How Alberta’s Mid-Year Tax Update Affects Your Practice’s Payroll 

In July 2025, the Canada Revenue Agency (CRA) announced a significant update to payroll tax rates. If you run a mental health practice in Alberta, these changes could affect your paycheque (and your stress levels). Here’s a straightforward breakdown of the changes and how they affect your payroll. 

Understanding the New Federal and Alberta Tax Rates 

First, let’s talk about the federal tax rate. Starting in July, the federal bottom tax bracket was reduced from 15% to 14%. This means slightly more money in your pocket if your income falls within that bracket. 

At the same time, Alberta introduced a lower provincial tax rate of 8% on the first $60,000 of taxable income, down from 10%. That’s up to $1,200 in annual savings if you earn $60,000 a year. 

How Mid-Year Changes Impact Payroll Deductions 

Because the changes took effect mid-year, the CRA has prorated the new rates. From July to December, federal tax is calculated at 14%, and the Alberta rate is temporarily set at 6% to reflect the full-year average of 8%. 

Why does this matter? The CRA uses prorated rates to make sure your total tax deductions for the year stay accurate, even if the rate changes partway through. This prevents you from paying too much (or too little) during the year. 

Here’s a quick example. Suppose your monthly taxable income is $5,000: 

• From January to June, your federal taxes were deducted at 15%. 
• From July onward, the deduction changes to 14%, which slightly increases your monthly take-home pay.
• Provincially, the rate drops to 6% from July to December to reflect the mid-year shift to an 8% annual rate.  

Checklist for Updating Payroll Calculations 

Updating your payroll software helps you avoid over-deducting. Here’s a quick checklist to keep things accurate: 

• Check your payroll software – Double-check your software is up-to-date. If you use Wagepoint, updates are already live. 
• Review past deductions – Compare July pay stubs to June’s to confirm the change is reflected. 
• Inform your team – Even if you work alone or have just one team member, let anyone supporting your payroll know. 
• Plan for adjustments – Flag any unusual deductions or reconciliations needed at year-end. 

These small steps help you stay compliant and avoid unnecessary payroll stress. 

Quick Reference Tables for Easy Recalculation 

Here’s a reference to help you compare the old and new tax rates: 

Now let’s see how that affects a monthly salary of $5,000: 

• Old federal deduction (Jan–Jun): $750 
• New federal deduction (Jul–Dec): $700 → Monthly federal savings: $50 

• Old Alberta deduction (Jan–Jun): $500 
• New Alberta deduction (Jul–Dec): $300 → Monthly Alberta savings: $200 

Altogether, you could see a $250 monthly increase in take-home pay for the rest of 2025. 

Staying on Top of Your Payroll 

Payroll changes don’t have to be stressful. Staying informed helps you protect your cash flow and avoid costly errors. We offer payroll services specific to mental health practices.  

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