The lowest federal income tax bracket rate is now 14% (was 15% before July 1, 2025), the federal Basic Personal Amount rose to $16,452, and all four bracket thresholds were indexed up by approximately 2.7%. The other four bracket rates (20.5%, 26%, 29%, 33%) are unchanged. Provincial brackets and rates were also indexed by each province independently.
Changes at a glance
| Item | 2025 | 2026 |
|---|---|---|
| Lowest bracket rate | 15% (Jan-Jun) / 14% (Jul-Dec) | 14% (full year) |
| Lowest bracket cap | $57,375 | $58,523 |
| Second bracket cap (20.5%) | $114,750 | $117,045 |
| Third bracket cap (26%) | $177,882 | $181,440 |
| Fourth bracket cap (29%) | $253,414 | $253,414 |
| Federal Basic Personal Amount | $16,129 | $16,452 |
| Federal BPA tax credit | $2,419 at 15% | $2,303 at 14% |
What did not change
The 20.5%, 26%, 29%, and 33% bracket rates are unchanged. The basic personal amount phase-out for high-income earners (between $181,440 and $253,414) still applies, with the reduced 2026 BPA at $14,829.
Effect on payroll deductions
Employers updated payroll software in January 2026 to reflect the new brackets and BPA. Employees may notice slightly larger paycheques in 2026 because of the lowest-bracket rate cut and the BPA increase. The combined effect for a worker earning $60,000 of taxable income is a federal tax reduction of approximately $700 in 2026 versus a full-year-2025 calculation.
Provincial tax changes (separate)
Each province sets its own brackets and BPA. Most provinces also indexed brackets and BPAs in early 2026 by approximately 2.4% to 3% based on provincial CPI. Quebec and Newfoundland adjusted their lowest-bracket rates as well, but at different magnitudes than the federal change.
Related Canadian Money Help content
- Reference article: Federal Tax Brackets and Basic Personal Amount (2026)
- Reference article: Marginal vs Effective Tax Rate Explained (2026)
- Calculator: Canadian Federal Income Tax Calculator