The Canada Revenue Agency has released the federal income tax brackets for 2026, along with a new indexation rate and updated income thresholds. It will also be the first full year that the lowest tax rate drops to 14%, giving Canadians more savings on the first part of their income.
Canada uses a progressive tax system, meaning different parts of your income are taxed at different rates. The CRA updates tax brackets every year to match inflation so people aren’t pushed into higher brackets unfairly. For 2026, the indexation rate is 2.0%.
2026 Federal Tax Brackets:
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14% on the first $58,523
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20.5% on $58,523 to $117,045
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26% on $117,045 to $181,440
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29% on $181,440 to $258,482
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33% on anything over $258,482
These rates cover federal taxes only.
The basic personal amount (BPA), which reduces how much income is taxed, also rises in 2026.
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Up to $181,440 of income: BPA = $16,452
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Over $258,482 of income: BPA = $14,829 (reduced)
Someone earning $16,452 or less pays no federal tax.
Lower-income Canadians benefit the most because more of their income is taxed at the new 14% rate, and the higher BPA helps reduce what they owe. Middle-income earners also save because indexation helps them stay in lower tax brackets longer. Higher-income earners still see some benefit, though the BPA is reduced at higher income levels.
Overall, the 2026 changes help offset inflation and give most Canadians a small break on their federal taxes.
