By Unity Financial Services – Helping Canadians Save Smarter
Tax planning in Canada is never static. Each year, new rules and policy changes create fresh opportunities — and sometimes risks — for individuals, families, business owners, and investors.
Here’s what actually changed at the federal level in 2025, and how you can plan smarter to maximize your after-tax income.
🔑 Federal Tax Changes for 2025
1️⃣ Middle-Class Tax Cut
- What changed: Effective July 1, 2025, the lowest federal personal income tax rate drops from 15% to 14%. For the 2025 tax year the blended rate is 14.5%, and from 2026 onward it’s 14%.
- Why it matters: Lower-income earners will see slightly more take-home pay. Even modest savings can compound if you invest them in RRSPs, TFSAs, or FHSAs.
2️⃣ Capital Gains Inclusion Rate — Cancelled
- What changed: A 2024 proposal to raise the inclusion rate to 66.7% for large gains was first deferred to 2026, then cancelled in March 2025.
- Why it matters: The inclusion rate remains 50%. Investors and business owners don’t face higher tax on gains — but must still plan around thresholds and exemptions.
3️⃣ Lifetime Capital Gains Exemption (LCGE)
- What changed: Increased to $1.25 million (from ~$1.016M) effective June 25, 2024, and still applies in 2025.
- Why it matters: Small business owners, farmers, and fishers can now shelter more gains when selling shares or property — improving exit and retirement strategies.
4️⃣ Canadian Entrepreneurs’ Incentive (CEI)
- What changed: A new measure gradually lowers the capital gains inclusion rate to about 33.3% for eligible entrepreneurs, up to $2 million lifetime gains by 2029.
- Why it matters: Entrepreneurs who meet the criteria (founder ownership, active involvement, qualifying business type) could cut their tax bill significantly when selling.
5️⃣ RRSP Contribution Limit (2025)
- What changed: Increased to $32,490 (up from $31,560 in 2024).
- Why it matters: More contribution room means higher potential tax deferral. If you have unused room, catch-up contributions can make a big difference.
6️⃣ TFSA & FHSA Updates
- TFSA: Limit remains $7,000 for 2025.
- FHSA: Annual limit $8,000; lifetime max $40,000. Contributions are deductible, and qualifying withdrawals for a first home are tax-free.
- Why it matters: Together, these accounts let you grow wealth without tax drag. FHSA is especially powerful if you’re a first-time homebuyer.
🛠️ Tax-Saving Strategies for 2025
Here’s how Canadians can benefit from the current landscape:
- Maximize RRSPs: Reduce taxable income and defer tax.
- Use TFSAs strategically: Best for higher-growth investments (no tax on gains or withdrawals).
- Open and fund an FHSA: Combine immediate deductions with tax-free first-home savings.
- Leverage LCGE & CEI: Plan business succession or sale timing to qualify.
- Stay flexible on capital gains: Inclusion rate is stable at 50% for now, but keep an eye on future policy shifts.
- Claim credits & deductions: Medical expenses, childcare, tuition, and donations all reduce taxable income.
- Plan timing of income: Deferring large gains or bonuses into lower-income years can mean real savings.
🚨 What to Watch in 2025 and Beyond
- Future capital gains proposals: Though cancelled, similar changes could return.
- Final CEI details: Eligibility criteria and phase-in caps are still being refined.
- Provincial rules: Rates and credits differ across provinces.
- Inflation adjustments: Tax brackets and credit thresholds change annually.
📌 Bottom Line
- Everyday Canadians benefit most from the middle-class tax cut, higher RRSP room, and continued TFSA/FHSA advantages.
- Entrepreneurs and investors should focus on the LCGE and CEI to reduce taxes on business sales.
- As always, plan around current law — not proposals — and stay updated.
At Unity Financial Services, we help Canadians across the country file smarter, save more, and prepare for changes.
📞 Call us: 438-701-3770
🌐 Visit: unityfs.ca
Take control of your taxes in 2025 — and keep more of what you earn.