Lowest federal personal income tax rate falls to 14%

The lowest federal personal income tax rate is 14% for the 2026 tax year, down from 15%.

The reduction took effect on 1 July 2025, producing a blended rate of 14.5% for that year. The full 14% rate applies from 2026 onward.

For 2026 the bottom bracket covers the first $58,523 of taxable income.

Effect on tax credits

Non-refundable tax credits — including the basic personal amount, the age credit and the pension income credit — are converted into tax relief at the lowest bracket rate. Reducing that rate reduces the value of every one of them.

The Department of Finance published a report examining this effect. For most taxpayers the reduction in tax payable on first-bracket income exceeds the reduction in credit value, producing a net saving. Where an individual’s non-refundable credit amounts are large relative to their taxable income, the decrease in credit value can exceed the rate saving.

The government has estimated savings of up to $420 for an individual and $840 for a two-income family in 2026, affecting close to 22 million taxpayers.

For dividend income

Combined federal and provincial marginal rates on eligible and non-eligible dividends reflect the gross-up and dividend tax credit arithmetic, which resolves against the bracket rates. Published combined rate tables for 2026 incorporate the 14% bottom rate.

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Event dated January 1, 2026. Primary document: Department of Finance Canada — report on the impact on non-refundable tax credits.