Why You Won’t Actually Save $800 from the New Federal Tax Cut
When the federal government announced it was cutting the lowest personal income tax rate from 15% to 14%, it was hailed as a big win for the middle class. Headlines promised that individuals could save “up to $420” and two-income families could pocket “up to $840” per year.
But if you're earning around $70,000, those savings might not be as generous as advertised. Here’s what’s really going on — and how much you’ll likely keep after the dust settles.
The Promise: “Up to $840 in Tax Savings”
Yes, that number is technically correct — but it only applies in very specific circumstances, such as when two people each earn just enough to max out the savings in the lowest tax bracket (which tops out at $55,867 for 2025). Most working Canadians, especially those earning $60K–$80K, will save less than half that amount.
Why the Tax Savings Shrink as Income Rises
Here’s the important detail:
The 1% rate cut only applies to income in the lowest tax bracket, not to all your income.
For 2025:
The first $55,867 of taxable income is taxed at the new 14% rate.
The rest is taxed at higher rates (20.5%, 26%, etc.) — unchanged.
So, if you earn $70,000, only part of your income is affected.
Real-World Example: $70,000 Income
Let’s break it down.
Income under 2025’s first tax bracket limit:
First $55,867 taxed at 14% (was 15%)
Tax savings: 1% of $55,867 = $558.67
Income above that:
The remaining $14,133 (70,000 – 55,867) is not affected by the cut
No savings here
But Wait — Non-Refundable Tax Credits Also Drop
Here’s the catch: most federal tax credits — like the Basic Personal Amount, CPP, and tuition — are calculated using the lowest tax rate. When that rate drops from 15% to 14%, the value of your credits drops too.
For example:
Basic Personal Amount (BPA): $16,129 × 15% = $2,419.35 (old)
New BPA: $16,129 × 14% = $2,258.06
Lost value: ~$161
So your net savings is:
$558.67 (from lower tax) – $161 (from reduced credits) = **$397.67**
So… Where’s My $800?
You’d only see $800+ if:
You and your spouse both earn just under $55,867, and
You each qualify for the full tax cut amount, and
You don’t have other income sources pushing you into the next tax bracket
That’s a narrow slice of taxpayers. For most people earning a moderate income, realistic savings will fall in the $300–$450 range.
Final Thoughts: Still a Win — Just Not as Big as It Sounds
The tax cut is real. You will keep more of your income. But the headline numbers are “maximum possible” figures, not a guarantee.
For someone earning $70,000, expect around $400 in extra take-home pay for the year — not $800. And if you’ve heard otherwise, it might be time to take those government announcements with a grain of salt.
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