Potential Tax Changes

Federal Tax Changes

1. Middle-Class Income Tax Cut

The federal government is implementing a reduction in the lowest personal income tax rate from 15% to 14%, effective July 1, 2025. This measure is expected to benefit approximately 22 million Canadians, with two-income households potentially saving up to $840 annually. The initiative is part of a broader $27 billion relief package aimed at easing the cost of living and stimulating economic growth.

2. Capital Gains Tax Policy

Prime Minister Mark Carney has canceled a previously proposed increase in the capital gains inclusion rate. However, the government will maintain the increased Lifetime Capital Gains Exemption limit of $1.25 million for the sale of small business shares, as well as farming and fishing properties.

3. Digital Services Tax (DST)

Canada’s 3% Digital Services Tax, targeting large tech companies with significant Canadian digital revenues, came into force on June 28, 2024. The first payments are due by June 30, 2025, covering revenues retroactive to January 1, 2022. This tax has led some companies, such as Google and Amazon, to implement surcharges on Canadian advertisers.

4. Removal of Federal Consumer Carbon Tax

In April 2025, the federal consumer carbon tax was set to 0%, effectively removing it. This action contributed to a decrease in Canada’s annual inflation rate to 1.7% in April, primarily due to a significant drop in energy prices