Canada 2026 Tax Brackets and CRA Changes: New Rates, CPP/EI, TFSA and RRSP Limits Explained

As of December 3, 2025, Canadians finally have a clear picture of what their 2026 tax year will look like. The Canada Revenue Agency (CRA) has published its 2026 indexation fact sheet, and Ottawa’s “middle‑class tax cut” is beginning to filter through the numbers. ^[1]

Since November 27, Jamie Golombek’s deep‑dive on the new CRA figures, CTV News’ explainer on how much you’ll be taxed in 2026, and a fresh Global News story on December 2 about changing federal tax brackets have all pushed these changes into the headlines. ^[2]

Here’s a detailed breakdown of what’s changing — and what it means for your paycheque, your retirement savings, and your 2026 tax return.

Quick snapshot: What’s changing in 2026?

Indexation and tax brackets

The CRA is using a 2.0% indexation factor for 2026, which nudges most federal tax brackets, benefit amounts and non‑refundable credits up by 2%. ^[3]
The 2026 federal income tax brackets (before provincial tax) are now: ^[4]
- Up to $58,523 of taxable income
- Over $58,523 to $117,045
- Over $117,045 to $181,440
- Over $181,440 to $258,482
- Over $258,482
The CRA and tax reference sites confirm that the lowest federal rate is set to be 14% for 2026, down from the long‑standing 15%, with an effective 14.5% rate in 2025 because the cut kicked in mid‑year. ^[5]

Bottom line: Most Canadians will see slightly more income in the lowest tax brackets and a lower rate on that first slice of income in 2026, assuming Parliament fully enacts the planned rate cut.

Basic Personal Amount (BPA)

The Basic Personal Amount — the income you can earn before paying any federal tax — rises to $16,452 in 2026 for people with net income up to $181,440. ^[6]
For high earners, the enhanced BPA phases out between $181,440 and $258,482 and bottoms out at $14,829 for those above the top bracket threshold. ^[7]

CPP and EI payroll deductions

CPP (Canada Pension Plan):
- Year’s maximum pensionable earnings (YMPE) jump to $74,600 in 2026 from $71,300 in 2025. ^[8]
- The contribution rate stays at 5.95% on earnings between $3,500 and the YMPE, with a maximum employee contribution of $4,230.45 (and the same again from your employer). ^[9]
- A second earnings ceiling (YAMPE) of $85,000 continues to apply to the newer CPP2 layer of contributions for higher earners. ^[10]
EI (Employment Insurance):
- Maximum insurable earnings rise to $68,900 in 2026, up from $65,700 in 2025. ^[11]
- The federal EI premium rate drops slightly to 1.63% (from 1.64%) with a maximum employee premium of $1,123.07 and a maximum employer premium of $1,572.30. ^[12]

Registered plans and savings limits

TFSA annual contribution limit remains $7,000 in 2026, bringing the cumulative room to $109,000 for someone eligible since 2009. ^[13]
RRSP dollar limit for 2026 rises to $33,810, though you’re still capped at 18% of your previous year’s earned income, plus any unused room. ^[14]
FHSA (First Home Savings Account) limits are unchanged: $8,000 per year, $40,000 lifetime per eligible first‑time homebuyer. ^[15]

Seniors, benefits and interest rates

The Old Age Security (OAS) clawback threshold moves up to $95,323 of net income in 2026. ^[16]
Key benefits such as the GST/HST credit, Canada Child Benefit (CCB) and Canada Workers Benefit (CWB) are all indexed by the same 2% factor, boosting maximum amounts and thresholds. ^[17]
The prescribed CRA interest rate for Q1 2026 stays at 3%, which means 5% interest on refunds the CRA owes you and 7% interest on balances you owe them. ^[18]

1. Why 2026 looks different: 2% indexation meets a tax‑rate cut

Each year, the CRA “indexes” key tax amounts — brackets, credits and benefit thresholds — using a formula based on average inflation over the 12 months to September 30. For 2026, the indexation factor is 1.02, or 2%, down from 2.7% used to set 2025 amounts. ^[19]

On top of this routine inflation adjustment, the federal government has put forward a “middle‑class tax cut” that reduces the lowest federal rate from 15% to 14%, effective July 1, 2025. Global News reports that the CRA’s own guidance treats this as: ^[20]

an effective rate of 14.5% for 2025, because the cut only applies to the second half of that year; and
a full‑year rate of 14% for 2026 and beyond, assuming the legislation is fully enacted.

TaxTips.ca, which tracks CRA confirmations, notes that the CRA has already incorporated the 14% rate into its 2026 payroll formulas and credit calculations. ^[21]

Translation:

Indexation stops “inflation‑driven bracket creep” by lifting the brackets and credits.
The rate cut actually lowers the tax bite on your first slice of income.
Together, the two changes mean most low‑ and middle‑income earners should see a modest drop in federal income tax in 2026, before provincial tax and payroll contributions are factored in.

