Canada’s 2026 Federal Tax Brackets – What the New Changes Mean for You

Published On: December 8, 2025

If you earn an income in Canada, 2026 could bring some noticeable changes to your paycheque. That’s because the Canada Revenue Agency (CRA) is updating federal income tax brackets and credits once again—this time, with a few significant shifts designed to offer some relief to middle- and lower-income earners.

With a 1% tax rate cut set to take full effect and bracket thresholds increasing due to inflation, here’s everything you need to know about how federal income tax in Canada will work in 2026.

Table of Contents

Brackets

Let’s start with the key numbers. In 2026, the lowest federal income tax rate will officially drop to 14%. This tax cut was originally introduced as part of a “middle-class tax cut” by Prime Minister Mark Carney’s government. While it was partially applied mid-2025 with a blended 14.5% rate, the full 14% rate kicks in across the board starting January 1, 2026.

Here’s a full breakdown of the federal income tax brackets for 2026:

Income Range	Tax Rate
$0 – $58,523	14%
$58,523 – $117,045	20.5%
$117,045 – $181,440	26%
$181,440 – $258,482	29%
Over $258,482	33%

Compared to 2025, each bracket has widened slightly to account for inflation indexing—a built-in adjustment that helps maintain your purchasing power as prices go up.

Inflation

Why do these brackets change every year? The answer is inflation.

Ryan Minor, director of tax at CPA Canada, explains that as goods and services become more expensive, tax brackets are adjusted upward so Canadians aren’t taxed more heavily just because their nominal income increased.

For example, if your salary went up 2% to keep pace with inflation, you shouldn’t be pushed into a higher tax bracket and end up with less take-home pay. Indexing the brackets keeps things fair and prevents “bracket creep.”

BPA

Another important number to watch is the Basic Personal Amount (BPA)—that’s the income you can earn tax-free at the federal level.

In 2025, the BPA is $16,129 for incomes under $177,882.
In 2026, the BPA increases to $16,452, for incomes under $181,440.

Above those income thresholds, the BPA gradually decreases until it bottoms out for high earners.

Here’s how the BPA translates into tax savings:

Year	BPA Amount	Tax Rate	Tax Credit Value
2025	$16,129	14.5%	$2,338.71
2026	$16,452	14%	$2,303.28

Though the tax credit amount is slightly lower in 2026 due to the reduced rate, the increase in the BPA still means more income stays tax-free.

Context

This shift in tax brackets and rates comes amid broader moves by the federal government to support middle-income Canadians, particularly as inflation has impacted the cost of living. These changes are part of an effort to:

Simplify the tax structure
Adjust thresholds to match inflation
Reduce the tax burden on lower earners

It’s also a signal that Ottawa is trying to offer relief through tax policy instead of direct cash transfers.

Future

Looking forward, the CRA will continue adjusting tax brackets annually. These updates are generally modest but important—especially for Canadians living paycheck to paycheck.

If your salary lands in the first or second bracket, the 2026 updates will likely result in a slightly smaller tax bill. Combine that with a higher BPA, and you’re looking at a few hundred extra dollars in your pocket each year.

Even higher earners benefit somewhat from the wider brackets, though their marginal tax rate remains unchanged.

As we move into 2026, keep an eye on how these changes affect your tax withholding and your overall financial plan. While the CRA’s updates may not seem dramatic, they do add up—especially over time.