As Canada heads into 2026, the tax story is less about one dramatic overhaul—and more about a cluster of meaningful “moving parts” that will show up in paycheques, contribution room, and planning decisions throughout the year.
The headline change is a lower federal tax rate on the first slice of taxable income. But Canadians will also see inflation-adjusted bracket thresholds, updated registered-account limits (TFSA and RRSP), higher CPP ceilings (including CPP2 for higher earners), and a fresh round of Employment Insurance updates. Meanwhile, ahead of the 2026 filing season, the Canada Revenue Agency (CRA) has been under pressure to improve service, with new performance claims and oversight scrutiny.
Here’s what’s changing—and what it could mean for your money in 2026.
1) The federal lowest income tax rate drops to 14% in 2026
Starting January 1, 2026, the lowest federal income tax rate is set at 14%, applying to the first $58,523 of annual taxable income. [1]
For context, CRA payroll guidance notes the government proposed legislation to reduce the lowest rate from 15% to 14%, with 2025 having a 14.5% rate and a prorated 14% applied beginning in July 2025. [2]
2026 federal tax brackets (rates and thresholds)
The CRA’s 2026 payroll deduction formulas and tables lay out the federal thresholds as follows: [3]
- 14% on taxable income up to $58,523
- 20.5% on the portion from $58,523 to $117,045
- 26% on the portion from $117,045 to $181,440
- 29% on the portion from $181,440 to $258,482
- 33% on the portion over $258,482
What the rate cut is worth (roughly)
If your taxable income is at least the top of the first bracket, the maximum federal tax reduction from moving 14.5% to 14% on the first $58,523 is about $293 (0.5% × $58,523), before considering how credits and other factors affect the final result. [4]
2) Inflation indexation nudges brackets and key credits higher
Even when tax rates don’t change, bracket thresholds matter. If thresholds rise with inflation, it can reduce “bracket creep”—where inflationary pay raises push more income into higher tax bands even if your purchasing power hasn’t improved much.
For 2026, the CRA’s payroll deduction tables state the federal indexing factor is 2.0% and that federal income thresholds and key personal amounts (including the Canada Employment Amount) were updated accordingly. [5]
Basic Personal Amount in 2026: $16,452 (with an income-based phase-down)
The CRA’s payroll tables list the maximum federal basic personal amount at $16,452 and the minimum at $14,829 (for higher-income Canadians subject to the phase-down). [6]
The CRA’s payroll deduction formulas also show the phase-down range tied to net income levels around the upper brackets. [7]
Canada Employment Amount in 2026: up to $1,501
For workers, the CRA payroll tables put the federal Canada Employment Amount (CEA) at $1,501 (or employment income if lower), with the credit integrated into payroll deduction calculations. [8]
3) CPP gets bigger again: higher YMPE—and CPP2 continues for higher earners
CPP contributions remain one of the most visible “tax-adjacent” changes Canadians feel immediately, because they’re deducted throughout the year.
The 2026 CPP ceilings
The CRA lists the YMPE (first earnings ceiling) at $74,600 in 2026, and the YAMPE (second earnings ceiling) at $85,000. [9]
CPP contribution rate and maximum (base + first additional)
The CRA’s CPP contribution table shows for 2026: [10]
- Basic exemption: $3,500
- Maximum contributory earnings: $71,100
- Employee (and employer) rate: 5.95%
- Maximum annual employee contribution:$4,230.45 (same for employer)
CPP2 (second additional contributions): who pays and how much
CPP2 applies to earnings between YMPE and YAMPE. The CRA explains that CPP2 began in 2024 and that employees contribute 4% of earnings between the two ceilings (self-employed contribute 8%). [11]
In practical terms, the maximum CPP2 band in 2026 is $10,400 ($85,000 − $74,600). At 4%, that’s a maximum CPP2 contribution of $416 for employees (and $416 for employers), on top of the base/first additional CPP maximum. [12]
4) EI premiums: a slightly lower rate, but a higher maximum insurable earnings cap
EI can move in two directions at once: the rate can fall while the maximum insurable earnings rises—meaning some people pay more overall while others pay less, depending on earnings.
2026 EI maximum insurable earnings and premium rates
For 2026, federal guidance states: [13]
- Maximum insurable earnings:$68,900 (up from $65,700 in 2025)
- Employee premium rate (outside Quebec):$1.63 per $100 of insurable earnings
- Maximum annual employee EI premium:$1,123.07
- Employee premium rate (Quebec):$1.30 per $100
- Maximum annual employee EI premium:$895.70
EI maximum weekly benefit also rises
The federal notice also states that for claims beginning on or after December 28, 2025, the maximum weekly EI benefit rate is $729 (and $437 for extended parental benefits). [14]
5) TFSA stays at $7,000 in 2026—and the RRSP limit rises to $33,810
Registered accounts are a major part of Canada’s tax planning ecosystem, and the CRA has now published the key 2026 limits.
TFSA limit in 2026: $7,000
The CRA’s published limits show the TFSA dollar limit for 2026 is $7,000. [15]
RRSP dollar limit in 2026: $33,810
The CRA also lists the RRSP dollar limit for 2026 as $33,810. [16]
Remember: your personal RRSP contribution room is generally based on earned income and prior-year room, up to the annual cap—so the “limit” is the ceiling, not a guaranteed amount everyone can contribute.
