Almost 22 Million Canadians to See Income Tax Cut Starting July 1
Starting Tuesday, July 1, nearly 22 million Canadians will benefit from a federal income tax cut. This cut is designed to provide financial relief to the middle class. The lowest marginal personal income tax rate will drop from 15% to 14%. This change will offer savings to anyone earning taxable income in Canada.
How Much Will You Save?
The tax cut applies to the first $57,375 of taxable income for the 2025 tax year. According to Finance Canada, the full annual savings will reach up to:
- $420 per individual
- $840 per two-income couple
However, because the cut comes into effect mid-year, the effective tax rate for 2025 will be 14.5%, dropping to a full 14% starting in 2026 and beyond.
The measure targets the two lowest federal tax brackets, benefiting Canadians earning up to $114,750 annually. Nearly half the relief will go to those earning $57,375 or less.
How It Works
Starting next week, the Canada Revenue Agency (CRA) will update its source deduction tables, allowing employers to begin withholding less tax on paycheques. That means many working Canadians will see more take-home pay starting in July.
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If the system doesn’t withhold your taxes at the new rate, you will receive the savings when you file your 2025 tax return in spring 2026.
“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,” the federal government explained.
$27 Billion in Tax Relief Over Five Years
This tax reduction is expected to provide over $27 billion in relief over five years, beginning in the 2025–2026 tax year. The House of Commons unanimously approved the plan earlier this month.
Despite the move, economists and policy experts have argued that the tax cut alone won’t be enough to tackle the broader cost-of-living crisis. Many are calling for enhanced benefits, tax credits, and affordable housing support to go alongside these tax measures.
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Do you think this tax cut will make a real difference in your monthly budget?
More…
- https://www.canada.ca/en/department-finance/news/2025/05/government-of-canada-delivering-middle-class-tax-cut.html
- https://www.blogto.com/city/2025/06/income-tax-cut-canada-july-2025
- https://www.financialexpress.com/business/investing-abroad-big-tax-relief-for-middle-class-canadians-announced-two-income-families-save-up-to-840-a-year-in-2026-3848063
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