The first federal bracket rate has dropped. The federal government lowered the tax rate on the first bracket of personal income from 15% to 14%. The cut took effect on July 1, 2025 — giving a blended rate of 14.5% for 2025 — and then applies in full for 2026, according to the Department of Finance Canada. In 2026, this first bracket covers taxable income up to $58,523.
Who benefits. About 22 million Canadians gain something, and the relief goes mostly to people in the two lowest tax brackets. Because the reduced rate applies to the first bracket, everyone who pays federal tax benefits on that portion of their income — not only lower earners.
How much it amounts to. The maximum saving is about $420 per person and $840 per two-income couple in 2026, according to the Department of Finance. It is not a separate payment: it is simply less tax.
You don't have to apply. The cut is automatic. It shows up in the tax withheld from your paycheque and in the calculation of your federal income tax return. No form, no sign-up.
This is federal tax, separate from Quebec tax. Don't mix them up: this measure is federal and affects the federal portion of your tax. In Quebec, you also pay a provincial tax, calculated separately by Revenu Québec with its own rates. The federal cut is on top of what Quebec does on its side; it does not replace it.
Good to know for newcomers. You don't need to do anything to get this cut — but you still have to file your tax returns (federal and provincial) every year so your taxes are calculated correctly and you receive your credits. To understand the basics, see our guide to taxes for newcomers.
