Personal Tax Return

Canada Disability Benefit

The Canada Disability Benefit is a new program under which the Government of Canada intends to provide up to $2,400 annually to support low-income, working-age Canadians, who are eligible for the Disability Tax Credit, beginning in July 2025. 

Under current rules, payments received under the Canada Disability Benefit would be included in income for tax purposes. While an offsetting deduction would be provided to ensure these payments are effectively non-taxable. 

This benefit will be rendered exempt. 

This measure would apply to the 2025 and subsequent taxation years

Middle-class tax cut

Reduction of the lowest marginal personal income tax rate from 15% to 14%, effective July 1, 2025. 

To reflect a one-percentage-point cut in the lowest tax rate coming into effect halfway through the year, the full-year tax rate for 2025 will be 14.5 per cent and the full-year rate for 2026 and future tax years will be 14 per cent. 

The rate applied to most non-refundable tax credits will continue to be the same as the lowest personal income tax rate.

Top-Up Tax Credit

To mitigate the effect of the middle-class tax cut on the non-refundable tax credit rate (see above), this credit would effectively maintain the current 15-per-cent rate for non-refundable tax credits claimed on amounts in excess of the first income tax bracket threshold.

The Top-Up Tax Credit would apply for the 2025 to 2030 taxation years.

Personal Support Workers Tax Credit

Temporary refundable tax credit of 5 per cent of eligible earnings, providing a credit value of up to $1,100 for eligible personal support workers working for eligible health care establishments. 

An eligible personal support worker is a person who ordinarily provides one-on-one care and essential support to optimize and maintain another individual's health, well-being, safety, autonomy, and comfort, consistent with that individual's health care needs as directed by a regulated health care professional or a provincial community health organization. The person's main employment duties must include helping patients with activities of daily living and mobilization. 

Eligible health care establishments would be hospitals, nursing care facilities, residential care facilities, community care facilities for the elderly, home health care establishments, and other similar regulated health care establishments.

Eligible earnings would include all taxable employment income, including wages and salaries, and employment benefits (as well as similar tax-exempt income and benefits earned on a reserve) that is earned as an eligible personal support worker performing employment duties for eligible health care establishments.

This measure would apply to the 2026 to 2030 taxation years.

Home Accessibility Tax Credit

Simultaneous claims of medical expenses and Home Accessibility Tax Credit will be disallowed as of 2026. 

Capital gain deferral – ESBCS

Under the Income Tax Act, individuals are allowed to defer taxation on capital gains realized on the qualifying disposition of Eligible Small Business Corporation (ESBC) shares to the extent that proceeds from the disposition are used to acquire replacement ESBC shares within the year of disposition, or up to 120 days following that year [ITA 44.1].

To qualify as an ESBC share, a share must be a common share issued by an ESBC to the individual and the total carrying value of the assets of the ESBC and related corporations must not exceed $50 million immediately before and immediately after the share was issued.

Eligible small business corporation at any time means a corporation that, at that time, is a Canadian-controlled private corporation all or substantially all of the fair market value of the assets of which at that time is attributable to assets of the corporation that are:

1. assets used principally in an active business carried on primarily in Canada by the corporation or by an eligible small business corporation that is related to the corporation;
2. shares issued by or debt owing by other eligible small business corporations that are related to the corporation; or
3. a combination of assets described in paragraphs (a) and (b).

Budget 2025 proposes to increase of the period to acquire replacement shares and to expand what qualifies as an ESBC share. First, the period to acquire replacement shares would be expanded to encompass the year of disposition and the entire calendar year after the year of disposition. Second, an ESBC share would include both common and preferred shares. Finally, the limit to the carrying value of the assets of the ESBC and related corporations would be increased to $100 million. 

For qualifying dispositions that occur on or after January 1, 2025.

Canada Child Benefit (CCB)

Extension of eligibility of CCB in respect of a child for six months after the child's death (the "extended period"), if the individual would have otherwise been eligible for the CCB in respect of that particular child.

