Canada’s 2027 Federal Tax Brackets: What 2.6% Indexation Moves, and What It Saves
The 2027 figures follow from data already published
Every input that sets Canada’s 2027 federal tax brackets is now in. The last one was the September 2026 Consumer Price Index, released by Statistics Canada on October 19, 2026, which closed the 12-month window the Income Tax Act measures. The indexation factor for 2027 is therefore final rather than provisional. The Canada Revenue Agency has not caught up: its indexation adjustment page still carries columns for 2026, 2025, 2024 and 2023 only, with a date modified of March 12, 2026, as of October 29, 2026.
The rate schedule is not what moves. Income Tax Act section 117(2), under the heading “Rates for taxation years after 2024,” sets five federal rates: 14%, 20.5%, 26%, 29% and 33%. No amendment to that schedule appears on the Justice Laws list of amendments not in force for the Act, which is current to September 30, 2026. What changes every January 1 is the income at which each rate starts, and the dollar value of the personal credits.
The indexation factor works out to 2.6%
Section 117.1(1) indexes the specified dollar amounts by the ratio of two 12-month CPI averages, minus one. Section 117.1(4) defines each 12-month figure as the monthly all-items CPI aggregated over the period, divided by twelve, and rounded to the nearest one-thousandth. For 2027 the comparison runs October 2025 through September 2026 against the 12 months before that.
The average all-items CPI for October 2025 to September 2026 was 167.525. For the prior 12 months it was 163.275. The ratio is 1.02602970, which rounds to 1.026, an indexation increase of 2.6%. Both averages come from StatCan table 18-10-0004, vector 41690973, coordinate 2.2, the Canada all-items series on the 2002=100 base. Running the same section 117.1 method against every year CRA has published an indexation increase for reproduces all seven: 1.9% for 2020, 1.0% for 2021, 2.4% for 2022, 6.3% for 2023, 4.7% for 2024, 2.7% for 2025 and 2.0% for 2026.
That same 1.026 factor is doing double duty this year. Run through the $500 rounding rule in the TFSA provisions, it is what produced the $7,500 TFSA contribution limit for 2027.
The 2027 bracket thresholds and credit amounts
Taxable income above which each federal rate begins:
| Rate | 2026 | 2027 | Increase |
|---|---|---|---|
| 14% | first dollar | first dollar | |
| 20.5% | $58,523 | $60,044 | +$1,521 |
| 26% | $117,045 | $120,088 | +$3,043 |
| 29% | $181,440 | $186,157 | +$4,717 |
| 33% | $258,482 | $265,203 | +$6,721 |
And the credit amounts. These are the amounts a credit is calculated from, not the credit itself: the credit equals 14% of the amount, because section 248(1) defines the “appropriate percentage” used for these credits as the lowest percentage referred to in subsection 117(2).
| Amount | 2026 | 2027 |
|---|---|---|
| Basic personal amount, maximum | $16,452 | $16,879 |
| Basic personal amount, minimum | $14,829 | $15,214 |
| Enhanced top-up (the difference) | $1,623 | $1,665 |
| Canada employment amount | $1,501 | $1,540 |
Ten further amounts come out of the same chain exactly: the disability amount at $10,610, the disability supplement for children at $6,189, the Canada caregiver amount for other infirm dependants 18 or older at $9,001, the Canada caregiver amount for children under 18 at $2,812, the child care and attendant care expense threshold at $3,625, adoption expenses at $20,491 per adoption, the tradespersons tools threshold at $1,540, the Canada workers benefit disability supplement at $1,574, and the Canada workers benefit family net income threshold at $34,843.
An RRSP deduction is worth whatever marginal rate it comes off at, and every threshold above has just shifted where that rate changes. Anyone estimating next year’s refund should put the new numbers into the RRSP tax refund calculator rather than last year’s.
A shortcut gets three of these numbers wrong by a dollar
The obvious way to project a 2027 figure is to take last year’s published number and multiply by 1.026. That is not what the Act says. Section 117.1(1)(a) carries forward “the amount that would, but for subsection (3), be the amount to be used under the relevant provision for the preceding taxation year.” Subsection (3) is the rounding rule. So what carries forward is the unrounded amount, and the figure CRA publishes is only a rounded view of it.
Section 117(2) restates the bracket amounts as whole dollars for 2025, which makes the mechanics checkable. Take $57,375, the 2025 figure for the start of the 20.5% bracket. Multiplied by 1.020 that is 58,522.50, which CRA published as $58,523 for 2026. The amount that carries into 2027 is 58,522.50, not 58,523. Multiplied by 1.026 that is 60,044.085, which rounds to $60,044. The shortcut, starting from the published $58,523, gives 60,044.598, which rounds to $60,045.