2. 2026 federal income tax brackets: where your income falls

Putting the indexation factor and rate cut together, the 2026 federal brackets and rates (excluding provincial tax) look like this for most taxpayers: ^[22]

14% on taxable income up to $58,523
20.5% on income over $58,523 to $117,045
26% on income over $117,045 to $181,440
29% on income over $181,440 to $258,482
33% on income over $258,482

Compared with 2025, each bracket threshold is roughly 2% higher, so a bit more of your income stays in lower brackets. ^[23]

Global News highlights the same thresholds and notes that this widening is meant to preserve purchasing power: as prices rise, you shouldn’t be pushed into higher tax brackets purely due to inflation. ^[24]

3. Basic Personal Amount: more tax‑free income

The Basic Personal Amount (BPA) is one of the most important numbers in the tax system — it’s the amount of income you can earn before paying any federal income tax.

For 2026: ^[25]

The maximum BPA rises to $16,452, up from $16,129 in 2025.
You get the full $16,452 if your net income is $181,440 or less (the start of the 29% bracket).
The enhanced portion of the BPA is phased out between $181,440 and $258,482.
At incomes above $258,482, you’re left with the “old” BPA, indexed up to $14,829 in 2026.

The value of the BPA is turned into a non‑refundable tax credit by multiplying it by the lowest federal rate — 14% in 2026. That makes the maximum federal credit worth about $2,303 for those who qualify. ^[26]

Practically speaking:

Low and middle earners: a slightly larger slice of your income is tax‑free in 2026.
Higher earners: the enhancement to the BPA is partially or fully clawed back, so the benefit shrinks as your income rises through the fourth and fifth brackets.

4. CPP and EI in 2026: more off the top for higher earners

Even if your federal income tax bill shrinks, your payroll deductions may tell a more complicated story.

Canada Pension Plan (CPP)

From 2026: ^[27]

YMPE (maximum earnings for regular CPP contributions): $74,600
Basic exemption: still $3,500
Employee/employer rate: 5.95% (each)
Maximum regular CPP (CPP1) contribution: $4,230.45 for both the employee and employer
Self‑employed rate: 11.9%, with a maximum of $8,460.90

On top of that, CPP’s enhancement adds a second tier: ^[28]

Earnings between $74,600 and $85,000 are subject to CPP2 contributions at a 4% employee/employer rate (8% for self‑employed), with a modest additional maximum.

For someone earning at or above the YMPE, the maximum regular CPP contribution rises by about $196 in 2026 compared with 2025. ^[29]

Employment Insurance (EI)

The EI structure in 2026 looks like this (federal, outside Quebec): ^[30]

Maximum insurable earnings: $68,900 (up from $65,700 in 2025)
Employee premium rate: 1.63% (down from 1.64%)
Maximum employee premium: $1,123.07
Maximum employer premium: $1,572.30

What this means in real life:

If your income is below $65,700, you actually pay slightly less EI in 2026 thanks to the lower rate.
If your income is at or above $68,900, your annual EI contribution increases by about $46 relative to 2025 because more of your pay is insurable. ^[31]

So while federal income tax may be falling, high earners will see some of that offset by higher CPP (and, at the top, EI) deductions.

5. TFSA, RRSP and FHSA: 2026 contribution room

TFSA: limit frozen at $7,000

The Tax‑Free Savings Account (TFSA) annual dollar limit stays at $7,000 for 2026, the third straight year at that level. ^[32]

Because TFSA room accumulates over time, someone who has been eligible since 2009 and has never contributed will have $109,000 of total room by 2026. ^[33]

RRSP: higher dollar limit

The RRSP dollar limit for 2026 is $33,810, up from $32,490 in 2025. ^[34]

You can contribute the lesser of:

18% of your 2025 earned income (employment & net self‑employment income, plus certain other amounts), and
$33,810,
plus any RRSP room you carried forward from past years.

FHSA: homebuyers’ tax‑advantaged account

The relatively new First Home Savings Account (FHSA) is unchanged for 2026: ^[35]

Annual contribution limit: $8,000
Lifetime limit: $40,000 per eligible individual
Contributions are tax‑deductible, and qualifying withdrawals to buy a first home are tax‑free, combining features of both RRSPs and TFSAs.

If you’re planning a home purchase in the next decade, this unchanged FHSA limit is still one of the most powerful tools in the system.

