Canada’s 2025 Tax Season: What You Need to Know

Opening of Tax Season and Key Changes

Canada’s 2025 tax season officially opened on Monday, marking the start of a period where Canadians can file their income tax and benefit returns online. This year, there are several key changes that could impact household finances, making it a good idea for individuals to carefully review their tax situations. Financial expert Clay Jarvis of NerdWallet Canada emphasizes that with the financial stress many Canadians are currently facing, it’s essential to ensure every eligible tax credit is claimed. The Canada Revenue Agency (CRA) reported that over 33 million returns were filed last year, resulting in more than 19 million refunds, with an average refund amount of $2,294.

The deadline for most individuals to file their taxes and pay any owed amounts is April 30. Missing this deadline could result in penalties and interest. Self-employed Canadians have a later deadline of June 15 to file their tax returns, but any taxes owed must still be paid by April 30 to avoid interest. Jarvis advises filers to start early, especially if their tax situation is complex, as this can lead to a smoother process, quicker refunds, and more time to address any issues or gather necessary documents.

Federal Tax Brackets and Contributions for 2025

The federal income tax brackets for 2025 have been adjusted to account for inflation, increasing by 2.7%, following a 4.7% increase in 2024. The brackets are as follows:

• 15% on earnings up to $57,375.
• 20.5% on earnings between $57,375.01 and $114,750.
• 26% on earnings between $114,750.01 and $177,882.
• 29% on earnings between $177,882.01 and $253,414.
• 33% on earnings above $253,414.

In addition to federal taxes, provinces and territories apply their own tax rates based on individual income levels.

Other key updates include increases to the Registered Retirement Savings Plan (RRSP) contribution limit, which has risen to $32,490 for the 2025 tax year, up from $31,560 in 2024. The Year’s Maximum Pensionable Earnings (YMPE) for 2025 has also increased to $71,300, up from $68,500 in the previous year. This adjustment impacts contributions to the Canada Pension Plan (CPP). For employees and employers, the maximum CPP contribution for 2025 is $4,034.10, up from $3,867.50 in 2024, while the contribution rate remains unchanged at 5.95%. Self-employed individuals face a higher rate of 11.90%, with a maximum contribution of $8,068.20.

The contribution room for Tax-Free Savings Accounts (TFSAs) remains unchanged at $7,000 for 2025. The basic personal amount (BPA), which determines the income level on which federal income tax is not payable, now ranges from $14,538 to $16,129, depending on overall income. This represents an increase from the 2024 range of $14,256 to $15,705.

Updates to CRA Services and Filing Processes

The CRA has introduced several improvements to its online services for the 2025 tax season. A streamlined sign-in process now allows users to access My Account, My Business Account, and Represent a Client portals with a single sign-in, reducing the need for multiple logins. Additionally, the CRA has launched a new document verification service and an online chat function, enabling users to seek assistance from CRA agents directly through their My Account portal.

Jarvis underscored the importance of leveraging digital services, whether through the CRA or CRA-approved tax filing platforms, for those who choose to file their taxes independently.

Automatic Tax Filing and Capital Gains Updates

More than two million Canadians with low or fixed incomes and straightforward tax situations will now have access to the CRA’s SimpleFile by Phone service, while a new digital option is also available for individuals who have filed their taxes in recent years. This free automatic tax filing service is designed for those with unchanged tax circumstances year-over-year. Eligible Canadians will receive invitation letters by mail or through their CRA accounts over the coming months.

In other news, the federal government has delayed plans to increase the capital gains inclusion rate until January 1, 2026. This means the current inclusion rate of 50% will remain in place for now, providing relief to wealthier Canadians who would otherwise face higher taxes. While the CRA is working to update its systems to reflect this change, filers affected by capital gains may want to wait until these updates are complete to avoid processing delays.

Employment Insurance and Gig Worker Considerations

The maximum insurable earnings under Employment Insurance (EI) have increased to $65,700 for 2025, up from $63,200 in 2024. The maximum annual EI premium for employees has also risen to $1,077.48, while the maximum weekly EI benefit rate has increased to $695, up from $668.

Jarvis emphasized the importance of gig workers, particularly those new to Canada, familiarizing themselves with Canadian tax laws to ensure they are taking full advantage of available credits and benefits. He also highlighted the availability of free tax advice for low-income gig workers through tax clinics.

Filing Tips and Responsible Use of Refunds

Jarvis advises Canadians to approach tax refunds responsibly, treating them as a return of their own money rather than a windfall. He recommends using refunds to pay off debt, save for emergencies, or invest for the future. For those working from home, Jarvis suggests carefully reviewing expenses and deductions related to remote work to ensure all eligible tax credits are claimed.

With the CRA’s updated tools and expanded services, filing taxes in 2025 is more accessible than ever. However, staying informed and seeking assistance when needed remains crucial for making the most of this tax season.