The coming year will see some changes to existing tax measures, the abandonment of others and some help for personal support workers. But overall changes to the taxes individuals pay will be minor in 2026.
Daniel Rogozynski, an accountant and professor at the University of Waterloo, says the changes impacting individuals in 2026 could best be described as “a snoozefest.”
“We were waiting for months for something that was going to be; ‘wow, that’s a big change, that really changes, you know, the game for Canadians versus Americans and the rest of the world in terms of competitiveness,” Rojozyski said.
“It just wasn’t there.”
He says the change Canadians are most likely to notice is the one percentage point reduction to the lowest marginal tax rate — taking it from 15 per cent to 14 per cent.
That measure was promised during the election campaign and first came into effect July 1, 2025, when taxes on the first $57,375 earned were only taxed at 14.5 per cent. (tax measures introduced in the middle of a tax year start at half the rate and then bump up to the full cut the following year).
Each year tax brackets increase to account for inflation, which means that beginning Jan. 1 the rate drops to 14 per cent on the first $58,523 someone earns in 2026.
When the measure was rolled out, Finance Canada projected maximum tax savings of $840 per couple with two incomes. In June Yves Giroux, the previous parliamentary budget officer, said a two-income couple with a child would only get about $750 in average savings in 2026.
The budget also implements a new refundable tax credit for personal support workers worth five per cent of eligible earnings to a maximum of $1,100, which means anyone earning at least $22,000 annually qualifies for the full amount.
The credit is temporary and, for now at least, will only be available for the 2026 to 2030 tax years.
To be eligible for the credit, a personal support worker has to be employed by an eligible health-care establishment, which the budget defines as: “hospitals, nursing care facilities, residential care facilities, community care facilities for the elderly, home health-care establishments and other similar regulated health-care establishments.”
To qualify as a personal support worker, the budget says the individual must provide one-on-one care in order to “maintain another individual’s health, well-being, safety, autonomy and comfort.”
The credit does not apply to people in British Columbia, Newfoundland and Labrador and the Northwest Territories because those provinces have deals with the federal government to increase wages for those workers.
Over the past two years there have been proposals to change capital gains inclusion rates and exemptions in a way that created confusion over what did and did not apply, but those measures were cleared up and simplified in the 2025 federal budget.
Carney’s first budget increases the lifetime capital gains exemption when selling eligible small business shares, a farm or fishing property from just over $1 million to $1.25 million, making it retroactive to June 25, 2024.
A capital gain is the difference between the cost of an asset — an investment property, a stock or a mutual fund — and its total sale price.
“So if you have a plumbing company or you have a distribution company and you sell it for $1.25 million more than what you paid for it, you have no tax to pay,” Rogozynski said. “That’s a big incentive for people to go out and start businesses.”
Rogozynski says that to make up for this measure, which is good for small businesses but cuts into federal revenues, the Liberal government announced in budget 2025 that it was eliminating a measure announced in the 2024 budget that never became law: the Canadian Entrepreneurs’ Incentive.
The incentive would have reduced the inclusion rate from the proposed two-thirds to one-third on a lifetime maximum of $2 million in capital gains for business owners that were set up as Canadian-controlled private corporations (CCPC).
In the 2024 budget, the federal government also had announced increases to the capital gains tax inclusion rate for businesses and some individuals.
But a couple of days before the start of the 2025 federal election, Prime Minister Mark Carney announced the proposed capital gains hikes would be scrapped.
The new year will be the third implementing the enhanced Canada Pension Plan (CPP) contribution requirements. Under those rules, two ceilings are used to determine the maximum CPP contributions individuals have to pay.
The first ceiling for 2026 is now $74,600, up from $71,300 in 2025. To work out the maximum contribution for an employee, the contribution rate of 5.95 per cent is applied to the maximum of the first ceiling, once the $3,500 basic exemption is factored in.
That means that in 2026, the first ceiling maximum contribution for an employee is $4,230.45. The employer pays a matching amount for a total maximum contribution per employee of $8,460.90.
The second ceiling in 2026 is $85,000, up from $81,200 in 2025.
To work out the maximum CPP contribution under the second ceiling, employees have to take the difference between $74,600 and $85,000, which is $10,400, and multiply that amount by the lower contribution rate of four per cent to get $416. Employers make a matching contribution of this same amount.
Beginning Jan. 1, federal income tax bracket thresholds in Canada, which increase in line with inflation, will rise two per cent across all brackets, compared to a 2025 rise of 2.7 per cent and a 2024 rise of 4.7 per cent.
Provinces have their own income tax brackets, but for 2025 the federal thresholds will now be:
The maximum insurable earnings ceiling for employment insurance rises to $68,900 starting Jan. 1, up from $65,700 in 2025. That means the new maximum annual EI contribution for a worker will increase to $1,123.07, up from $1,077.48 in 2025.
Employers contribute a matching amount of 1.4 multiplied by the employee contributions for a maximum contribution in 2026 of $1,572.30 up from $1,508.30 last year.
The annual tax-free savings account (TFSA) contribution amount in 2026 will remain at $7,000.
Basic personal exemption amounts have also been adjusted to account for inflation depending on income and family situation.
