Budget 2026- Drinking from a fire hose

Finance Minister Francois-Philippe Champagne tabled the 2026 Federal Budget (“Budget 2026”) on November 5^th, 2026. This budget is two-fold: introduction of a new $15M capital gains exemption for certain business owners and simplification of the tax system for Canadians, including a proposed new individual filing deadline effective for the 2027 tax year. There are a large number of proposed measures to consolidate deadlines, provide flat-rate methods for various tax deductions and credits, increase thresholds and reduce frequency of payments. The numerous measures have a target audience: individuals and business. Get ready for the tsunami.

Canada Growth Incentive – Capital Gains Exemption

Budget 2026 proposes to introduce a new $15 million Canada Growth Incentive (CGI) capital gains exemption for Canadian-resident individuals on the disposition of qualifying shares of a qualifying corporation. This measure will come into force on Budget Day and before 2037. 

Claiming this exemption would require multiple, strict tests to be met at various stages such as before shares are issued from the corporation up until the time of share disposition. These tests bear some resemblance to the existing tests for claiming the lifetime capital gains exemption (LCGE) for qualified small business corporation shares (QSBC), which is currently indexed at $1,275,000 for the 2026 tax year. Notably, the CGI exemption is not available across industries, excluding certain service and agricultural sectors such as farming and fishing. 

Although farming and fishing are excluded from the proposed rules, there are proposed measures in place to expand the rollover of qualified farm and fishing property (see the section below titled “Expansion of the intergenerational farm and fishing property rollover”). 

More importantly, using the CGI exemption would limit the ability to use the LCGE on the sale of shares of the same corporation; however, one may claim both the CGI exemption and capital gains exemption (CGE) for an employee ownership trust (EOT) on the same share sale.  

Who does it apply to? 

A qualifying individual is an individual (other than a trust), who is at least 18 years old at the time they acquired a qualifying share. The individual would have to be a Canadian resident throughout the year in which they claimed the exemption. 

The claim could relate to a capital gain realized on the disposition of a qualifying share in that year or a preceding taxation year. 

What is a qualifying business? 

A qualifying business would be an active business excluding: 

1. a business providing consulting services, professional practices including accountants, lawyers and notaries, health care practices such as physician and other health care practitioners, engineers, architects, and any business whose principal asset is the reputation or skill of one or more employees;
2. a business operating in the agricultural, fishing, forestry, mining, financial, insurance, utilities, real estate, food and accommodation, arts, recreation, or entertainment sectors; and
3. a business operating under a licensing or franchising agreement.

What is a qualifying share?

A qualifying share would have to be issued by a qualifying corporation to the qualifying individual (or a partnership of which the qualifying individual is a member) and owned directly by the qualifying individual or by the partnership. This prevents ownership of shares by a family trust where individuals are beneficiaries of such trust. There are additional restrictions pertaining to shares owned by a partnership. 

What are the conditions to be met?

Immediately before and after the share’s issuance:

The combined carrying value of the assets of the corporation and all corporations related to it must not exceed $100 million. 

At the time of share issuance:

1. the corporation must be a Canadian-controlled private corporation (CCPC); and
2. all or substantially all of the fair market value of the corporation’s assets must be attributable to assets used, or reasonably intended to be used within 36 months, principally in a qualifying business carried on primarily in Canada.

Consideration for issued shares 

The share must have been issued either solely for cash consideration or in exchange for employment services provided by the qualifying individual to the qualifying corporation. Where issued shares are subsequently exchanged in the course of a reorganization, continuity rules would be proposed and forthcoming. 

During the period of share ownership:

During the period which the qualifying individual (or partnership), 50% or more of the fair market value of the corporation’s assets must be attributable to assets used, or reasonably intended to be used, principally in a qualifying business. 

In addition, for a minimum period of 24 consecutive months immediately following share issuance, the qualifying business would be required to be carried on primarily in Canada.

Immediately before share disposition:

For a minimum period of 36 consecutive months immediately before the disposition, the share must have been held by the qualifying individual or partnership. 

At the time of disposition:

1. The corporation must be a Canadian-resident corporation that is either a private corporation or a public corporation listed on a designated stock exchange located in Canada; and

2. All or substantially all of the fair market value of the corporation’s assets must be attributable to assets used principally in a qualifying business.

