Every year brings a few changes to the numbers on your tax return. Here is a plain-language summary of what is different for Canadian individuals in 2026, and what it could mean for you.
The lowest federal tax rate is now 14%
The federal government cut the lowest personal income tax rate from 15% to 14%, effective July 1, 2025. Because the cut took effect partway through the year, the rate for the 2025 tax year works out to 14.5%. For 2026 and later years, the full 14% applies.
For 2026, the federal brackets are:
- 14% on the first $58,523 of taxable income
- 20.5% on income from $58,523 to $117,045
- 26% on income from $117,045 to $181,440
- 29.29% on income from $181,440 to $258,482
- 33% on income over $258,482
The federal basic personal amount (the income you can earn before paying federal tax) is up to $16,452 for 2026. It is reduced gradually for higher incomes. Provincial tax, including Saskatchewan tax, is calculated separately.
New savings limits for 2026
- TFSA: $7,000 of new contribution room for 2026. If you have been eligible since 2009 and never contributed, your total room is $109,000.
- RRSP: the dollar limit for 2026 is $33,810, up from $32,490 in 2025. Your own limit is 18% of your previous year’s earned income, up to that maximum, plus any unused room. Check your Notice of Assessment for your exact number.
- FHSA: up to $8,000 a year, to a lifetime maximum of $40,000, toward a first home.
Budget 2025: measures to watch
The federal budget tabled in November 2025 proposed several personal tax measures. They were proposals when announced, so their final form depends on legislation:
- Top-Up Tax Credit – to make sure the lower 14% rate does not reduce the value of non-refundable credits for people with larger claims, credits above the first bracket would continue to be calculated at 15% for 2025 to 2030.
- Automatic tax filing – the CRA would be able to file returns for certain lower-income Canadians so they do not miss benefits such as the GST/HST credit and the Canada Child Benefit.
- Personal Support Workers Tax Credit – a temporary refundable credit of 5% of eligible earnings, up to $1,100 a year, for 2026 to 2030.
What did not change
The proposed increase to the capital gains inclusion rate was cancelled in March 2025, so the inclusion rate remains one-half. The consumer carbon charge ended on April 1, 2025, and with it the quarterly Canada Carbon Rebate payments.
What this means for you
For most people, the lower rate means slightly less tax withheld from each paycheque. It is also a good time to review your RRSP, TFSA and FHSA plans with the new limits in mind.
Need a hand?
LMZ Accounting helps individuals and small businesses across Canada with bookkeeping, payroll, tax preparation and GST filing. Call us at (306) 450-0434, email leonardceo@lmzaccounting.com, or send us a message.
This article is general information, not tax or legal advice. Tax rules change and every situation is different, so talk to us about yours before you act.
