The Working Canadians Rebate and Key 2025 Tax Updates You Should Know About
As we approach 2025, it’s important to take a moment and consider the upcoming changes to your personal tax preparation. The Canada Revenue Agency (CRA) has announced several significant updates that could affect your financial planning. One of the key changes is the introduction of the Working Canadians Rebate, along with adjustments to tax brackets and various contribution limits. This article will provide an overview of these updates and what they mean for you in the upcoming tax year.
What is the Working Canadians Rebate?
In 2025, the federal government will introduce new legislation in Parliament to provide a $250 Rebate to eligible Canadians. This rebate will be distributed in early spring 2025 and is designed to support individuals who worked during the 2023 tax year.
To be eligible for the Working Canadians Rebate, you must meet the following criteria:
- Worked in 2023 and filed your 2023 tax return by December 31, 2024.
- Have claimed the tax credit for Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) contributions on employment or self-employment earnings.
- Have claimed the tax credit for Employment Insurance (EI) or Quebec Parental Insurance Plan (QPIP) premiums on employment or self-employment earnings.
- Reported income from EI or QPIP benefits.
- Be a resident of Canada as of March 31, 2025.
- Not be incarcerated for a period of 90 days or more before April 1, 2025.
- Not be deceased as of April 1, 2025.
If you meet these requirements and your income was under $150,000, you will receive a tax-free $250 rebate.
Changes to 2025 Tax Figures
Each year, the CRA adjusts various tax thresholds and contribution limits to account for inflation. For 2025, the inflation rate used for these adjustments is 2.7%, which is lower than the previous year’s inflation rate of 4.7%. Here are some key changes that will affect your 2025 tax planning:
- Federal Tax Brackets
The federal income tax rates for 2025 will continue to range from 15% to 33%, but the income thresholds have been updated. The new tax brackets for 2025 are:
- 0 to $55,375 of income: 15% tax rate
- $55,375 to $114,750: 20.5% tax rate
- $114,750 to $177,882: 26% tax rate
- $177,882 to $253,414: 29% tax rate
- Above $253,414: 33% tax rate
These updated tax brackets mean that individuals with income in the higher ranges may see a slightly higher tax burden.
- Basic Personal Amount
The Basic Personal Amount (the income level at which no tax is paid) will increase to $16,129 for 2025. This means that more of your income will be tax-free. However, individuals earning more than $253,414 will see this amount phase out completely.
- EI Contributions
The contribution rate for Employment Insurance (EI) has increased to 1.64% for 2025, with a maximum contribution of $1,077.48 (note that the figures may differ for Quebec). This adjustment impacts employees and employers alike and may slightly reduce your take-home pay if you are subject to EI contributions.
- RRSP Contribution Limit
The contribution limit for Registered Retirement Savings Plans (RRSPs) will rise to $32,490 in 2025. This provides more room for tax-deferred retirement savings, potentially allowing you to reduce your taxable income while planning for retirement.
- OAS Repayment Threshold
For individuals receiving Old Age Security (OAS) benefits, the repayment threshold will increase to $93,454. If your income exceeds this amount, you may be required to repay some or all of your OAS benefits, so it’s important to keep track of your total income for the year.
- TFSA Contribution Limit
The Tax-Free Savings Account (TFSA) contribution limit remains at $7,000 for 2025, the same as last year. Although there is no increase, continuing to contribute to your TFSA will still help you grow your savings tax-free.
Why This Matters to You
These updates represent a significant opportunity for taxpayers to adjust their financial strategies. Whether it’s maximizing your RRSP contributions, understanding how changes to tax brackets will impact your taxable income, or preparing to receive the new Working Canadians Rebate, now is a great time to review your tax situation.
If you need help understanding how these new tax changes will affect your 2025 tax return, or if you have any questions about the Working Canadians Rebate or other updates, don’t hesitate to reach out to Rosen & Associates Tax Law. Our experienced team is available for a free consultation to provide personalized advice and help you navigate the complexities of the new
Schedule your free consultation with Rosen & Associates Tax Law today.
Michelle Kosarnia