Planning considerations for the CGI Exemption 

Interaction with the LCGE and CGE on EOT

Claiming the CGI exemption on the disposition of qualifying shares would limit the individual’s ability to claim the LCGE on the same sale of shares (and visa versa). However, there is an ability to claim both the CGE on the sale of shares to an EOT (which is at $10M) and the CGI exemption. 

Although the CGI exemption is arguably the larger dollar limit, there are multiple tests to be met adding an extra layer of complexity compared to claiming the LCGE. 

Interaction with Alternative Minimum Tax (AMT)

The AMT is a parallel tax calculation that permits fewer tax credits, deductions, and exemptions than the regular tax calculation performed under the ordinary personal income tax rules. Similar to LCGE, capital gains exempted under CGI would be subject to a 30% inclusion rate under the AMT regime, requiring careful planning to be undertaken in the year of disposition. 

Tax on split income rules (TOSI)

The proposed rules for the CGI does not mention any related impact on the tax on split income rules (TOSI), which currently have a carveout for taxable capital gains resulting from the disposition of qualified farm or fishing property (QFFP) and QSBC shares. 

Integrity Rules

There will be additional rules proposed to prevent the abuse of the CGI exemption measure such as multiplication of the exemption limit by using multiple corporations to carry on the same underlying business.

Expansion of the intergenerational farm and fishing property rollover 

There are existing rules in place that allow for the rollover of QFFP from a taxpayer to the taxpayer’s child or the child’s spouse or common-law partner, where a child includes the taxpayer’s grandchild or great-grandchild. These rules essentially limited the rollover to the lineal descendants of the taxpayer. 

Budget 2026 proposes to expand the eligibility of the rollover of QFFP, effective January 1, 2027, to a niece, nephew, grandniece, or grandnephew of the taxpayer or the taxpayer’s spouse or common-law partner. 

Expansion of the intergenerational farm and fishing property rollover 

There are existing rules in place that allow for the rollover of QFFP from a taxpayer to the taxpayer’s child or the child’s spouse or common-law partner, where a child includes the taxpayer’s grandchild or great-grandchild. These rules essentially limited the rollover to the lineal descendants of the taxpayer. 

Budget 2026 proposes to expand the eligibility of the rollover of QFFP, effective January 1, 2027, to a niece, nephew, grandniece, or grandnephew of the taxpayer or the taxpayer’s spouse or common-law partner. 

Canada Growth Incentive – Rollover for Investments in Small Businesses

There are existing rules that allow individuals to defer taxation on capital gains realized on a qualifying disposition of eligible small business corporation (ESBC) shares to the extent that proceeds from the disposition are used to acquire replacement ESBC shares (replacement shares) in the year of disposition or the following calendar year.

Budget 2026 proposes to modify the existing rules with an effective date of January 1, 2027 to lower the active business requirement, increase the required period to acquire the replacement shares, and allow for situations where future equity can be acquired through an extended period. 

Under the existing rules, the following three conditions must be met to qualify for a disposition of ESBC shares:

1. Holding period: The shares were held by the individual for a minimum of 185 days immediately before the disposition.
2. Active business requirement: Throughout the period during which the individual owned the shares, the corporation was a taxable Canadian corporation all or substantially all (generally at least around 90%) of the assets of which (measured by fair market value) were used principally in an active business carried on by the corporation (or by a related active business corporation); or shares or debts of a related active business corporation.
3. Canadian activity: The active business of the corporation was carried on primarily in Canada for the lesser of two years and the period during which the individual held the share.

Active business requirement

Budget 2026 proposes to lower the threshold from “all or substantially all” to “primarily” (which is generally equivalent to 50% or more) for the active business component of the test. There is still a requirement for this component to be met throughout the period during which the individual owned the shares. Despite this lower threshold, the 90% threshold would still need to be met at the time of issuance and disposition of the shares.

In addition, the active business would be required to be carried on primarily in Canada at the time of share issuance and for a continuous period immediately following issuance. That period would be the lesser of two years and the period during which the individual owned the shares.

Extended period to acquire replacement shares 

Budget 2026 proposes to increase the period to acquire replacement shares to the end of the third calendar year following the year of disposition, instead of the immediately following calendar year following the year of disposition. 

Future equity agreements 

Budget 2026 proposes to introduce a special provision for individuals who have entered into agreements for future equity before the end of the proposed three-year replacement

Period. The investor would provide upfront capital in return for shares to be issued at a future date (e.g., a simple agreement for future equity or "SAFE”) and would be able to defer the capital gain for an additional two years, for a total replacement period of up to five years.