The CCB entitlement for each month during the extended period would be based on the age of the child in that particular month as if the child were still alive and would reflect the other family circumstances that apply in that month.

A CCB recipient would still be required to notify the CRA of their child's death before the end of the month following the month of their child's death to ensure that there are no overpayments after the new extended period of six months ends. 

The extended period would also apply to the Child Disability Benefit, which is paid with the CCB in respect of a child eligible for the Disability Tax Credit. 

This measure would apply for deaths that occur after 2024.

Accelerated Investment Incentive

Reinstatement of the tripling of the first year CCA rate for eligible property acquired and available for use as of January 1, 2025. 

The triple rate would apply for tax years 2025 to 2029, then the incentive is progressively reduced to double the first CCA rate for tax years 2030 to 2033. 

Immediate expensing (100% CCA rate)

Reinstatement of immediate expensing for eligible property acquired and available for use on or after January 1, 2025, for CCA class 53 (manufacturing or processing machinery and equipment), class 43.1 (clean energy generation and energy conservation equipment), classes 54, 55, and 56 (zero-emission vehicles).

Immediate expensing would be applicable for tax years 2025 to 2029, then progressively reduced for tax years 2030 to 2033 (75% enhanced rate for 2030 and 2031, then 55% enhanced rate for 2032 and 2033). 

Budget 2025 also proposes to provide temporary immediate expensing for the cost of eligible manufacturing or processing buildings, including the cost of eligible additions or alterations made to such buildings. The enhanced allowance would provide a 100-per-cent deduction in the first taxation year that eligible property is used for manufacturing or processing, provided the minimum 90-per-cent floor space requirement is met. 

This measure would be effective for eligible property that is acquired on or after Budget Day (November 5, 2025) and is first used for manufacturing or processing before 2030. 
An enhanced first-year CCA rate of 75 per cent would be provided for eligible property that is first used for manufacturing or processing in 2030 or 2031, and a rate of 55 per cent would be provided for eligible property that is first used for manufacturing or processing in 2032 or 2033. The enhanced rate would not be available for property that is first used for manufacturing or processing after 2033.

Canadian Entrepreneurs' Incentive

2025 Federal budget confirms the cancellation of the Canadian Entrepreneurs' Incentive

Underused Housing Tax (UHT)

Budget 2025 proposes to eliminate the UHT as of the 2025 calendar year. As a result, no UHT would be payable and no UHT returns would be required to be filed in respect of the 2025 and subsequent calendar years.

Luxury Tax on Aircraft and Vessels

Budget 2025 proposes to amend the Select Luxury Items Tax Act (SLITA) to end the luxury tax on subject aircraft and subject vessels. All instances of the tax would cease to be payable after Budget Day (November 5, 2025) including the tax on sales, the tax on importations, and the tax on improvements. 

Corporate tax return

Accelerated Investment Incentive & Immediate expensing (100% CCA rate)

The measures mentioned above are also applicable to corporations.

Scientific research and experimental development (SR&ED)

Increase of the expenditure limit on which the enhanced 35 per cent rate can be earned from $3 million to $6 million.

The taxable capital phase-out thresholds for determining the expenditure limit would also be increased from $10 million and $50 million to $15 million and $75 million, respectively. 
Extension of eligibility for the enhanced refundable tax credit to eligible Canadian public corporations.

An eligible Canadian public corporation would be a corporation that, throughout the taxation year:

• is resident in Canada;
• has a class of shares listed on a designated stock exchange (a list is available on the Department of Finance website) or, if not, has elected, or been designated by the Minister of National Revenue, to be a public corporation; and,
• is not controlled directly or indirectly in any manner whatever by one or more non-resident persons.

Canadian-resident corporations all or substantially all of the shares of the capital stock of which are owned by one or more eligible Canadian public corporations would also be eligible.

