Newcomers May Pay Less Tax in 2026: Here’s What You Should Know

Key Takeaways 

• Certain key payments taxpayers make in Canada change each year, and we now know what these payment rates will look like for 2026.  
• Canada’s government is reducing taxes for the lowest tax bracket in Canada. This means you may benefit from as much as $420 more in your pocket in 2026. 

You Might Pay Less Tax in 2026 

Canada’s tax brackets are most likely changing in 2026 (so long as the proposed legislation passes). The proposed change would reduce the tax rate for the lowest tax bracket to 14%, while also adjusting the tax brackets for inflation.  

The tax rates and brackets are as follows: 

• for income under $58,523, the tax rate is 14% 

• for income from $58,523 to $117,045, the tax rate is 20.5% 

• for income from $117,045 to $181,440, the tax rate is 26% 

• for income from $181,440 to $258,482, the tax rate is 29% 

• for income of $258,482 and over, the tax rate is 33%. 

  For context, for the 2025 tax year, rates looked like this:  

• for income under $57,375, the tax rate is 14.5% 

• for income from $57,375 to $114,750, the tax rate is 20.5% 

• for income from $114,750 to $177,882, the tax rate is 26% 

• for income from $177,882 to $253,414, the tax rate is 29% 

• for income of $253,414 and over, the tax rate is 33%. 

You might notice that the ranges have changed year-over-year, but that the percentage of tax payable has remained the same for all brackets except the first one. Let’s dig into that.  

Changing Tax Brackets in Canada 

Each year, Canada adjusts its tax brackets to reflect inflation. This move is designed to help protect overall purchasing power of the people earning that money.  

In other words, money in 2025 is likely going to be worth a little more (in terms of buying power) than it will in 2026 – due to inflation. To explain this a little further, here’s an example: You make $60,000 in 2025 and did not get a pay increase for 2026. Each year, the cost of goods go up. Because of this in 2025, you could buy more with that 60,000 than you could in 2026. 

This is a healthy part of any economy. But it’s helpful that Canada’s tax brackets are adjusted to reflect the reduced buying power of Canadian residents each year.  

Though, it’s arguable whether the inflation amount actually reflects real changes to pricing. Food prices are expected to increase by around $1000 for a family of four in 2026 compared to 2025. So, while the tax bracket change will help here – it certainly won’t offset the increasing real cost of goods.  

Tax Rate Reducing to 14% For Lowest Tax Bracket 

The other notable change is that the tax rate is decreasing to 14% for the lowest tax bracket. What’s really important to note is that this does not mean you only benefit from this if you earn less than $58,523 in 2026.  

What it means is that everyone in Canada will pay just 14% on the first $58,523 they earn in 2026. The maximum tax savings from this change (for 2026) is $420 per person, or $840 per couple.  

And yes – even those in the highest tax bracket will save on taxes on that first $58,523. Because Canada’s tax brackets are marginal.  

Marginal tax brackets mean your income is split into chunks, and each chunk is taxed at a different rate. Only the dollars that fall into a higher bracket get taxed at the higher rate—not your whole income. 

Other CRA Changes You Should Know About 

Canada Pension Plan Contributions Annual Increase 

If you look at your paycheque in Canada, you’ll likely see a deduction for the Canada Pension Plan (CPP). You can learn more about payroll deductions in our dedicated article.  

The federal government defines the CPP as a “monthly, taxable benefit that replaces part of your income when you retire. If you qualify, you’ll receive the CPP retirement pension for the rest of your life.”  

In 2025, the maximum contribution you would have made (as an employee) $4,430.10. The rates are higher for those who are self-employed.  

For 2026, this increases to $4,646.45. 

Employment Insurance Maximum Premiums Increased 

Employment Insurance (EI) premiums are also increasing for 2026. The maximum you’d see deducted from your paycheque in 2025 is $1,1077.48, while in 2026 that will increase to $1,123.07.  

The maximum insurable earnings will increase to $68,900, up from $65,700 in 2025.  

Tax Advantaged Account Contribution Limits 

The Tax-Free Savings Account (TFSA) contribution limit is staying the same for 2026 – it’s $7,000. If you want to learn more about this tax-advantaged account, check out our guide to TFSAs.  

Meanwhile, the maximum contribution limit for RRSPs has increased to $33,810 – but there’s a catch. Only high earners are permitted to contribute this amount. Contributers are limited to 18% of your 2025 earned income as your individual maximum contribution limit. So be sure to check your tax documents and/or speak with a tax professional to work out what your personal contribution limit for 2026 looks like.  

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