The government’s plan to reduce the lowest federal marginal personal income tax rate from 15% to 14% will cost $28.2 billion over five years, starting in 2025, according to an estimate released on Wednesday by the Parliamentary Budget Officer.
The personal income tax rate also applies to most federal non-refundable tax credits. While the tax cut will cost the federal government $64 billion, it will save $35.7 billion through a reduction in non-refundable tax credits.
The PBO pegs the tax cut’s net cost at $4.2 billion in 2025-26, rising to about $6 billion a year for 2026-30. Results for 2025-26 are lower because the rate is intended to go into effect on July 1, 2025, meaning the full year’s rate will be 14.5%.
Even with the reduction in the value of non-refundable tax credits, no family will see an increase in federal taxes payable.
In 2026-27, the first full year of implementation, the average estimated savings is $90 for tax filers in the lowest tax bracket, compared to $330 for all other tax filers. The savings generally represent a higher share of income for individuals in the first tax bracket compared with those in the other brackets, as Canada has a progressive tax system.
Savings would vary by family type. For example, a single senior with a taxable income of $27,380 will save $50 in 2026, whereas a couple earning $276,690 with two children will save $750.
Tax filers in Quebec get 16.5% less tax savings from the proposed rate reduction than residents in the rest of Canada as Quebec residents benefit from a reduction of 16.5 percentage points of federal personal income tax through the Quebec Abatement.
The tax cut was one of the Liberal Party’s campaign promises ahead of the April election.