Middle-class Canadians are getting a tax cut on Canada Day. Here's what to know

Calgary Herald

7 hours ago

With a middle-class tax cut promised by Prime Minister Mark Carney and the Liberal government coming into effect Tuesday, some Canadians in the lowest tax brackets may find extra cause to celebrate Canada Day.
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While dropping the lowest marginal personal income tax rate from 15 to 14 per cent is expected to offer immediate relief to some, there are questions about how much people are actually saving and whether those who need it most are benefiting.
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Here's what you need to know about the tax cut.
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When announced after the election and cabinet swearing in, Minister of Finance François-Philippe Champagne said the measure would deliver upwards of $27 billion in tax savings to more than 22 million Canadians over five years, starting in the 2025-26 tax year.
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Since the change is being implemented in July, the full-year tax rate for 2025 is adjusted to 14.5 per cent, dropping to 14 in subsequent years.
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Those with a job or other income where tax is taken out automatically might notice slightly more money on the paystubs starting in July, while others won't realize the savings until they file their taxes in spring 2026.
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The cut lowers the rate on the first $57,365 of taxable income, regardless of their income level, according to Finance Canada.
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The department noted the majority of the tax relief would be felt by those in the bottom two tax brackets, with those earning $57,365 and under benefiting from 45 per cent and those making $114,750 or less getting a 41 per cent share in 2025.
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The three highest brackets — $114,750 to $177,882; $177,882 to $253,414; and over $253,414 — pay 18, 10 and 20 per cent of the taxes and gain nine, three and two per cent, respectively, of the tax relief.
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In early June, a ways and means motion introduced by Champagne in the House of Commons to have the changes take effect for Carney's promised Canada Day deadline was passed unanimously. The actual legislation will still require approval and adoption when the House resumes in September.
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Because the tax cut is coming at the midway point of the year, the PBO analysis estimates an average savings of $90 this year, $190 in the following three years and $200 in 2029-30.