If you live in Alberta and filed your taxes in previous years, your 2025 return looks different. The Government of Alberta introduced a new personal income tax bracket in 2025 — an 8% rate on the first $60,000 of taxable income — replacing what was previously a 10% rate at the lowest bracket. This is a meaningful change, and understanding it helps you know what to expect when you file.
What Changed and When
Effective January 1, 2025, Alberta introduced a new provincial income tax rate of 8% on the first $60,000 of an individual’s taxable income. The previous lowest rate was 10%. The change was announced in the February 27, 2025 Alberta budget.
Because the change took effect partway through the payroll year, the government used a prorated tax rate of 6% for the period from July 1 to December 31, 2025 to average out the annual rate to 8%. For purposes of your 2025 T1 personal income tax return, the effective rate on the first $60,000 of taxable income is 8% for the full year.
For 2026 and subsequent years, the $60,000 threshold will be indexed annually like other Alberta income tax brackets. The 8% rate applies to this first bracket on an ongoing basis.
Source: Government of Alberta. Budget 2025 highlights. alberta.ca; Canada Revenue Agency. Alberta — 2025 income tax package. canada.ca
Who Benefits Most
The benefit of this change is straightforward: if your taxable income was $60,000 or below in 2025, you paid 2 percentage points less in Alberta provincial tax on every dollar in that range compared to 2024. The maximum provincial tax saving for someone earning $60,000 or less in taxable income is approximately $750 for the 2025 tax year, according to the Government of Alberta.
For individuals with taxable income above $60,000, the saving still applies to the first $60,000 of their income. If your taxable income is $80,000, for example, you still saved approximately $750 on the first $60,000 — you simply did not receive any additional saving on income above that threshold.
Source: Government of Alberta. Tax overview — personal income tax. alberta.ca
What Alberta’s Tax Brackets Look Like for 2025
Alberta uses a progressive rate system. The new 8% rate applies only to the lowest bracket. Higher income continues to be taxed at higher rates as you move through the brackets. Alberta’s other brackets remain above the $60,000 threshold and continue at rates of 10%, 12%, 13%, 14%, and 15% depending on income level, with the top rate of 15% applying to income above $341,502 for 2025.
These provincial rates are in addition to federal income tax. Federal and provincial tax are calculated separately and combined on your return.
Source: Canada Revenue Agency. Payroll Deductions Tables — Alberta. canada.ca
What This Means at Filing Time
If your employer was withholding payroll tax based on the older 10% rate for the first part of 2025 and adjusted to 6% from July onward, your payroll withholding should be relatively accurate for the year. However, other factors — RRSP contributions, additional deductions, investment income, rental income, or changes in employment — will all affect your final balance or refund.
One important note: lower provincial rates can sometimes result in a smaller refund than prior years even if you paid less tax overall. This is because the reduced withholding during the year is already reflected in your net pay — you received the benefit in each paycheque, rather than as a lump sum at filing time.
Alberta Has No Provincial Sales Tax
It bears repeating for anyone comparing Alberta to other provinces: Alberta is the only province in Canada with no provincial sales tax. Combined with competitive personal and corporate income tax rates, this remains a meaningful financial advantage for individuals and businesses based in the Edmonton area.
The Bottom Line
The new 8% bracket is good news for most Albertans on their 2025 return. If you earn under $60,000 in taxable income, you are paying less provincial tax than you did in 2024. If you earn more, you still benefit — just on the first $60,000. Filing correctly and understanding what changed ensures you do not overpay or miss an opportunity the new rate creates.
Key Takeaway: The 8% Alberta rate is new for 2025. If your withholding or instalments were calculated using older rates, your final tax position may be better than you expect.
Questions about how this change affects your specific return? Contact Nguyen Scott LLP at nsllp.ca/contact-us/ — serving Edmonton, St. Albert, Leduc, and Drayton Valley.
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