The province’s tax plan was one of the lengthiest sections of Alberta’s 2025 budget. Although the Alberta government’s plan to introduce a new eight per cent tax bracket on the first $60,000 ahead of schedule has dominated headlines, the budget also features several other significant tax measures.
The new eight per cent personal income tax bracket will save individuals up to $750 in 2025. Meanwhile, individuals earning less than $60,000 will see their personal income taxes fall by 20 per cent. The tax cut will save Albertans around $1.2 billion in 2025.
Alberta Director of the Canadian Taxpayers Federation, Kris Sims, said the $1,500 saved for a two-person family would cover more than a month’s worth of groceries or rent.
“Premier Danielle Smith keeping her promise and cutting the Alberta income tax is great news because it means huge savings for most working families,” said Sims. “We are concerned about the increased spending and the big deficit.”
Additionally, the budget introduces a new tax credit to prevent Albertans who claim over $60,000 in non-refundable tax credits from facing higher taxes under the new bracket.
To address inflation, income thresholds for the existing 10, 12, 13, 14, and 15 per cent tax brackets have increased by 2 per cent from 2024.
“With low personal and corporate income taxes, low fuel tax, and no sales tax, Albertans and Alberta businesses generally pay lower overall taxes than taxpayers in other provinces,” reads the province’s fiscal plan.
The province previously amended the Alberta Taxpayer Protection Act in 2023, prohibiting it from increasing income taxes without a referendum.
The newest tax cut further cements Alberta’s tax advantage in Canada. The province highlighted that Albertans and Alberta businesses would pay at least $20.1 billion more in taxes if they lived in the second-least taxed province, B.C. If they lived in the most taxed province, P.E.I., they would pay $36.0 billion more.
An Albertan earning $75,000 with no children will pay around $2,100 less tax in Alberta than they would in B.C., up from $1,400 before the new tax bracket.
At eight per cent, Alberta’s general corporate income tax rate is the lowest in Canada and 30 per cent lower than the next lowest province. Alberta’s combined federal-provincial tax rate is lower than the combined federal-state rates of 43 U.S. jurisdictions.
The province said the country needs to support productivity by enhancing investment. It celebrated the Liberals pausing the capital gains tax hike but urged the feds to cancel it altogether.
Other key initiatives introduced in the province’s 2025 budget were new measures to combat contraband tobacco, an increase in the fuel tax rate on locomotive fuel, the winding down of previously cancelled personal income tax credits, and increasing the proportion of education operating costs funded by the education property tax.
While contraband tobacco accounted for more sales than legal tobacco in some provinces, Alberta said it remains around 25 per cent of the province’s total market.
The province will implement four new measures to address the growing concern around contraband tobacco, which the province said results in annual revenue losses of $150 million. The new measures include strengthening enforcement, introducing new administrative penalties, improving coordination, and continuing to advocate for stronger federal action.
The education property tax helps fund the province’s education system. It will increase in 2025-26.
“The share of education operating costs funded by the tax will increase to 31.6 per cent in 2025-26, following historic lows of 28.5 per cent in 2023-24 and 29.5 per cent in 2024-25,” reads the fiscal plan.
The province is also raising the fuel tax rate on locomotive fuel from 5.5 to 6.5 cents per litre on Mar. 1, 2025. The Alberta government said this would bring its rate more in line with other Prairie provinces and expects around $3 million annually generated from this tax.
The Alberta government is eliminating the remaining entitlements to two tax programs that were cancelled in 2019 and 2020.
The provincial government expects over $28.8 billion in revenue from taxes—39.9 per cent of total revenue—the majority of which is still derived from personal income tax despite the cuts.