Canada Revenue Agency Releases Federal Income Tax Brackets for 2026

Kritika Pandey

Updated On Dec 3, 2025

The Canada Revenue Agency (CRA) has announced the 2026 federal income tax brackets. This confirms new indexation, updated thresholds, and the first full year of the 14% lowest rate.

Canada Revenue Agency Releases Federal Income Tax Brackets for 2026

The Canada Revenue Agency (CRA) has finally announced the federal income tax brackets for 2026. The new Canadian income tax system maintains a progressive nature, which means different segments of your taxable income are taxed at corresponding rates.

A notable change in 2026 is the federal indexation rate, which is set at 2.0%. This is an annual adjustment that raises the income limits for each tax bracket. It's a protection against 'bracket creep', ensuring that inflation alone doesn't push you into a higher tax bracket without an actual increase in your buying power.

Here is a quick breakdown of the 2026 federal tax brackets, the new basic personal amount, tax planning implications, comparisons to the 2025 tax year, and more.

Canada Federal Income Tax Bracket 2026

Here are the new federal tax rates and the corresponding taxable income thresholds for the 2026 tax year:

Tax Rate	Taxable Income Bracket (Federal)
14%	On the first USD 58,523
20.50%	On income over USD58,523 up to USD117,045
26%	On income over USD117,045 up to USD181,440
29%	On income over USD181,440 up to USD258,482
33%	On income over USD258,482

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The Basic Personal Amount (BPA) Update

The Basic Personal Amount (BPA) update is one of the most important non-refundable tax credits; which directly reduces the amount of income on which most Canadians pay federal tax. The BPA has also been adjusted for 2026:

Maximum BPA: USD16,452 for individuals with a net income of USD181,440 or less.
Minimum BPA: USD14,829 for those earning USD258,482 or more.

For incomes between these two thresholds, the BPA is gradually reduced, which means that any individual with a taxable income at or below USD16,452 will owe zero federal income tax.

Difference Between 2026 & 2025 Federal Tax Brackets

As you prepare to file your 2025 tax return in the spring of 2026, comparing the tax rates for both years can help you understand where savings are generated due to policy changes and inflation indexing.

Here are the federal tax brackets and Basic Personal Amount (BPA) for 2025 (the return you file next) and the upcoming 2026 tax year:

Tax Rate	2025 Taxable Income	2026 Taxable Income
Lowest Rate	14.5% on the first USD57,375	14.0% on the first USD 58,523
20.50%	up to USD114,750	up to USD 117,045
26.00%	up to USD177,882	up to USD 181,440
29.00%	up to USD253,414	up to USD 258,482
33.00%	beyond USD253,414	beyond USD 258,482

Key Differences Summarized

Component	2025 Value	2026 Value	Impact
Lowest Tax Rate	14.5% (effective rate)	14.0% (full year)	Lower federal tax on the first portion of all taxable income.
Income Thresholds	Based on 2025 indexation	Higher due to 2.0% indexation	More income is taxed at lower rates, preventing "bracket creep."
Maximum BPA	USD16,129	USD16,452	A larger amount of income is tax-free at the federal level.
Minimum BPA	USD14,538	USD14,829	The minimum credit for high-income earners is also slightly increased.

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How Indexation Can Protect Taxpayers in 2026

Indexation is a safeguard built into Canada's progressive tax system. It makes sure that the inflation does not unfairly impose a higher tax burden on Canadians, a phenomenon commonly known as "bracket creep".

Without annual indexation, when your income rises merely to keep pace with the cost of living (inflation), the increase would push you into a higher tax bracket. This means you would pay a greater percentage of tax on your income without any actual increase in your real purchasing power or standard of living. Indexation is designed to eliminate this hidden tax increase.