Almost 22 million Canadians getting income tax cut next week

Canada is set to move forward with its proposed middle-class income tax cut on Tuesday.

The federal government will deliver tax relief to Canadians by reducing the lowest marginal personal income tax rate from 15 per cent to 14 per cent, effective July 1.

According to Finance Canada, nearly 22 million Canadians are expected to benefit from the income tax cut.

The measure would reduce the tax rate that is applied to the first $57,375 of an individual's taxable income in 2025, regardless of their income level.

A majority of the tax relief will go to Canadians in the two lowest tax brackets (those with taxable income under $114,750 in 2025), including nearly half to those in the first bracket ($57,375 and below in 2025).

Ottawa says the maximum tax savings will be $420 per person and $840 per couple in 2026. All in all, this is expected to deliver over $27 billion in tax savings to Canadians over five years, starting in the 2025/2026 tax year.

Since the tax cut will take effect halfway through the year, Finance Canada states that the full-year tax rate for 2025 will be 14.5 per cent and the full-year rate for 2026 and future tax years will be 14 per cent. The rate applying to most non-refundable tax credits will remain the same as the lowest personal income tax rate.

The Canada Revenue Agency (CRA) will update its source deduction tables for the period from July to December 2025, allowing pay administrators to reduce tax withholdings as of July 1.

"This means that, effective July 1, individuals with employment income and other income subject to source deductions could have tax withheld at 14 per cent," explained the government in the initial announcement in May. "Otherwise, individuals will realize this tax relief when they file their 2025 tax returns in Spring 2026."

The House of Commons voted unanimously in favour of the Liberals' proposed income tax cut earlier this month.

Experts have argued that this measure won't be enough to combat the cost-of-living crisis, suggesting that the federal government needs to increase benefits and credits, as well as affordable housing assistance.