%	No change
$106,718 – $165,430	26%	26%	No change
$165,431 – $235,675	29%	29%	No change
Over $235,675	33%	33%	No change

While the tax rates remain unchanged, all tax brackets have been indexed to inflation at 2.4% for 2025.

Basic Personal Amount

The Basic Personal Amount (BPA) will increase to $16,375 in 2025, up from $15,705 in 2024. This represents an additional tax savings of approximately $100 for most Canadian taxpayers.

The enhanced BPA continues to be reduced for individuals with net income exceeding $171,000 and is fully phased out for those with net income above $246,752.

Canada Workers Benefit

The Canada Workers Benefit (CWB) has been enhanced with:

Increased maximum benefit amount to $1,550 for single individuals (up from $1,428)
Increased maximum benefit amount to $2,950 for families (up from $2,461)
Increased phase-in rate to 27% (up from 26%)
Adjusted income thresholds to support more low-income workers

This enhancement is expected to provide additional support to approximately 3.5 million low-income Canadians.

Climate Action Incentive Payment

The Climate Action Incentive Payment (CAIP) will see increases in 2025:

Province	Single Adult	Family of Four	Increase from 2024
Ontario	$520	$1,040	+$44 (family)
Manitoba	$580	$1,160	+$50 (family)
Saskatchewan	$950	$1,900	+$82 (family)
Alberta	$785	$1,570	+$68 (family)

Residents of rural and small communities continue to receive a 10% supplement on these amounts.

Retirement Savings and Pension Changes

RRSP Contribution Limit

The RRSP contribution limit for 2025 will increase to $31,560, up from $30,780 in 2024. This represents 18% of earned income from the previous year, to the maximum amount.

For more information on RRSP limits and regulations, visit CRA RRSP Information.

TFSA Contribution Limit

The annual TFSA contribution limit for 2025 will be $7,000, up from $6,500 in 2024. This is the first increase to the TFSA limit since 2019 and reflects the application of inflation indexing.

The cumulative TFSA contribution room for someone who has never contributed and has been eligible since its introduction in 2009 will reach $95,500 in 2025.

For more details on TFSA rules and limits, visit CRA TFSA Information.

Changes to Registered Pension Plans

Increased Defined Benefit Limit: The maximum pension accrual for defined benefit registered pension plans will increase to $3,680 per year of service, up from $3,506.
Pension Income Splitting Age Reduction: The eligible age for pension income splitting will be reduced from 65 to 60 for income from registered pension plans (effective January 1, 2026).
Enhanced Survivor Benefits: Changes to allow for increased survivor benefits under defined benefit pension plans without reducing the member’s pension.

New Multigenerational Home Renovation Tax Credit

A new refundable tax credit will be introduced for families creating a secondary suite for a senior or adult with a disability. Key features include:

15% refundable tax credit on eligible renovation expenses
Maximum credit of $7,500 (on expenses up to $50,000)
Available for renovations that create a self-contained secondary unit
Claimable by the homeowner or immediate family member

Small Business and Corporate Tax Changes

Small Business Tax Rate

The small business tax rate will remain at 9% for the first $500,000 of qualifying active business income for Canadian-controlled private corporations (CCPCs).

Small Business Deduction Expansion

The Budget introduces a gradual phase-out of the small business deduction for CCPCs with taxable capital between $10 million and $50 million, an increase from the previous range of $10 million to $15 million. This allows more medium-sized businesses to benefit from the small business deduction.

For more information on the small business deduction, visit CRA Small Business Deduction Guide.

Manufacturing and Processing Equipment

The Budget extends the accelerated investment incentive for manufacturing and processing equipment, allowing for:

100% first-year write-off for eligible manufacturing and processing equipment acquired before 2027
75% write-off for equipment acquired in 2027
55% write-off for equipment acquired in 2028
Regular declining balance rate of 30% for equipment acquired after 2028

For details on eligible equipment and claiming procedures, visit CRA Capital Cost Allowance.

Clean Energy Investment Tax Credits

Several new or enhanced investment tax credits have been announced:

Clean Technology Manufacturing Tax Credit: 30% tax credit for investments in manufacturing equipment used to produce clean technologies (e.g., solar panels, wind turbines, batteries)
Clean Electricity Investment Tax Credit: 15% to 40% tax credit for investments in clean electricity generation, storage, and transmission
Clean Hydrogen Production Tax Credit: Up to 40% tax credit for clean hydrogen production projects

These credits aim to accelerate Canada’s transition to a clean economy while creating jobs in the green technology sector.

Housing and Real Estate Measures

First-Time Home Buyers’ Tax Credit

The First-Time Home Buyers’ Tax Credit will increase to $1,500 (up from $1,000), providing additional support to first-time home buyers. This represents a tax savings of up to $225.

For eligibility requirements and how to claim, visit CRA Home Buyers’ Amount.

Home Buyers’ Plan Withdrawal Limit

The Home Buyers’ Plan RRSP withdrawal limit will increase to $40,000 from $35,000. This allows first-time home buyers to withdraw more from their RRSPs toward their home purchase without tax penalties, provided the amount is repaid within 15 years.

