Tax changes for 2026 (with lots of numbers :))

Hello All,

It's that time of year where we look at upcoming tax changes for 2026. There are a lot of numbers which might result in some zoning out (totally understandable). What's important to know is the impact rather than the exact dollar amounts.

For 2026, the changes are mostly modest: a lower bottom federal tax rate, higher brackets and credits, and increased CPP/EI contributions.

Here’s a summary of what actually changed for 2026

Personal tax changes (2026)

Lower lowest federal tax rate

• The bottom federal personal tax rate is now 14% for the full 2026 year
  (vs. an effective 14.5% in 2025 due to the mid-year change).

• This applies to the first federal bracket, roughly the first $58,500 of taxable income in 2026.

Federal tax brackets (indexed)
Federal thresholds increased by about 2% for 2026.

What this means: Your income taxes will be slightly less at the same level of earnings.

Check out my video on how tax brackets/marginal tax rates work

Approximate brackets:

• 14% up to ~$58,523

• 20.5% from ~$58,524 to ~$117,045

• 26% from ~$117,046 to ~$181,440

• 29%–29.29% from ~$181,441 to ~$258,482

• 33% over ~$258,482

Basic Personal Amount (BPA)

What this means: There are zero income taxes (CPP/QPP still applies though for income over $3,500) for those of you who earn less than this amount. For everyone else, this translates into about $2,300 of federal tax relief before any provincial credits.

• Maximum federal BPA for 2026: ~$16,452

• Minimum BPA (for high-income earners): ~$14,829

TFSA limit (2026)

What this means: You can contribute at least $7k plus any unused contribution room from previous years. Be very careful to not overcontribute as there are significant penalties for this.

• Annual TFSA contribution limit: $7,000

• Total cumulative TFSA room for someone eligible since 2009 and never contributed: $109,000

FHSA limit (2026)

What this means: You can contribute at least $8k plus any unused contribution room from previous years.

• Annual FHSA contribution limit: $8,000

• Lifetime FHSA limit: $40,000

RRSP limit (2026)

What this means: You can contribute to your RRSPs based on what is reflected on your CRA notice of assessment for last year.

• RRSP contribution limit: 18% of prior-year earned income, up to $33,810

• Unused RRSP room continues to carry forward indefinitely.

Small business & self-employed updates (2026)

Service corporations / PSBs

• Corporations earning primarily from one client (management, consulting, or services) remain at higher risk of being classified as a personal services business (PSB).

• PSB status removes access to the SBD and significantly restricts deductions, leading to much higher effective tax rates.

Canada Pension Plan (CPP)

• The CPP contribution rate remains 5.95% for employees and 11.9% for self-employed individuals (combined employer + employee).

• CPP2 (the second tier introduced in recent years) continues to apply on earnings increasing total CPP costs for higher earners. This maxes out at $85,000.

• This means that:

  • Maximum employee CPP contribution (including tier 2) is roughly $4,650

  • Maximum self-employed CPP contribution is roughly $9,300

QPP (Québec)

• QPP rates remain slightly higher than CPP:

  • Employee rate is approximately 6.40%

  • Self-employed rate is approximately 12.8%

• Similar to CPP, there is a second tier that maxes out at $85k.

• Maximum employee CPP contribution (including tier 2) is roughly $4,900

• Maximum self-employed CPP contribution is roughly $9,800

EI

• EI employee rate is approximately 1.63% (down from 1.64%), with employers paying 1.4× that amount.

• Maximum insurable earnings are $68,900 up from $65,700 in 2025.

These increases to CPP/QPP and EI affect both payroll costs and owner-managers paying themselves salary. (although note that owners who own 40% or more of their corporations are not required to pay EI)

CRA enforcement trends

• Expanded digital matching across T-slips, GST/HST, and payroll continues.

• Common review areas remain:

  • Home-office claims

  • Vehicle expenses

  • Management fees between related entities

• Digital platforms like Airbnb, Uber, and Etsy are now required to report your annual earnings directly to the CRA. This means the CRA will use "digital matching" to verify your reported income, so it’s more important than ever to ensure your bookkeeping for any "gig" or platform work is precise.

• Crypto Reporting: No Longer "Under the Radar" Starting in 2026, crypto exchanges and service providers are required to report your transaction data directly to the CRA. This means the CRA will have visibility into your crypto trades, making it essential to keep detailed records and report your gains or losses accurately to avoid automated flags.

Planning for 2026

For individuals

• Plan to contribute to RRSPs before the deadline of March 2nd, 2026 to receive a tax deduction against your 2025 income.

• Use your 2025 Notice of Assessment to confirm RRSP room.

• Contribute any savings to FHSAs first(if you plan to buy a home) and then either TFSAs or RRSPs or both

For small business owners

• Revisit your salary vs dividend mix in light of higher CPP/QPP costs.

• Make sure you are not in danger of being classified as a Personal Services Business.

• If you use a digital platform for your business such as Uber or Etsy, make sure that you are properly declaring your income (and of course claiming your expenses).

• If you don't already, ensure that you are aware of the crypto reporting rules and have a system in place to track and report them.

January is a great time to start planning your finances, estimating your tax bill and assessing any areas of risk that should be addressed.

— Ronika

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