The Alberta government has introduced legislation to create a new eight per cent personal income tax bracket on earnings up to $60,000, fulfilling a key promise from Budget 2025. The move is expected to save individual taxpayers up to $750 annually, while two-income families could see savings of up to $1,500.
The Financial Statutes Amendment Act, 2025 (Bill 39), tabled in the legislature this week, formally replaces the previous 10 per cent flat tax structure with a new lower bracket for income up to $60,000, while income above that threshold remains taxed at 10 per cent. The province estimates the new tax cut will cost $1.2 billion in 2025, increasing to $1.4 billion by 2028.
The tax cut applies starting in the 2025 tax year, meaning it will first be reflected in tax returns filed in 2026. A supplemental tax credit is also introduced, tied to specific deductions, though eligibility and full impact details remain unclear.
Horner framed the tax cut as a response to economic uncertainty, noting Alberta's real GDP growth is forecast to drop from three per cent last year to 1.8 per cent in 2025 and 1.7 per cent in 2026.
"As you know, we've hit some uncertain economic times, and that's a bit of an understatement when we factor in U.S. tariffs and the whiplash policies coming from our neighbors to the south," said Nate Horner, President of the Treasury Board and Minister of Finance. "It's a stormy time, but Budget 2025 meets this challenge by including plans that account for this uncertainty."
The tax reduction is one of several fiscal changes included in Bill 39, which also revises how the government handles budget surpluses, increases legal aid funding, and adjusts fuel taxes and income support programs.
Under amendments to the Sustainable Fiscal Planning and Reporting Act, 50 per cent of surplus cash generated in a fiscal year could be directed to the Alberta Heritage Savings Trust Fund, while the remaining 50 per cent could be used for debt repayment or one-time spending initiatives that do not increase ongoing operating costs. Previously, surplus funds were required to go entirely toward debt repayment.
Horner said the shift in surplus cash allocation aims to help us reach our goal to “build the Heritage Fund to the point where the fund’s earnings reduce our reliance on non-renewable resource revenue.”
The bill also doubles the share of interest earned on lawyers’ trust accounts that must be allocated to Legal Aid Alberta, increasing it from 25 per cent to 50 per cent. In addition, large Alberta Law Foundation grants—any exceeding $250,000—will now require approval from the provincial government. Any grants over $250,000 issued between first reading and Royal Assent without approval will be retroactively voided.
"The changes increase the statutory contribution by the Alberta Law Foundation to Legal Aid Alberta to 50 per cent from 25 per cent," Horner said. "These amendments, if passed, would ensure important Legal Aid Alberta funding is maintained, while also balancing the needs of Access to Justice grant funding."
Other provisions in the bill include:
- A fuel tax increase: The tax on locomotive fuel will rise from 5.5 cents to 6.5 cents per litre starting March 1, 2025.
- Elimination of a financial oversight body: The legislation repeals sections of the Auditor General Act that previously established the Audit Committee, which oversaw financial reviews and Auditor General reports. Its responsibilities will now be absorbed by the Treasury Board.
- Changes to income support calculations: Amendments to the Income and Employment Supports Act will alter how core income support payments and annual adjustments are determined.
Horner positioned Budget 2025 as a "prudent path forward" amid economic volatility.
"These uncertain economic times require cautious and prudent decisions," he said. "We need to meet the challenge of providing for the needs of our growing province in a way that also sets us up for future success."
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