Three figures come out a dollar apart on the two methods:
| Amount | Act’s chain | Shortcut |
|---|---|---|
| 20.5% bracket begins above | $60,044 | $60,045 |
| Basic personal amount, maximum | $16,879 | $16,880 |
| Basic personal amount, minimum | $15,214 | $15,215 |
The 26%, 29% and 33% thresholds and the Canada employment amount come out the same either way. But the mismatch is not a one-off, and it is testable on figures CRA has already published. Across every amount in CRA’s own indexation tables from 2020 to 2026, the shortcut misses the published figure 32 times in 128 amount-years, and 16 of the 22 amounts tested are missed at least once. For 2022 the shortcut gives $50,196 for the 20.5% threshold where CRA published $50,197. The unrounded chain accounts for that. The shortcut does not. The error does not always run the same way either: for the Canada caregiver amount for children under 18, the shortcut comes out a dollar low rather than a dollar high.
What the three one-dollar differences are worth, together: 20.5 cents. The dollar on the bracket threshold is worth 6.5 cents, because it moves a dollar of income from the 20.5% rate down to 14%. The dollar on the basic personal amount is worth 14 cents. That is the honest size of the thing. It is worth getting right for the sake of being right about the law, not for the money.
Six amounts land on a two-dollar range
The same mechanism cuts the other way on six figures. Because the published number is a rounded view of an unrounded amount, it pins that amount only to within half a dollar. Narrowing that band across every year CRA has published settles most amounts on a single dollar. For these six it leaves two adjacent candidates, and the second decimal place that would separate them has never been published:
| Amount | 2026 | 2027 |
|---|---|---|
| Old age security repayment threshold | $95,323 | $97,801 or $97,802 |
| Age amount | $9,208 | $9,447 or $9,448 |
| Age amount net income threshold | $46,432 | $47,639 or $47,640 |
| Canada caregiver net income threshold | $20,601 | $21,136 or $21,137 |
| Medical expense credit, 3% of net income ceiling | $2,890 | $2,965 or $2,966 |
| Canada workers benefit, minimum earnings threshold | $4,478 | $4,594 or $4,595 |
For planning purposes the dollar does not matter. The OAS recovery tax starts just under $97,802 of net income in 2027, up from $95,323, and that is the figure a retiree managing income around the clawback needs.
The bracket amounts were reset for 2025
Running the chain of unrounded amounts from the 2020 published bracket figures forward, with no restart, reproduces the published series for the 20.5%, 26% and 33% thresholds. It breaks at 2026 on the 29% threshold: the carried amount lands between $181,439.13 and $181,439.28, which cannot round to the $181,440 CRA published. That is the fingerprint of something written into the Act. Section 117(2), headed “Rates for taxation years after 2024,” names $57,375, $114,750, $177,882 and $253,414 as fresh whole-dollar amounts for 2025, and a restatement like that clears whatever fractional remainder had built up. Starting the chain from those four whole dollars reproduces all four of CRA’s published 2026 thresholds exactly.
What the 2.6% is worth in federal tax at each income
Federal tax on the same income, computed once under 2026 parameters and once under 2027 parameters, for an employee claiming the basic personal amount and the Canada employment amount and nothing else, so income and taxable income are the same figure.
| Income | 2026 federal tax | 2027 federal tax | Change |
|---|---|---|---|
| $20,000 | $286.58 | $221.34 | -$65.24 |
| $30,000 | $1,686.58 | $1,621.34 | -$65.24 |
| $50,000 | $4,486.58 | $4,421.34 | -$65.24 |
| $60,044 | $5,991.61 | $5,827.50 | -$164.11 |
| $70,000 | $8,032.59 | $7,868.48 | -$164.11 |
| $100,000 | $14,182.59 | $14,018.48 | -$164.11 |
| $120,088 | $18,467.99 | $18,136.52 | -$331.47 |
| $150,000 | $26,245.11 | $25,913.64 | -$331.47 |
| $186,157 | $35,801.35 | $35,314.46 | -$486.89 |
| $265,203 | $59,206.84 | $58,470.90 | -$735.94 |
| $300,000 | $70,689.85 | $69,953.91 | -$735.94 |
| $500,000 | $136,689.85 | $135,953.91 | -$735.94 |
The saving is a staircase, not a slope. It sits flat at $65.24 up to $60,044, flat at $164.11 up to $120,088, flat at $331.47 up to $186,157, and flat at $735.94 from $265,203 up. Between $186,157 and $265,203 it slides from $486.89 to $735.94, because that is the stretch where the enhanced basic personal amount is phasing out and the 2026 and 2027 phase-out bands do not line up. Spread over 26 pay periods, the bottom of the staircase is about $2.51 a pay and the top about $28.31.
A dollar-by-dollar sweep from zero to $600,000 found no income at which 2027 federal tax is higher than 2026 on the same income. The largest saving is $735.94, first reached at $265,203 and flat above it. The first income at which there is any saving at all is $17,954, because below that federal tax is already nil.
