Canada 2026 Tax Rates and Key Tax ChangesPosted on January 13, 2026

2026 Federal Income Tax Brackets

The most notable change in this reform is that the federal tax rate for the lowest income bracket is officially set at 14% for the first time. The rate, which had previously been 15%, was reduced to 14% effective July 1. As a result, the effective rate for the 2025 tax year is applied on an average basis at 14.5%.

Beginning 2026, the full-year rate of 14% will apply, meaning many workers and households are expected to notice changes in both taxes payable and refunds. There are no changes to the tax rates applied to the higher income brackets.

In addition, the income thresholds for 2026 have been increased to reflect an inflation adjustment of 2%. For reference, the inflation adjustment applied in 2025 was 2.7%, compared to 4.7% in 2024, and 6.3% during the high-inflation period in 2023.

• Up to $58,523: 14%

• Over $58,523 to $117,045: 20.5%

• Over $117,045 to $181,440: 26%

• Over $181,440 to $258,482: 29%

• Over $258,482: 33%

Other Major Tax Changes

1. Basic Personal Amount (BPA)

The Basic Personal Amount (BPA), which is the amount of income exempt from federal income tax, will increase to $16,452 in 2026. No federal income tax is payable on income up to this amount. For individuals with income of $181,440 or less, the full BPA applies, providing a maximum federal non-refundable tax credit of $2,303, calculated at the 14% tax rate.

2. Canada Pension Plan (CPP)

The base contribution rate remains unchanged at 5.95% for both employees and employers. However, the Year’s Maximum Pensionable Earnings (YMPE) will increase to $74,600, raising the maximum annual contribution to $4,230.45.

In addition, under the CPP second-tier contributions introduced in 2024, income earned between $74,600 and $85,000 will be subject to additional contributions. Employees and employers will each contribute an extra 4%, while self-employed individuals will pay 8% on this income range.

3. Employment Insurance (EI)

The employee contribution rate will decrease by 0.01% to 1.63% (or 1.30% in Quebec). The maximum insurable earnings will rise to $68,900, resulting in a maximum employee contribution of $1,123.07 (or $895.70 in Quebec). Employers will contribute at a rate of 2.28%.

Other Notable Changes

• The TFSA annual contribution limit remains unchanged at $7,000.

• The RRSP contribution limit increases to $33,810.

• The Old Age Security (OAS) clawback threshold rises to $95,323. Income above this level will result in a reduction of OAS benefits in the following year.

• The prescribed interest rate for the first quarter of 2026 remains at 3%. The CRA interest rate on refunds is set at 5% (the prescribed rate plus 2%), while arrears will accrue interest at 7%.