A Toronto and Ontario angle: your provincial bracket thresholds matter, too
While federal brackets drive a big part of the headline story, your total marginal tax rate depends heavily on your province.
Ontario’s 2026 payroll deduction tables show updated provincial thresholds (and also outline items like the Ontario health premium and surtax mechanics). [17]
Other provinces and territories have their own indexation factors and rules—and some don’t fully index. The CRA’s 2026 payroll formulas, for example, note Manitoba’s decision not to index its basic personal amount and bracket thresholds. [18]
The “non-rate” change many Canadians will care about: CRA service reforms heading into tax season
Ask taxpayers what “tax changes” feel most real, and many won’t start with marginal rates—they’ll start with the experience of getting help, fixing notices, and resolving account access issues.
In December 2025, the CRA said its call responsiveness improved materially during its 100-day service improvement push, stating that the share of unique calls answered more than doubled—from 35% to more than 70%, with peaks of 92%—supported by staffing actions and new tools. [19]
But oversight voices also caution the story isn’t finished. The Office of the Taxpayers’ Ombudsperson said it was pleased to see improvements in areas such as the percentage of callers answered, while flagging continuing issues including delays in processing complex T1 adjustment requests. [20]
What tax experts want next: Golombek’s 2026 “wish list” and CPA Ontario’s reform push
Not every major tax story is a change that has already passed. Some are debates that could shape the next few years.
Tax expert Jamie Golombek—Managing Director, Tax & Estate Planning at CIBC, and a long-time National Post/Financial Post tax columnist—has argued that even with the 2026 rate cut, Canada’s broader system still needs deeper reform. In his 2026 “tax wish list,” he points to ideas such as lowering rates further, rethinking RRIF minimum withdrawals, continuing CRA service improvements, and simplifying the Income Tax Act (including reconsidering “boutique” credits). [21]
CPA Ontario’s 2025 report, “Tax Reform for Growth in Canada,” frames the issue in economic competitiveness terms—arguing that complexity and high marginal rates can discourage investment and productivity, and recommending reforms ranging from simplification to changes in how Canada taxes capital and income. [22]
What about the capital gains inclusion rate in 2026?
For many investors and business owners, the biggest “2026 tax change” they feared was a higher capital gains inclusion rate.
In early 2025, the Department of Finance announced a deferral of the proposed inclusion rate change to January 1, 2026, alongside details like a proposed $250,000 annual threshold for individuals and an increased Lifetime Capital Gains Exemption (LCGE) to $1.25 million. [23]
But later, in March 2025, the Prime Minister’s office announced the government would cancel the proposed hike in the capital gains inclusion rate, while maintaining the LCGE increase to $1,250,000 for qualifying dispositions such as small business shares and farming and fishing property. [24]
If you’re planning a major sale or restructuring, this is exactly the kind of area where it’s worth confirming the latest rules with a qualified tax professional—especially because details and transitional rules can matter as much as the headline.
A practical 2026 checklist: what Canadians can do now
If you want to turn all these numbers into smarter decisions, focus on the basics:
- Look at your January pay stub. Payroll withholding updates can show up immediately once employers load 2026 tables (federal + provincial). [25]
- Update TD1 forms when your situation changes. New job, second job, major credit changes, or changes in eligible amounts can all affect withholding. [26]
- Plan registered contributions early. With TFSA at $7,000 and the RRSP cap rising, spacing contributions through the year can help cash flow and reduce last-minute mistakes. [27]
- Expect higher CPP deductions if you’re near the ceilings. YMPE and YAMPE shifts can change total deductions even if your salary hasn’t meaningfully increased in real terms. [28]
- If you’re a higher earner, watch CPP2. The earnings band between $74,600 and $85,000 is where CPP2 applies in 2026. [29]
- If you’re self-employed, budget for both “sides” of CPP. CPP and CPP2 rates differ for self-employed filers and can affect instalment planning. [30]
2026 isn’t just a “new brackets” year—it’s a year where multiple adjustments stack up. For many Canadians, the real impact will come from how these moving parts interact with their province, their pay, and the tax planning choices they make early in the year.
References
1. www.canada.ca, 2. www.canada.ca, 3. www.canada.ca, 4. www.canada.ca, 5. www.canada.ca, 6. www.canada.ca, 7. www.canada.ca, 8. www.canada.ca, 9. www.canada.ca, 10. www.canada.ca, 11. www.canada.ca, 12. www.canada.ca, 13. www.canada.ca, 14. www.canada.ca, 15. www.canada.ca, 16. www.canada.ca, 17. www.canada.ca, 18. www.canada.ca, 19. www.canada.ca, 20. www.canada.ca, 21. www.jamiegolombek.com, 22. www.cpaontario.ca, 23. www.canada.ca, 24. www.pm.gc.ca, 25. www.canada.ca, 26. www.canada.ca, 27. www.canada.ca, 28. www.canada.ca, 29. www.canada.ca, 30. www.canada.ca