If no ESBC shares are issued to the individual under the agreement by the end of the fifth year following the year of disposition, the deferred gain would be taxed.

Falling offside of the replacement share rules

If any proceeds of a qualifying disposition are not ultimately invested in replacement shares, interest would apply at the Canada Revenue Agency’s (CRA) prescribed rate from the balance-due day for the year of disposition to the last day of the taxation year in which the gain is taxed.

Simplification of corporate tax elections 

Under various provisions in the Income Tax Act (the “Act”) and Income Tax Regulations, corporations may file elections or agreements with the CRA such as a capital dividend election among others. Typically, a certified copy of a directors’ resolution authorizing the election is required. 

Budget 2026 proposes to eliminate the existing requirements for corporations to file a certified copy of a resolution (or authorization) when making certain elections or agreements. This measure would apply to elections and agreements made on or after the date of royal assent of the enacting legislation. This administrative change would make it easier to file various elections, including the capital dividend election, with the CRA, reducing the number of required documents. 

Taxable Preferred Shares

The taxable preferred share regime is designed to prevent the erosion of corporate tax revenues through after-tax financing that involves the issuance of shares with debt-like characteristics (referred to as “taxable preferred shares”). This can arise when the issuer corporation is non-tax paying (e.g., it has unused deductions, losses or credits) and is unable to immediately benefit from the tax deduction for interest expense. Consequently, the tax benefit to the investor of receiving an amount as a tax-free intercorporate dividend (instead of as taxable interest income) may exceed the tax benefit to the issuer corporation of claiming an equivalent interest expense deduction.

To make the tax system more neutral between debt and preferred share financing, the taxable preferred share regime imposes a special Part VI.1 tax on dividends paid on taxable preferred shares. Part VI.1 tax can be offset against tax payable under Part I of the Act. Part VI.1 tax is also only payable for dividends paid in excess of a $500,000 dividend allowance threshold. The threshold is reduced to the extent dividends paid in the prior calendar year exceeded $1,000,000.

Budget 2026 proposes to introduce the following measures:

• Exempt CCPCs from the taxable preferred share regime by excluding dividends they pay from Part VI.1 tax. This measure would apply to dividends paid on or after Budget Day.
• Increase the dividend allowance from $500,000 to $1,500,000 and the threshold for the reduction of the dividend allowance from $1,000,000 to $3,000,000. 

These measures would apply to taxation years that end after 2026.

Corporate Loss Transfers 

Under the current tax rules, corporations are taxed on a stand-alone basis. For instance, a corporation may offset its non-capital losses against its own income (subject to the carry-forward rules) but cannot directly deduct a loss incurred by another related corporation. A potential way to use another related corporation’s existing losses is through amalgamations, wind-ups, or intra-group financing transactions. However, these transactions can be complex and costly for business owners. 

Budget 2026 invites stakeholders to comment on the introduction of a corporate loss transfer rule where transfers of current-year non-capital losses between corporations may be permitted under certain conditions. The rules are not yet finalized, however, the basic design parameters of the loss transfer mechanism, and certain key considerations, have been proposed at this stage. 

Qualifying Corporate Group

Loss transfers would be permitted in the following cases:

• Between a parent corporation and a subsidiary corporation that is wholly owned, directly or indirectly, by the parent corporation; and
• Between two subsidiary corporations that are wholly owned, directly or indirectly, by the same parent corporation.

Eligible Corporations

The rule would apply only to Canadian resident corporations resident subject to Part I tax. However, certain types of corporations that are considered conduits for their shareholders or members (e.g., mutual fund corporations) would not be able to transfer or receive losses.

Eligible Losses and Annual Joint Election

The rule would permit current-year non-capital losses to be transferred either in whole or in part through a joint election made between the transferor and transferee. Non-capital losses are subject to a 20 year carry forward period so the ability to transfer these losses to another corporation that can actually use the loss is a welcome change. 

The transferee would be permitted to deduct the elected amount in computing its income for the relevant taxation year. The transferor’s non-capital loss for the relevant taxation year would be reduced by the elected amount. Any portion of the transferred amount that is not deducted by the transferee in that year would not be made available for carryback or carryforward.

