Canada Revenue Agency Unveils Federal Income Tax Brackets for 2026
The Canada Revenue Agency has released the federal income tax brackets for 2026, featuring a new indexation rate, updated thresholds, and the full year implementation of the lower 14% tax rate on the bottom bracket. These changes will impact Canadians preparing for financial planning, salary discussions, RRSP contributions, and early tax estimations.
The country’s tax system remains progressive, dividing income into segments taxed at corresponding rates. As incomes increase, individuals move through multiple tax brackets rather than paying the highest rate on their total income. Yearly indexation and this structure shape Canadians’ annual tax obligations.
Annually, the CRA adjusts federal tax brackets based on Statistics Canada’s consumer price index to prevent inflation from unfairly pushing taxpayers into higher brackets. The 2026 federal indexation rate is set at 2.0%, lower than the previous year’s 2.7% adjustment.
For the 2026 tax year, the lowest federal tax rate is officially 14%, providing all Canadians savings on the initial portion of their income. This article offers a detailed breakdown of the 2026 federal tax brackets, the new basic personal amount, tax planning implications, comparisons to 2025, and real-life examples to assist taxpayers.
Full Federal Income Tax Brackets For 2026
- 14% on the first $58,523 of taxable income
- 20.5% on income over $58,523 up to $117,045
- 26% on income over $117,045 up to $181,440
- 29% on income over $181,440 up to $258,482
- 33% on income over $258,482
These brackets apply to federal taxes only and exclude provincial or territorial taxes, which vary by region. The thresholds reflect the 2.0% indexation rate applied to all brackets, potentially keeping taxpayers in lower brackets longer and reducing tax payments on higher income portions.
How The 14% Federal Rate Works In 2026
The federal government reduced the lowest tax rate to 14% in 2025, with the full reduction taking effect for the entire 2026 tax year. This change results in reduced taxes on the initial $58,523 of taxable income for all Canadians, especially benefiting lower- and middle-income earners.
Updated Basic Personal Amount (BPA) For 2026
The basic personal amount is a significant nonrefundable credit that reduces taxable income before bracket calculations. In 2026:
- Maximum BPA for incomes up to $181,440: $16,452
- Minimum BPA for incomes above $258,482: $14,829
- Gradually reduced amount for incomes in between
Individuals with incomes at or below $16,452 owe no federal tax due to the BPA, which is income-tested to provide targeted relief to low- and middle-income earners.
Example: Federal Tax Owed On A $140,000 Salary In 2026
Calculating federal tax for a $140,000 income in 2026:
- $0 tax on the first $16,452 (BPA)
- 14% on the next $42,071
- 20.5% on the next $58,522
- 26% on the remaining $22,955
Total federal tax owed: $23,855.25, excluding provincial taxes and other deductions. This example illustrates how federal brackets are applied to a $140,000 income in 2026.
While the 2025 tax brackets are relevant for the upcoming tax return, the 2026 changes will shape Canadians’ financial obligations next year.