Learn more about the Home Buyers’ Plan at CRA Home Buyers’ Plan.

Multi-Generational Home Renovation Tax Credit

As mentioned earlier, this new tax credit supports families who renovate their homes to include a secondary suite for seniors or adults with disabilities.

Residential Property Flipping Rules

New anti-flipping rules will come into effect for residential properties sold after owning them for less than 12 months (with certain exceptions). These sales will be taxed as business income at 100% inclusion rate rather than as capital gains.

Foreign Buyer Ban Extension

The ban on foreign buyers purchasing residential property in Canada has been extended for an additional two years, until January 1, 2028, with certain exemptions still in place.

Business Investment and Innovation

Canada Growth Fund

The Budget provides details on the previously announced Canada Growth Fund, which will:

Receive $15 billion in funding over the next three years
Focus on attracting private investment in low-carbon industries and critical minerals
Operate at arm’s length from government with professional investment management
Use various financial instruments including loans, equity investments, and guarantees

Critical Minerals Exploration Tax Credit

The Budget introduces a new 30% Critical Minerals Exploration Tax Credit for companies exploring for minerals essential to clean technology manufacturing, including:

Lithium, cobalt, nickel, and rare earth elements
Graphite and copper
Other minerals designated as critical by the government

This credit is aimed at supporting Canada’s position in the global supply chain for electric vehicles and clean energy technologies.

Expanded Scientific Research and Experimental Development (SR&ED) Program

The Budget enhances the SR&ED program with:

Increased refundable credit rate for small CCPCs from 35% to 40%
Higher expenditure limit of $4 million (up from $3 million)
Gradual phase-out of enhanced benefits for CCPCs with taxable capital between $10 million and $50 million (increased from $10 million to $15 million)

For complete program details and application procedures, visit CRA SR&ED Program.

International Tax Measures

Global Minimum Tax Implementation

Canada will implement the OECD’s Pillar Two global minimum tax framework for large multinational enterprises (MNEs) with annual revenue of €750 million or more. Key elements include:

15% minimum effective tax rate on profits earned in each jurisdiction
Income Inclusion Rule (effective July 1, 2025)
Domestic Minimum Top-up Tax (effective January 1, 2026)
Subject to Tax Rule implementation pending international agreement

For the latest information on global minimum tax implementation, visit Department of Finance – International Tax Policy.

Digital Services Tax

The Budget confirms the implementation of the Digital Services Tax (DST) at a rate of 3% on revenue derived from certain digital services reliant on Canadian users and data. This will be retroactively applied from January 1, 2024, unless an international agreement on digital taxation is reached.

Enhanced Transfer Pricing Rules

The Budget introduces enhanced transfer pricing rules to address tax avoidance by multinational enterprises, including:

Strengthened substance requirements for offshore structures
New economic substance tests for cross-border arrangements
Increased penalties for transfer pricing adjustments over certain thresholds

Other Notable Changes

GST/HST Digital Platform Rules

New GST/HST rules require digital platforms that facilitate short-term accommodation rentals to collect and remit taxes on behalf of hosts, regardless of the host’s registration status.

For more information on these changes, visit CRA GST/HST for Digital Economy Businesses.

Carbon Tax Adjustments

The federal carbon price will increase to $85 per tonne on April 1, 2025, up from $65 per tonne. This will increase the cost of gasoline by approximately 4.4 cents per liter compared to 2024 rates.

For details on the federal carbon pricing system, visit Environment Canada – Carbon Pollution Pricing.

Electric Vehicle Incentives

The Budget extends and enhances incentives for zero-emission vehicles:

Purchase incentives of up to $5,000 for eligible vehicles
Expanded list of eligible vehicle models
New commercial fleet electrification incentives
Additional funding for charging infrastructure

Healthcare and Dental Care

The Budget allocates additional funding for:

The Canadian Dental Care Plan, expanding coverage to all eligible Canadians by end of 2025
Mental health initiatives, including a new Mental Health Transfer to provinces and territories
National pharmacare program development, with a focus on coverage for diabetes medications and contraceptives initially

Implementation Timeline

Measure	Effective Date
Personal tax bracket adjustments	January 1, 2025
Enhanced Canada Workers Benefit	2025 tax year
TFSA limit increase	January 1, 2025
Multigenerational Home Renovation Credit	Expenses incurred after April 19, 2025
Small Business Deduction expansion	Fiscal years beginning after April 19, 2025
First-Time Home Buyers’ Credit enhancement	2025 tax year
Critical Minerals Exploration Tax Credit	Expenses incurred after April 19, 2025
Residential property flipping rules	Properties sold after April 19, 2025
Global Minimum Tax (Income Inclusion Rule)	July 1, 2025
Digital Services Tax	Retroactive to January 1, 2024
Carbon Tax increase	April 1, 2025

Additional Budget Resources

For more detailed information on the 2025 Federal Budget, consult these official resources:

Tax Depot provides this budget summary for informational purposes only. The actual budget implementation bill may include modifications to these proposals. This does not constitute financial or tax advice. For guidance on your specific situation, please consult with our tax professionals.

Sources: Department of Finance Canada, Canada Revenue Agency, Parliamentary Budget Office

Last Updated: April 2025