Provincial Allocation

The corporate loss transfer rule could affect provincial and territorial tax bases if a loss arising in one jurisdiction were used to reduce taxable income allocated to another jurisdiction. As such, a loss arising in a province or territory could only be transferred to offset income arising in that same jurisdiction. In particular, the rule would be available only where:

• the transferor has a permanent establishment in only one province or territory;
• the transferee has a permanent establishment in only one province or territory; and
• the permanent establishments of the transferor and transferee are located in the same province or territory.

International Tax Measures

Withholding for disposition of taxable Canadian property for non-residents 

Budget 2026 proposes reducing the withholding and remittance rates from 25% of the purchase price for capital property other than specified Taxable Canadian Property (TCP) and 50% of the purchase price for TCP to 15% and 30%, respectively. This withholding obligation doesn’t apply if the vendor obtains a certificate of compliance (clearance certificate) from the CRA. To obtain the certificate, the vendor must remit an estimate of the taxes owing, post security or demonstrate to the CRA that no tax will be owing. 

Budget 2026 also proposes to exempt vendors and purchasers from the withholding and tax remittance requirements for fully tax-deferred section 85 rollovers of TCP provided that, within 30 days of the disposition, the section 85 election form is filed and the purchaser provides a notice to the CRA setting out information regarding the transaction and the vendor.

An existing anti-avoidance rule denies a tax-deferred rollover if, within 3 years, there is a subsequent disposition of the transferred property or substituted property, and one of the main purposes of the series was to benefit from an exemption from Canadian tax (e.g., under a tax treaty). Budget 2026 proposes strengthening this rule for rollovers of TCP by non-residents by extending the 3-year period to 5 years and ensuring that a subsequent disposition of a property that principally derives its value from the transferred property or substituted property is also subject to the rule.

Tax filing, reporting and remittance changes

Individual tax return and balance due deadline change

Budget 2026 proposes changing the T1 filing and balance-due dates to May 15 for all individuals, including self-employed individuals and their spouses or common-law partners. This would apply to the 2027 and subsequent taxation years, meaning the April 30 deadline would remain in place for the 2026 tax year for non-self employed individuals.

Increasing installment thresholds

Budget 2026 proposes to increase the period to acquire replacement shares to the end of the third calendar year following the year of disposition, instead of the immediately following calendar year following the yearIncreasing installment thresholdsBudget 2026 proposes increasing the installment dollar threshold from $3,000 to $7,500 for corporations and individuals resident outside Quebec, and from $1,800 to $4,500 for individuals resident in Quebec. The thresholds would be indexed to inflation and rounded to the nearest $500. Any remaining tax payable for a taxation year would be due on the applicable balance-due date. This measure would apply to taxation years that begin on or after January 1, 2028.

Budget 2026 also proposes that individuals whose primary source of income is from a business (including professional or commission income) be allowed to make a single annual installment payment, instead of quarterly installments. The single installment payment would equal 2/3 of their combined federal-provincial net tax owing for the year and be due by December 31. The remainder would be due on the applicable balance due date. This change would extend similar treatment to what is currently available for farming and fishing income to other business income. This measure would apply to the 2028 and subsequent taxation years. of disposition. 

Foreign Income Verification Statement – Form T1135

Budget 2026 proposes increasing the threshold above which Form T1135 must be filed from $100,000 to $200,000. The CRA would also increase the threshold for simplified reporting from less than $250,000 to less than $500,000. These measures would apply to taxation years or fiscal periods that end after 2026.

Objections to assessments

Budget 2026 proposes, for most taxpayers, to amend the deadline to file a notice of objection to an income tax assessment to one year after the day the notice of assessment is sent. For individuals and graduated rate estates, Budget 2026 proposes to amend the deadline to the later of one year after the notice of assessment is sent and two years from the tax return filing due date for the taxation year being assessed. Consequently, taxpayers would no longer need to apply for an extension of time and the ability to do so would be eliminated.

This amendment would apply to assessments sent on or after the day that is three months after royal assent.

Registered retirement savings plan 

The government’s intention is to merge the core features of the RRSP and RRIF under the Act into a single “RRSP for life” and to make other changes to improve and modernize the RRSP tax rules. This would eliminate the need for individuals to convert their RRSP to a RRIF at age 71. Individuals over the age of 71 would continue to be required to make minimum withdrawals.