6. Benefits and credits: small but meaningful increases

The CRA’s 2026 indexation table also bumps up a wide range of credits and benefits by around 2%. ^[36]

Some highlights:

GST/HST credit: maximum adult and child amounts rise (for example, the adult maximum moves to $356 in 2026, up from $349). ^[37]
Canada Child Benefit (CCB):
- Base amounts for children under 6 and ages 6–17 are higher in 2026, with phase‑out thresholds also indexed. ^[38]
Canada Workers Benefit (CWB): maximum benefits and phase‑out thresholds increase, slightly expanding support for low‑income workers. ^[39]
Disability amount, age amount, caregiver amounts and other non‑refundable credits all get similar 2% bumps. ^[40]

These changes are smaller on a per‑person basis than the bracket and rate changes, but they matter, especially for families with children, low‑income workers and Canadians with disabilities.

7. How much less tax will you pay? Sample federal‑only scenarios

To get a feel for the impact, consider approximate federal income tax (before provincial tax, CPP/EI and other deductions) for someone who claims only the BPA and has employment income only. Using the 2025 and 2026 brackets, rates and BPAs, you get roughly: ^[41]

These figures are rough estimates for illustration, not precise tax calculations. Your actual tax will vary.

Taxable income: $40,000
- 2025 federal tax: ≈ $3,460
- 2026 federal tax: ≈ $3,300
- Savings: about $150–$170
Taxable income: $60,000
- 2025: ≈ $6,500
- 2026: ≈ $6,200
- Savings: roughly $300–$330
Taxable income: $80,000
- 2025: ≈ $10,600
- 2026: ≈ $10,300
- Savings: also roughly $300–$330
Taxable income: $120,000
- 2025: ≈ $19,100
- 2026: ≈ $18,650
- Savings: roughly $450

For incomes in this range, federal tax savings from the 2026 numbers are generally on the order of a few hundred dollars, before you factor in CPP and EI:

At $40,000–$60,000, small EI reductions may partially offset CPP increases, leaving you with a modest net gain in take‑home pay. ^[42]
At $80,000+, you benefit from the lower tax rate and wider brackets but also pay more CPP and EI at the maximum, trimming your net pay increase.

Actual results will depend heavily on:

your province or territory of residence
your personal credits (spouse, children, disability, etc.)
RRSP and FHSA contributions
other income (investments, rental, business)

8. What should Canadians do before and during 2026?

A few practical steps to consider as these 2026 numbers settle in:

Update your tax planning with 2026 brackets
- Use an up‑to‑date calculator or speak with a professional to refresh your 2026 tax projections, especially if you’re close to a bracket threshold or the OAS clawback line.
Adjust payroll and withholding
- If you’re an employer or self‑employed, make sure your payroll software is updated for 2026 CPP/EI and tax tables. The CRA’s T4127 guide and CPP/EI rate pages are the technical source of truth. ^[43]
Maximize registered plan contributions
- Consider RRSP contributions before the 2025 deadline to reduce taxable income that will be used to calculate your 2026 RRSP room.
- Plan TFSA contributions to use the extra room as of January 1, 2026.
- If you’re saving for a first home, open an FHSA so your contribution room starts accumulating.
Review retirement and benefit planning
- If you’re near or above the OAS clawback threshold, higher thresholds in 2026 might slightly reduce your clawback or allow more income before it kicks in. ^[44]
Keep an eye on Parliament
- Global News notes that the 14% lowest rate is still tied to legislation working its way through Parliament. ^[45]
- While CRA formulas already assume the rate cut, there’s still a small legislative “what‑if” factor. Any last‑minute changes would be reflected in updated CRA guidance.

9. The takeaway

Taken together, the 2026 CRA tax numbers deliver:

modest federal income tax cuts for most Canadians through a lower lowest‑bracket rate and wider brackets
slightly higher CPP contributions, especially for higher earners, reflecting rising pensionable earnings
small EI changes — a lower premium rate but higher maximum insurable earnings
continued $7,000 TFSA room and higher RRSP limits, with FHSA rules unchanged
Inflation‑indexed credits and benefits that add incremental relief for families, seniors and low‑income Canadians

It’s not a tax revolution, but for households feeling the squeeze of prices and interest rates, even a few hundred dollars of extra room in 2026 can help. Just remember: these figures are national averages and federal rules — your personal situation depends on where you live and how you earn, save and invest.

For personal advice and precise planning, talk to a qualified tax professional or financial planner before you make big decisions based on the 2026 numbers.

References

Canada 2026 Tax Brackets and CRA Changes: New Rates, CPP/EI, TFSA and RRSP Limits Explained

Quick snapshot: What’s changing in 2026?

1. Why 2026 looks different: 2% indexation meets a tax‑rate cut

2. 2026 federal income tax brackets: where your income falls

3. Basic Personal Amount: more tax‑free income