You may have set some New Year’s financial resolutions, which might include trying to save money or improving your investing knowledge.
But the start of 2026 is also when you may notice that your paycheque looks a bit different as a result of federal income tax changes that are coming into effect this year.
Here’s what you should know.
Canadian federal income tax changes for 2026
Before we get into tax changes, it’s important to note that Canada employs a marginal tax rate system. That means your income is divided into tax brackets according to amounts specified by the government, and each bracket is taxed at its own marginal tax rate. If your income increases and you fall into a higher marginal tax bracket, only the amount of income that falls within that new tax bracket will be taxed at the new higher marginal rate. (Read more about how marginal tax rates work here.)
Now, federal income tax changes.
New Canadian federal tax rules came into effect in 2026. Perhaps the most impactful change for Canadians is the reduction in the amount of federal income tax you have to pay if you earn less than $58,523 per year.
On July 1, 2025, the federal government reduced the tax rate on the lowest income tax bracket by one percentage point from 2024. So, if you make less than $58,523, you will be paying a federal tax rate of 14% in 2026. Keep in mind this doesn’t include your provincial income tax rate, which varies for each province and territory.
“For a lower income family, or a lower income taxpayer, it is a considerable tax break,” said Sébastien Desmarais, a tax, estate and business succession planner at TD Wealth. “This change will allow Canadians to save some money. And when it comes to taxes, I think we can all agree that saving money is a good thing.”
Canadians who earn more than $58,523 will also see some changes to their federal tax brackets.
Any income you earn between $58,523 to $117,045 will be taxed at 20.5%, which is the same rate as 2025. Last year, however, the ceiling for this bracket was $114,750. Meanwhile, every dollar earned above $117,045 and up to $181,440, will be taxed at 26% (last year’s ceiling was $177,882).
Income between $181,440 to $258,482 will be taxed at 29% (the upper threshold in 2025 was $253,414).
The top federal tax bracket now kicks in at $258,482 compared to $253,414 in 2025. Any income earned over that amount is subject to 33%.
Contribution amounts for TFSAs and RRSPs in 2026
If you are able to save some money in 2026, you might want to deposit it in a Tax-Free Savings Account (TFSA). A TFSA is an account that allows Canadians to invest their money in stocks, bonds, exchange-traded funds (ETFs), guaranteed investment certificates (GICs), and many other securities where they can grow tax free. What’s more, these funds can be withdrawn and used however you’d like, and you don’t have to pay tax on any funds you take out of your account.
Since 2009, every Canadian resident 18 years of age or older could open and contribute to a TFSA account. The maximum annual contribution limits change each year. The contribution room limit for 2026 is $7,000.
Each year, the federal government sets a new annual maximum contribution limit for Registered Retirement Savings Plans (RRSP). The maximum contribution limit for 2026 is $33,810, which is an increase of $1,320 from the 2025 limit of $32,490.
An RRSP can be a good way to help you fund your retirement. All of your RRSP contributions grow tax-free in your account until the end of the year you turn 71. At that point, you have to begin withdrawing funds from your RRSP, which will be taxed as income.
Changes to the Canadian Pension Plan in 2026
Many Canadians rely on the Canada Pension Plan (CPP) in retirement. In order to fund the CPP, most Canadians will contribute a percentage of their annual earnings to the Plan. If you’re an employee, the estimated maximum CPP contribution is expected to increase by about $200 to $4,230 in 2026.
In short, you’ll contribute 5.95% of your salary up to a ceiling of $74,600 (up from $71,300 in 2025) if you are employed by a company. (If you are self-employed, you will contribute 11.9% of your earnings to the CPP in 2026.)
If you earn more than $74,600 in 2026, you’ll pay an additional 4% (8% if you are self-employed) on those earnings up to a ceiling of $85,000 (up from $81,200 in 2025).
As with any personal finance advice, it’s best to consult a tax professional for personalized guidance. You can also visit the CRA’s website to learn more.
This article is for informational purposes only, and its information should not be construed as legal, tax, investment, financial, or other professional advice. The information provided is general and does not address the circumstances of any particular individual or entity for which you must obtain your own legal, tax or other professional advice.
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