The specific issues under consideration include the following:

• Whether and how the RRSP rules could include a “successor holder” (i.e., a spouse or common law partner) feature similar to other registered vehicles. This could permit a RRSP to remain open until the death of the successor holder (i.e., the original holder’s surviving spouse or partner) and avoid the value of RRSP property being included in the income of the deceased.
• Whether and how the current RRSP indirect “rollover” provisions that apply on death (involving an income inclusion and offsetting deduction for a qualifying survivor) could be replaced with rules to permit direct tax-free transfers to qualified registered vehicles of qualifying survivors.

Under provincial and federal pension standards, funds transferred from a pension plan are generally subject to locking-in restrictions until retirement and may be required to be held in prescribed vehicles, such as a locked-in RRIF or RRSP. As a result, merging the RRSP and RRIF rules could require consequential changes to the federal Pension Benefits Standards Regulations, 1985 and similar provincial legislation. Budget 2026 has draft legislation that provides an indication of how transfers of an RRSP will occur on death but the final iteration of the changes remains to be seen – whether it will mirror the existing RRIF or TFSA rules or create a new transfer framework. Internationally, additional consideration will be required to address how these changes may affect Canadians receiving RRSP and RRIF payments abroad. For example, RRIF and RRSP payments are treated differently under the Convention Between Canada and the United States of America.

The government is seeking Canadians’ views on this proposal. Submissions can be made by January 8, 2027.

Registered Disability Savings Plan – qualifying family member 

As of January 1, 2027, the government proposes permanently allowing a qualifying family member to open a Registered Disability Savings Plan (RDSP) on behalf of an adult whose ability to enter into a contract for an RDSP is in doubt, and who does not have a legal representative.

Trust distributions to non-residents 

Personal trusts are generally deemed to have disposed of their capital property and certain other property for fair market value proceeds on the 21st anniversary of their creation, and every 21st anniversary thereafter (the “21-year rule”). 

A common planning strategy for the 21-year rule is to do a tax-deferred rollout of capital assets using subsection 107(2) of the Act to capital beneficiaries, which is limited to Canadian resident beneficiaries. In Budget 2025, rules were introduced to prevent indirect trust to trust transfers that would indefinitely avoid the 21 year deemed disposition rule. 

Budget 2026 notes that there are certain planning techniques to roll out the property to a non-resident beneficiary. This may be the case where trust property is transferred to a Canadian resident corporate beneficiary that is owned by a non-resident person. Budget 2026 proposes to have the current rollout denial rule apply to transfers of trust property to Canadian resident corporations (or partnerships) that have a direct or indirect non-resident shareholder (or partner). The effective date of this measure is November 5, 2026. 

Canada Strong Sovereign Wealth Fund 

The Canada Strong Fund – Canada's first sovereign wealth fund – will invest $25 billion in nation-building projects and high-growth Canadian companies. The Fund will invest exclusively in Canada, alongside and on the same commercial terms as private partners. It will take minority ownership positions and operate independently from government. 

In 2027, the government intends to launch Canada Strong Notes, a retail investment product linked to the Canada Strong Fund that will give Canadians the opportunity to invest alongside the Fund and share directly in its returns. Available through participating financial institutions, the Notes will enable Canadians to easily purchase, hold, and redeem their investment while participating in the Fund’s long-term success. In addition to the benefits generated through the Fund’s public ownership structure, Canada Strong Notes will provide investors with protection of their initial investment while offering a coupon payment and the chance to benefit from the Fund’s performance with flexible redemption.

The government’s intention is to bring forward legislation in the coming months to establish the Canada Strong Fund as an arm’s-length and standalone Crown corporation. In the interim period, the Canada Strong Fund will be incorporated as a wholly-owned subsidiary of the Canada Development Investment Corporation, with its own dedicated Board of Directors and Chief Executive Officer.

Tax credits, deductions and benefit changes 

Canada Groceries and Essentials Benefit

The Canada Groceries and Essentials Benefit (CGEB) helps low- and modest-income individuals and families offset the rising cost of food and other everyday essentials and the GST they pay. The CGEB is non-taxable, income-tested, and indexed to inflation.

Budget 2026 proposes a one-time CGEB supplement, to be delivered in early 2027, equal to half of the maximum annual CGEB amounts for the 2026-27 benefit year. The maximum amounts of this supplement would be $223 per adult, $117 per child and $117 for the single supplement. For this supplement only, the phase-in and phase-out rates would be adjusted to 6% and 15%, respectively, to ensure that the supplement would be fully phased in and phased out at the same income levels as under the current rules.

