Federal Credits, Benefits, and the New Top-Up Tax Credit (2025)

Basic Personal Amount and Credit Rate

As mentioned previously, the Basic Personal Amount (BPA) – a non-refundable credit every Canadian can claim – rose to $16,129 for 2025 (for most taxpayers)[9]. This translates into a federal credit of up to about $2,419. Normally, non-refundable credits (like the BPA, age credit, etc.) are calculated at the lowest personal tax rate. With the lowest rate dropping to 14% (effective 2026, and 14.5% blended in 2025), one might worry that the value of credits would shrink accordingly.

To address this, the government introduced a Top-Up Tax Credit. This measure ensures that non-refundable credits retain their value at 15% for those who need it, despite the rate cut[14][15]. In rare cases, a taxpayer might claim such large credits that part of their credits would otherwise apply at the old 15% rate beyond the first bracket threshold. For example, someone with very high tuition, medical, or charitable credits (possibly carried forward from prior years) could see a portion of those credits exceeding the taxable income in the first bracket. The lower rate would have made that portion of credits less valuable.

· How the Top-Up Tax Credit works: For 2025 through 2030, if your total non-refundable credits (e.g., Basic Personal, tuition, disability, medical, etc.) exceed the amount of income taxed in the lowest bracket, the Top-Up Tax Credit will effectively apply a 15% rate to the excess credits[16][17]. This “tops up” your credits so you’re not worse off due to the rate cut.

· Who is affected? The government expects this scenario to be very rare[18]. It could occur, for instance, if you have an unusually large one-time deductible expense (like a year of university tuition or significant medical/home care expenses) that generates credits larger than the tax on your first ~$57k of income. Thanks to the Top-Up Tax Credit, no one will pay more tax as a result of the rate cut – even in these edge cases[15].

Increases to Credit Amounts and Benefits

Many personal tax credit amounts are indexed to inflation. For 2025, with inflation moderating, we see modest increases:

· Age Credit: The federal age amount (for those 65+) increased to a maximum of $9,028 (up from $8,790 in 2024)[19]. The full amount is available for seniors with incomes up to a certain threshold (around $43,000, phasing out at higher incomes).

· Disability Credit: The disability amount is $10,138 in 2025 (was $9,872 in 2024)[20]. The supplement for disabled minors is up to $5,914 (up from $5,758).

· Medical Expense Threshold: The 2025 threshold for the medical expense credit is 3% of net income or $2,834, whichever is less (slightly up from $2,759 in 2024)[21].

· Canada Caregiver Credit: For infirm dependents, the credit amounts for 2025 rose to $2,687 (under 18) and $8,601 (18 or older)[22].

· Home Accessibility Tax Credit (HATC): This credit was previously enhanced – it allows seniors and those eligible for the disability credit to claim up to $20,000 in home renovation expenses to improve accessibility. The credit rate remains 15%, so up to $3,000 can be claimed. (While the HATC’s $20,000 cap was first in effect for 2022 and onward, it’s worth noting for 2025 if you’re planning renovations.)[23]

On the benefits side (amounts delivered outside the tax return):

· Canada Child Benefit (CCB): This tax-free monthly payment is indexed each July. For the July 2024 – June 2025 benefit year, the CCB maximums increased. In 2025, families can receive up to $7,997 per child under age 6 (and up to $6,748 per child age 6-17) annually[24], depending on income. (This is up from $7,787 / $6,570 in the prior year[24].)

· GST/HST Credit: The GST credit, a quarterly tax-free payment to low- and modest-income Canadians, was boosted in 2023 by a one-time “grocery rebate,” but for 2025 it returns to normal indexed amounts. The precise amounts for 2025 will depend on family size and income, but modest inflation indexing means slightly higher payments than the previous year.

· Canada Workers Benefit (CWB): This refundable credit for low-income workers saw enhancements in recent years (like a secondary earner supplement starting in 2023). For 2025, the CWB income thresholds and phase-out ranges will be indexed. This means eligible workers may see a small increase in their benefit. (No new structural changes to CWB were introduced in 2025, so the program continues as enhanced in prior budgets.)

No New Major Credits (But Some Temporary Programs Ended)

The federal government did not introduce brand-new general personal credits for 2025 (aside from the Top-Up Tax Credit discussed). A few pandemic or one-time measures from previous years have expired:

· The one-time “grocery rebate” (GST credit top-up) provided in 2023 was not repeated in 2025.

· COVID-related emergency benefits and recovery credits (CRB, etc.) are no longer in effect for 2025 filings.

· The First-Time Home Buyers’ Tax Credit remains at its enhanced level (a $10,000 credit amount, yielding $1,500 tax relief) as set in Budget 2022[25], with no further increase in 2025. However, first-time buyers should note the related First Home Savings Account (FHSA) introduced in 2023 – while not a tax credit, it’s a new tool to save tax-free for a down payment, complementing the existing RRSP Home Buyers’ Plan.

One noteworthy initiative is automatic tax filing for lower-income individuals. Starting with the 2025 tax year, the CRA is being empowered (under amended legislation) to automatically file tax returns for certain eligible individuals who haven’t filed on their own[26][27]. This is not a tax credit per se, but it’s a significant benefit change: it ensures that people with little or no tax payable, who might not normally file, are still assessed and can receive the credits/benefits they’re entitled to (such as the GST credit or CCB). Initially, this will target individuals below the income threshold of the BPA who have only T-slip income and missed filing in previous years[28]. If you have family or friends with very low income who skip filing, be aware that the CRA may file for them so they don’t miss out on benefits.

The Importance of Filing and Claiming

With increased credit amounts and new measures like the Top-Up Credit, it’s more important than ever to file your tax return and claim what you’re eligible for:

· File even if you have low income or no tax to pay. Many benefits (GST credit, CCB, provincial payments) are triggered by filing. And with potential automatic filing, the CRA might do it for you – but it’s best to be proactive.

· Keep receipts and documentation for things like medical expenses, tuition, charitable donations, and home renovations for seniors/disabled. The thresholds and credit amounts have improved, but you must claim them to benefit. For example, if you or a dependent had significant medical costs, ensure you claim them; the credit is at 15% of eligible costs above the $2,834 threshold[21].

· Students and new graduates: If you finished post-secondary education, remember to claim your tuition credits or transfer to a parent/spouse if needed. With the Top-Up Tax Credit, you can confidently claim large tuition amounts in 2025 without losing credit value due to the rate change.

In summary, federal credits and benefits for 2025 have generally become slightly more generous due to indexation. The introduction of the Top-Up Tax Credit is a safety net ensuring that the 1% tax rate reduction leaves no one worse off [15]. As these provisions are based on passed budget measures and existing law, taxpayers can plan with certainty. In the next post, we will shift focus to registered savings plans (like RRSPs, TFSAs) and payroll contribution limits (CPP/EI) – important items for financial planning in 2025.

Sources: Federal Budget 2025 Supplementary Tax Measures[14][15]; CRA/Advisor resources on credit amounts[22][24].