In 2025, several income tax changes in Canada will affect seniors. Here are five key updates:
- Adjusted Federal Income Tax Brackets: The federal income tax brackets have been indexed to a 2.7% inflation rate for 2025. This adjustment means that income thresholds for each tax rate have increased, potentially reducing the overall tax payable for seniors.
- Increased Basic Personal Amount (BPA): The BPA, which is the non-taxable portion of income for all Canadians, has risen to $16,129 in 2025. This increase allows seniors to earn more income before paying federal income tax.
- Higher Registered Retirement Savings Plan (RRSP) Contribution Limits: The RRSP contribution limit for 2025 has increased to $32,490, up from $31,560 in 2024. Seniors with earned income can benefit from this change by contributing more to their RRSPs, thereby reducing their taxable income.
- Old Age Security (OAS) Clawback Threshold Adjustment: The OAS recovery tax, commonly known as the clawback, now applies to individuals with net world income exceeding $90,997 for the 2025 income year. This threshold has increased from the previous year, allowing seniors to have a higher income before OAS benefits are reduced.
- Enhanced Canada Pension Plan (CPP) Benefits: As part of the ongoing CPP enhancement program, benefits have increased by 2.7% in 2025. The maximum monthly CPP benefit is now $1,433.00, up from previous amounts. This enhancement aims to provide greater financial support to retirees.
These changes are designed to provide financial relief and support to Canadian seniors in 2025. Contact our office to make sure you are ready for the 2025 tax filing season. Preparing early will make sure that filing your tax return is as stress free as possible. We are here to help you.