Canada Worker’s Benefit

The Canada Workers Benefit (CWB) is a refundable tax credit that supplements the earnings of low- and modest-income workers and improves incentives to work. Under current law, individuals who received the CWB for the previous taxation year are automatically entitled to receive the Advance CWB for the current taxation year, totaling half of the previous year’s CWB entitlement. For the 2027 taxation year, Budget 2026 proposes reducing the Advance CWB from 50% to 25% of the individual’s CWB entitlement for the 2026 taxation year. The Advance CWB would be eliminated beginning in the 2028 taxation year.

Budget 2026 also proposes enhancing the benefit and renaming it the Build Canada Workers Benefit (BCWB). For the 2027 taxation year, the enhanced benefit would:

• reduce the phase-in threshold to $500;
• increase the maximum benefit amounts to $1,859 for single individuals without children and to $3,143 for families; and
• adjust the phase-out thresholds to $27,104 for single individuals without children and to $30,731 for families, so that the higher maximum benefits do not change the income levels at which the entitlement is fully phased out.

The BCWB would retain the supplement for individuals eligible for the Disability Tax Credit. The phase-in threshold of the BCWB disability supplement would be reduced to $200 (down from $1,150 under the CWB). BCWB parameters would be indexed in the same manner as those of the CWB for years after 2027.These measures would apply to the 2027 and subsequent taxation years. 

Mineral Exploration Tax Credit and Critical Mineral Exploration Tax Credit 

Budget 2026 proposes to extend eligibility for the mineral exploration tax credit (METC) and critical mineral exploration tax credit (CMETC) for 5 years, to flow-through share agreements entered into on or before March 31, 2032. Budget 2026 also proposes to expand the CMETC to include antimony as an eligible critical mineral. This expansion would apply to expenditures renounced under eligible flow-through share agreements entered into after Budget Day and on or before March 31, 2032.

Canada Caregiver Credit

The Canada Caregiver Credit (CCC) is a non-refundable tax credit that recognizes the impact of non-discretionary, out-of-pocket expenses on a caregiver’s ability to pay tax.

Budget 2026 proposes to make the CCC refundable. A refundable CCC would retain the same design parameters of the current non-refundable credit, including the annual indexation of the maximum amounts and income threshold. This would apply to the 2027 and subsequent taxation years.

Northern residents deduction

Budget 2026 proposes eliminating both of the following restrictions to the residency deduction:

• The amount of the residency deduction is reduced by the amount of non-taxable employer-provided benefits received by the taxpayer for board and lodging at special work sites in the north.
• The residency deduction cannot exceed 20 per cent of the individual’s net income.

Budget 2026 proposes eliminating the following limit to the travel deduction, which is based on employer provided travel benefits or the portion of the $1,200 standard amount allocated to the trip. All eligible northern residents would therefore be able to claim their travel expenses subject to the same limits, whether or not they receive employer-provided travel benefits.

• either the total amount of employer-provided travel benefits received in respect of the trip or the portion of a $1,200 “standard amount” allocated to the trip.

These measures would apply to the 2027 and subsequent taxation years.

Optional Flat Amounts for Personal Income Tax Deductions and Credits

Individuals generally need to keep receipts and satisfy other requirements to claim certain deductions and tax credits. To reduce the need for individuals to keep receipts and itemize their expenses to support their amounts claimed, Budget 2026 proposes optional flat-amount calculation methods for certain deductions and credits. Individuals would still need to establish their eligibility. These measures, described below, would apply to the 2027 and subsequent taxation years.

Moving Expense Deduction

Budget 2026 proposes to allow individuals making an eligible relocation to deduct a flat $1,000 in respect of the relocation instead of tracking and claiming their deductible moving expenses.

Labour Mobility Deduction for Tradespeople

Budget 2026 proposes allowing eligible tradespeople and apprentices working in the construction industry who undertake an eligible temporary relocation to deduct a flat $1,500 per year instead of claiming actual eligible expenses incurred.

