MIDDLE‑CLASS TAX CUT: WHAT EVERY ALBERTAN NEEDS TO KNOW IN 2025
Middle Class Tax Cut: What Every Albertan Needs to Know in 2025
Beginning July 1, 2025, the federal government is lowering the lowest personal income tax rate from 15% to 14%. This new Middle Class Tax Cut is designed to provide relief to millions of Canadians, including families and individuals across Alberta. While the change may seem small, it can add up over time and is worth understanding.
What’s Changing
- The first federal income tax bracket—on taxable income up to $57,375 in 2025—will be taxed at an effective 14.5% in 2025 (a blend of 15% Jan–Jun and 14% Jul–Dec). Starting in 2026, this bracket is a full 14% year-round.
- Nearly 22 million Canadians are expected to benefit.
- For Albertans, this relief comes alongside the province’s own recent tax changes, making tax planning an important conversation heading into 2026. In Alberta, the first $60,000 of income is taxed at 8% for the entire 2025 tax year (previously 10%). Payroll withholdings were 10% in the first half of 2025 and 6% in the second half, so the year averages out to 8%.
What This Means in Real Terms
- Individuals: In 2025, savings are up to about $1,037 ($750 from Alberta’s 8% bracket and $287 from the federal cut). From 2026 onward, savings rise to about $1,170 per year.
- Couples In 2025, a two-earner couple can save up to about $2,074 combined. From 2026 onward, the combined savings increase to about $2,340 annually.
- The largest proportional benefit goes to low‑ and middle‑income earners, since a greater share of their income is taxed in this first bracket.
Planning Considerations for Albertans
- Maximize deductions and credits: Contributions to RRSPs, medical expenses, or childcare costs can push more of your income into the lower bracket.
- Watch timing of income: If you can control when to realize income (bonuses, investment gains, or business draws), consider how these changes might affect your overall tax position in 2025 versus 2026.
- Coordinate as a family: Couples should review how income is split between spouses to ensure both benefit from the lower bracket where possible.
While the Middle Class Tax Cut will provide some immediate relief, it is most effective when paired with thoughtful tax planning. If you’d like to explore how these changes affect your family, the Fulcrum Group team is here to help.
Resources
- Government of Canada: Delivering a Middle‑Class Tax Cut
- CRA: Updated source deduction tables (effective July 1, 2025)
- Government of Alberta: Provincial tax brackets and credits