An eligible Canadian public corporation would be eligible for the enhanced 35-per-cent tax credit rate on up to $6 million of qualifying SR&ED expenditures annually. Access to the $6 million expenditure limit for any given tax year would be phased out based on a corporation's gross revenue. Specifically, the expenditure limit would be reduced on a straight-line basis when the corporation's average gross revenue over the three preceding years is between $15 million and $75 million. 

• For a corporation that is a member of a corporate group that prepares consolidated financial statements, gross revenue would be as reported in the annual financial statements of the group presented to shareholders at the highest level of consolidation. Members of a corporate group for financial reporting purposes would be required to share access to the enhanced SR&ED credit's expenditure limit.
• For a corporation that is not a member of such a corporate group, gross revenue would be as reported in the corporation's annual financial statements prepared in accordance with generally accepted accounting principles and presented to shareholders.

Credits earned in respect of expenditures above their expenditure limit would be eligible for a 15-per-cent non-refundable credit rate.

Instead of determining eligibility based on taxable capital, CCPCs would have the option to elect to have their expenditure limit for the enhanced SR&ED credit determined based on the same gross revenue phase-out structure proposed for Canadian public corporations.

The 2024 Fall Economic Statement proposes to restore the eligibility of capital expenditures for both the deduction against income and investment tax credit components of the SR&ED program. The rules would be generally the same as those that existed prior to 2014. This change would apply to property acquired on or after the date of the 2024 Fall Economic Statement and, in the case of lease costs, to amounts that first become payable on or after the date of the 2024 Fall Economic Statement (December 16, 2024). 

Eligible capital expenditures for the purposes of immediate expensing under the SR&ED program would be expenditures incurred to acquire new or used depreciable property that the claimant intends to either:

• use all or substantially all (90 % +) of the operating time in its expected useful life in the performance of SR&ED in Canada, or,
• consume all or substantially all (90 % +) of its value in the performance of SR&ED in Canada.
  Eligible property would be eligible for expensing once it becomes available for use. 

If these criteria are met, the expenditure could be fully deducted for the purpose of determining taxable income in the year the eligible property becomes available for use or carried forward to the extent it is not deducted in the tax year (i.e., as part of a pool of deductible SR&ED expenditures). 

Qualifying capital expenditures would also generally be eligible for the SR&ED tax credit, with some differences from those eligible for immediate expensing, including:

• The acquisition of property that had been used or acquired for use or lease before it was acquired by the claimant would not be eligible for a tax credit.
• A SR&ED-related capital expenditure ineligible for a full deduction against income because it does not meet one of the all-or-substantially-all tests noted above could still be considered "shared-use equipment", meaning that part of the cost of the property would be eligible for the tax credit.

For qualifying CCPCs with access to the SR&ED program's enhanced 35-per-cent tax credit, credits earned on capital expenditures would be eligible for partial refundability at a rate of up to 40 per cent, unlike credits earned on current expenditures which are fully refundable up to a CCPC's expenditure limit.

The proposed new rules to determine eligibility for the enhanced SR&ED credit would apply for taxation years that begin on or after the date of the 2024 Fall Economic Statement (December 16, 2024). 

Non-profit Organizations (NPO)

NPOs with total gross revenues over $50,000 will have to meet a new additional requirement to also file the annual NPO information return.

Current requirements are: 

• the total of all of the NPO’s passive income in the fiscal period exceeds $10,000;
• the organization's total assets at the end of the preceding fiscal period exceeded $200,000; or,
• an information return was required to be filed by the organization for a preceding fiscal period.

As per the new requirement, NPOs that do not meet the thresholds for filing the annual NPO information return must file a new, short-form return that contains basic information about the organization, including:

• its business number or trust number;
• the name of the organization and its mailing address;
• the names and addresses of the directors, officers, trustees or similar officials;
• a description of the organization's activities, including whether it conducts activities outside Canada;
• the organization's total assets and liabilities and annual revenues; and,
  other prescribed information.
• Applicable for 2026 and subsequent taxation years. 
  
  

Trusts tax return
Reporting requirements for trusts

Required reporting date for bare trusts has been deferred to taxation years ending on or after December 31, 2026. 

