It’s time to start collecting your tax documents because the 2025 personal income tax season is here. The deadline for filing your tax return is April 30 – or June 15 if you or your spouse is self-employed. Here are some important points to keep in mind when filing your 2025 tax return.
Middle-class tax cut
Effective July 1, 2025, the federal tax rate for the lowest income tax bracket was reduced from 15.0% to 14.0% (net effect for 2025 was 14.5%). This is expected to provide individuals in this tax bracket cost savings of up to $420 per year. As this marginal tax rate also applies to most tax credits (basic personal amount, disability tax credit, medical expenses, etc.), there is a top-up tax credit to reduce the effect of the above rate reduction. This credit is in effect for the 2025 to 2030 tax years.
RRSP and TFSA limits
If you have a registered retirement savings plan (RRSP), you may contribute up to 18% of your prior year’s earned income to a maximum of $32,490 for the 2025 tax year (increased from $31,560 in 2024). You have until March 2, 2026, to make the contribution to be eligible to claim this on your 2025 tax return. Any unused contribution room continues to carry forward indefinitely.
For those with a tax-free savings account (TFSA), the annual contribution limit remains $7,000 for 2025 (and set to remain $7,000 for 2026). Unused TFSA contribution room is carried forward each year. Caution should be used when checking the CRA’s My Account for TFSA unused contribution room as this has not been accurately updated by the CRA.
Canada Pension Plan increases
Canada Pension Plan (CPP) contributions have continued to increase. CPP contributions are calculated using two income thresholds:
- The first limit, called the year’s maximum pensionable earnings (YMPE), is the income amount on which standard CPP contributions are made. For 2025, this limit is $71,300 and the maximum contribution was $4,034.10.
- A second, higher limit called the year’s additional maximum pensionable earnings (YAMPE) applies to higher earners. Introduced in 2024, it requires additional CPP contributions (often referred to as “CPP2”) on income above the first limit. For 2025, this second ceiling is $81,200 and the maximum contribution for CPP2 was $396.
If you’re self-employed, you pay both the employer and employee portions of the CPP.
For the 2026 tax year both will increase, to $4,230.45 (standard CPP) and to $416 (CPP2).
Digital news subscription tax credit
Gone are the days when you can claim a non-refundable tax credit for buying online subscriptions to qualified Canadian journalism organizations. This 15% credit ($75 maximum per year) was eliminated for the 2025 tax year. However, if you are self-employed, you may be able to deduct the costs of digital subscriptions used for business purposes.
Multi-generational home renovation tax credit
The multi-generational home renovation tax credit (MGHRTC) is a refundable federal tax credit that allows families to claim 14.5% (was 15% in 2024, will be 14% in 2026) of eligible renovation expenses (up to $50,000) for creating a secondary unit within an existing home. The renovation must allow a senior (65 plus) or an adult eligible for the disability tax credit to live with a qualifying family member. The maximum credit is $7,500 per qualifying renovation.
One consideration in creating a secondary unit in an existing home (regardless of whether the MGHRTC is claimed or not) is the CRA’s recent position that a secondary unit may not qualify for the principal residence exemption. Ensure that you discuss this with your tax professional if you are creating or disposing of a secondary unit.
Sales of residential property
If you sold residential property during the year, you need to consider whether you are impact by either the federal property flipping tax rules or the BC home flipping tax. The federal flipping tax, subject to properties disposed within 365 days of their acquisition, is effectively the recharacterization of the capital gain on the disposition to business income. This is done in your personal tax return for the year.
The BC home flipping tax requires a separate tax return to be filed for dispositions within 730 days of the acquisition dates. This tax starts at 20% of the gain portion and declines over time. This separate return is due within 90 days of the disposition date.
There are different exemptions for each of these taxes, including exemptions for changes in life circumstances.
Forgetting to disclose
If you forget to disclose some income sources or file an information return, consider using the Voluntary Disclosure Program (VDP). Changes to this program in October 2025 have made it easier to use. Using the VDP may result in the waiving of both penalties and interest; however, if the CRA finds income that was not previously reported or disclosed, there can be some significant penalties for the failure to report.
Reminders about CRA correspondence
Remember that if you are registered for the CRA’s My Account, the CRA may post your notice of assessment and other correspondence only in your account. The CRA will send you an email notifying you of mail in your account.
You are deemed to receive the correspondence once it is delivered to your CRA account, even if you don’t read it. Not reviewing your CRA correspondence might limit your ability to object or appeal a CRA notice. You may only get correspondence delivered by Canada Post if you have set your preferences to letter mail or you don’t have a My Account set up. Note that email from the CRA will never including a hyperlink or anything asking you to “click here.” This is the easiest way to identify a spam email posing as the CRA.
Disclaimer: This article is not intended as financial advice, and you should not make financial decisions based solely on the information presented. Tax rules can be complex. This article is not intended as tax advice, and you should not make tax decisions based solely on the information presented. You should seek the advice of a chartered professional accountant before implementing a tax plan or taking a tax filing position.
Shane Schepens, CPA, CA, is a principal at Clearline CPA and works in tax, with a focus on corporate reorganizations, estate planning, and succession planning. He helps businesses and their shareholders minimize income tax and creates business structures that are functional for both business and tax purposes. Shane has over 20 years of tax planning experience, has completed the In-Depth Tax courses, and teaches tax courses for CPABC.