Two separate things produce the saving and they stack. The credits move first: the basic personal amount rises $427 and the Canada employment amount rises $39, worth $59.78 and $5.46 at 14%, so $65.24 together for anyone with enough income to use both. That is the entire saving below $60,044. The thresholds move second, each one carrying a slice of income down into a lower rate, and they accumulate to $98.87 once past the first threshold, $266.23 past the second, $407.74 past the third and $676.58 past the fourth. Above the top of the phase-out the credit portion shrinks to $59.36, because only the minimum basic personal amount is available there. The two parts add to the table exactly outside the phase-out band: $65.24 plus $98.87 is $164.11, $65.24 plus $266.23 is $331.47, and $59.36 plus $676.58 is $735.94.
The federal tax-free line rises to $18,419
An employee claiming both the basic personal amount and the Canada employment amount owes no federal tax up to $17,953 of employment income in 2026, and up to $18,419 in 2027. That is $16,452 plus $1,501, and $16,879 plus $1,540.
The phase-out band hides an extra 0.295 points of marginal rate
The basic personal amount is not a single number, and section 118(1.1) defines it as A plus B. A is the indexed minimum. B is the enhanced top-up, and it is reduced in proportion to how far income has moved through the band between the start of the 29% bracket, under section 117(2)(d), and the start of the 33% bracket, under section 117(2)(e). Below the first point the full top-up applies. At or above the second, none of it does.
In 2027 that band runs from $186,157 to $265,203, a width of $79,046. The top-up lost across it is $1,665, worth $233.10 of credit at 14%. Spread over $79,046 of income that is an extra 0.295 percentage points of federal marginal rate on top of the stated 29%, so the effective federal marginal rate inside the band is 29.295%. The practical consequence for anyone earning in that range: a dollar of deduction is worth 29.295 federal cents there, not 29, because it buys back a sliver of the disappearing top-up as well as the tax. The 2026 band runs $181,440 to $258,482, a width of $77,042, and the same arithmetic gives the identical 0.295 points.
Indexation holds the burden on unchanged real income almost exactly
The precise version of the claim that indexation keeps up with inflation is testable directly. Take a 2026 income, raise it by the same 2.6% the brackets moved by, and compare the effective federal rate before and after.
| 2026 income | 2027 income | Effective rate 2026 | Effective rate 2027 |
|---|---|---|---|
| $40,000 | $41,040 | 7.7165% | 7.7167% |
| $60,000 | $61,560 | 9.9710% | 9.9712% |
| $100,000 | $102,600 | 14.1826% | 14.1827% |
| $200,000 | $205,200 | 19.9283% | 19.9284% |
| $500,000 | $513,000 | 27.3380% | 27.3380% |
Across a dollar-by-dollar sweep from $20,000 to $500,000, the largest change in the effective federal rate was 0.0005 percentage points. Indexation holds the federal burden on an unchanged real income essentially exactly, which makes the corollary the useful part: a raise bigger than 2.6% still costs more as a share of income, and a raise smaller than 2.6% costs less. Provincial brackets and credits index on their own separate schedules, on top of all of this.
The same rates and thresholds reach well beyond a paycheque. Interest income, half of a capital gain, and a grossed-up dividend net of the dividend tax credit all run through this schedule, which is the subject of our guide to how investment income is taxed in Canada. And the brackets are not the only thing resetting on the same January 1: Parliament has enacted a cut in the base CPP contribution rate from 4.95% to 4.75% for 2027, still waiting on an order in council, and it moves in the same direction on the same paycheque.
Disclaimer: The content on bestcanadianstocks.ca is for informational and entertainment purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always consult a qualified financial advisor before making investment decisions. Every figure in this article is derived from first-hand sources on disk. The 2027 indexation factor of 1.026 is computed under Income Tax Act section 117.1(1) and (4) from Statistics Canada table 18-10-0004, vector 41690973, the Canada all-items CPI, monthly to September 2026 (released October 19, 2026). The method reproduces the indexation increase the CRA published for each of 2020 through 2026. The 2027 amounts are carried forward on the unrounded chain section 117.1(1)(a) specifies, from the whole-dollar bases the statute names: the bracket amounts restated for 2025 in section 117(2), the $15,000 of section 117.1(2)(g) for 2023, and the $12,298 of section 117.1(2)(f) for 2020. Each chain is intersected with every year the CRA has published. Sixteen amounts resolve to a single dollar and are stated as such; six resolve only to two adjacent dollars and are stated as a two-value range. The CRA had published no 2027 figures as of October 29, 2026: its indexation adjustment page carried columns for 2026 back to 2023 and a date modified of March 12, 2026. No amendment to section 117, 117.1 or 118 appears on the Justice Laws amendments-not-in-force list for the Act, current to September 30, 2026. The tax table assumes employment income with only the basic personal amount and the Canada employment amount claimed, so income and taxable income are the same figure, and it is federal tax only. Every figure is the exact value rounded half-up exactly once, and every row foots.