Quebec
Family allowance

The Family Allowance payments, as well as those for the Supplement for Handicapped Children (SHC) and the Supplement for Handicapped Children Requiring Exceptional Care (SHCREC), where applicable, will be extended for 12 months from the month following the month that includes the day of an eligible dependent child’s death. 

This new measure will apply in respect of a death occurring after June 30, 2025.

Child care expenses

As of the 2026 taxation year, the age of 16 included in the definition of “eligible child,” for the purposes of the tax credit for child care expenses, will be reduced to 14. Consequently, an eligible child of an individual or of an individual’s spouse will have to be under 14 of age at any time during the year for child care expenses incurred for the child in the year to be eligible for the tax credit for child care expenses for that year.

Medical practitioner

As of January 1, 2026, the term “practitioner” provided in the Taxation Act no longer includes homeopaths, naturopaths, osteopaths and phytotherapists.

Educational Institutions designation

As of January 1, 2026, an educational institution offering courses that furnish a person with skills for, or improve a person’s skills in, an occupation, may be recognized by Revenu Québec only if it meets at least one of the first four criteria described below, and provided it is not excluded by the application of the exclusion criterion relating to the health sector:

Criterion 1 – Be an educational institution that receives government funding

Criterion 2 – Be a private educational institution that provides training equivalent to that provided in a public sector educational institution

Criterion 3 – Be a private educational institution that provides training for a profession or trade requiring certification or a licence issued by a government authority

Criterion 4 – Be an educational institution that provides training leading to a professional status recognized by the Québec Professional Code

As of taxation year 2026, individuals who claim the tax credit for tuition and examination fees in respect of tuition fees paid to an educational institution recognized by the Minister of Revenue will be required to certify, in their income tax return for the year, that they took the training in question in order to acquire or improve, as the case may be, the skills required to practise a profession. 

This certification will be similar to the one appearing on the back of federal Form T2202. 

Cooperative Investment Plan (CIP) deduction

For the purposes of the CIP deduction the adjusted cost of a qualifying security for an individual will be the cost of that security, determined without taking into account borrowing costs and other costs related to the acquisition, instead of 125% of such cost.

This change will apply in respect of a qualifying security acquired after the day of the budget speech (March 25, 2025).

Clergy residence deduction

The residence deduction for a member of the clergy or a religious order will be converted into a non-refundable tax credit.

Applicable for the 2026 and subsequent tax years.

Adult basic education tuition assistance

The adult basic education tuition assistance will be converted into a non-refundable tax credit.

Applicable for the 2026 and subsequent tax years.

Foreign Income Verification Statement

Revenu Quebec will introduce a Foreign Income Verification Statement similar to the Federal T1135 form. 

This new form will be included in the 2025 tax year 

Farming and Fishing property income

Revenu Quebec will introduce new forms for Farming and Fishing property income, similar to the Federal T2042 and T2121 forms. 

The new forms will be included in the 2025 tax year. 

English services

Revenu Quebec will introduce a new form for individuals or individuals in business to apply for an exception under the Charter of the French language to receive services in English. 

Exceptions:

• been declared eligible to receive instruction in English in Québec.
• an Indigenous person 
• do not live in Québec 
• an immigrant who has been in Québec less than six months 

An individual or individual in business is considered to have an acquired right if RQ were communicating with them in English before May 13, 2021.

Abolished measures

Following measures have been abolished:

• Tax shield (2026)
• Political contributions non-refundable tax credit (2026)
• Foreign researcher tax holiday deduction (March 25, 2025)
• Foreign expert tax holiday deduction (March 25, 2025)
• Tax holiday for foreign specialists assigned to operations of an international financial centre (March 25, 2025)
• Tax holiday for seamen engaged in international transportation of freight (March 25, 2025)
  Tax credit for patronage gifts (donations credit) (March 25, 2025)
• Deduction relating to the acquisition of an income-averaging annuity respecting income from artistic activities (2026)