Home Accessibility Tax Credit

Budget 2026 proposes to allow eligible individuals who incur qualifying expenses to calculate the Home Accessibility Tax Credit using a one-time optional flat-expense amount of $1,000 for a year instead of claiming their actual expenses incurred. The following conditions would apply to any flat-amount claim:

• Only one taxpayer would be allowed to claim the flat amount in respect of the same eligible dwelling for a particular year.
• If an individual chooses to claim the credit based on their detailed expenses in respect of an eligible dwelling for a particular year, the flat amount would not be available to any claimant in respect of that dwelling for that year. Instead, each individual with eligible expenses could claim eligible expenses under the existing rules.
• An eligible individual would be allowed to claim the flat amount under the Home Accessibility Tax Credit only once in their lifetime. An individual who claimed the flat amount in a given year would, however, still be able to claim the credit in future years based on their detailed expenses, provided all eligibility requirements are met.
• Individuals claiming the flat amount would continue to be required to retain some documents that substantiate that they incurred qualifying expenses for a qualifying renovation.

Adoption Expense Tax Credit

Budget 2026 proposes allowing eligible adoptive parents to calculate the Adoption Expense Tax Credit using an optional flat expense amount of $1,200 per adopted child in the year an adoption is completed, instead of their actual eligible adoption expenses.

• Only one taxpayer would be allowed to claim the flat amount in respect of the same adopted child.
• If one individual chooses to claim the credit based on their detailed expenses under the existing rules, all claimants would also have to use this method (and would not be able to claim the flat amount).

Apprentice Vehicle Mechanics’ Tools Deduction

Currently apprentice mechanics must claim two separate deductions to get the maximum eligible tax recognition for their tool expenses. Budget 2026 proposes allowing apprentice vehicle mechanics to deduct all eligible expenses under the apprentice vehicle mechanics' tools deduction.

Medical Expense Tax Credit and Disability Supports Deduction

Under the current rules, individuals need to track their expenses and keep receipts to claim the medical expense tax credit (METC) and disability supports deduction (DSD). An expense that is eligible under both may be claimed under either measure, but not both. Budget 2026 proposes simplifying the METC while maintaining the integrity of the credit by reducing the documentation requirements for certain eligible expenses. This measure would apply to the 2026 and subsequent taxation years.

In addition, Budget 2026 proposes allowing individuals to claim an optional flat amount in respect of the various categories of expenses. For a particular year, an individual who incurs expenses in an eligible category could choose to either claim the applicable flat amount or itemize and claim the expenses they actually incurred. An individual who chooses the flat amount would not be required to calculate the actual expenses incurred or retain receipts for those expenses. The existing eligibility conditions would continue to apply.

Deductibility of Expenses Against Commission Income

Budget 2026 proposes eliminating the rules that prevent commission employees from deducting travel and motor vehicle expenses under the general employee provisions when they also claim expenses under the commission-employee rules. This would allow a commission employee claiming travel or motor vehicle expenses under the general provisions to additionally claim other employment expenses as a commission employee up to the amount of their commission income. This measure would apply to the 2027 and subsequent taxation years.

Lump-sum Thresholds for Periodic Payment of Benefits

For individuals and families entitled to small payment amounts under the Canada child benefit (CCB), the Canada Groceries and Essentials Benefit (CGEB) and the Advance Canada Worker’s Benefit (CWB) in a given benefit year, the Act specifies that the annual entitlement be issued as a lump-sum, rather than regular payments throughout the year.

Budget 2026 proposes increasing the lump-sum payment threshold to $50 per month for the CCB, to $70 per quarter for the CGEB and, for the 2027 taxation year only, to $70 per payment for the Advance CWB. This measure would apply to benefits paid after June 2027. Budget 2026 also proposes indexing the CCB and CGEB thresholds annually to inflation, rounded to the nearest $5, as of July 2028.

Non-qualified investment, prohibited invest and advantage rules for Individual Pension Plans

Budget 2026 proposes subjecting IPPs to the same advantage rules, non-qualified investment rules, and prohibited investment rules that currently apply to other registered plans of controlling individuals. 

This measure would apply as of January 1, 2028. Transitional rules would apply to investments acquired before 2028 that become non-qualified or prohibited on January 1, 2028.

Conclusion

The proposals came in a massive wave with this budget, but luckily we have the benefit of time to parse through them and evaluate their impact. And we are going to need it. This is only the first tranche. The sequel is expected in the 2027 Spring Economic Update. Grab your wet suit and life preserver. The next wave is coming soon.