Every entry below states what changed, who it affects, when it takes effect, whether it is actually law yet, and the government source it comes from. Written by EverStone CPA, an Abbotsford, BC firm serving owner-managed businesses across Canada.
A large share of what circulates as a “new tax rule” is an announcement that has not been legislated, and acting on one as though it were law produces a wrong return. Each entry is labelled: of the 20 below, 19 are in force, and none of them is merely proposed, and 1 is a CRA administrative position rather than legislation. Where a measure is in force, the bill and its royal assent date are named. Every figure was re-checked against five or more independent sources on 1 August 2026.
This is general information, current as at August 2026. It is not advice for your situation, and tax measures change. Confirm anything load-bearing against the linked source or ask us.
In forceCapital gains · The 50% rate continues to apply
1. The capital gains inclusion rate increase was cancelled — one-half still applies
The proposed increase in the capital gains inclusion rate from one-half to two-thirds was deferred and then cancelled. It never took effect. Capital gains continue to be included in income at one-half.
The increase was announced, deferred, then cancelled. It never took effect.
What changed
The increase was announced in the 2024 federal budget, deferred on 31 January 2025 to 1 January 2026, and then cancelled on 21 March 2025. No version of it ever came into force.
Who it affects
Anyone who sold or is selling appreciated assets — corporate shares, real estate other than a principal residence, or investments — personally or through a corporation.
What to do about it
If a 2024 or 2025 transaction was planned, reported or accrued on the assumption of a two-thirds inclusion rate, it should be revisited. Some returns were filed during the period when the increase was still expected.
In forceCapital gains · Applies to qualifying dispositions
2. The lifetime capital gains exemption stays at $1.25 million
The increase in the lifetime capital gains exemption to $1.25 million on qualified small business corporation shares and qualified farm or fishing property was kept, even though the inclusion rate increase announced alongside it was cancelled.
What changed
The increase to $1.25 million took effect 25 June 2024 and is indexed to inflation from 2026. The two measures were announced together, so the cancellation of the inclusion rate increase led some to assume the exemption increase went with it. It did not.
Who it affects
Owners selling shares of a qualifying small business corporation, and farmers and fishers selling qualifying property.
What to do about it
The exemption applies to share sales, not asset sales, and the corporation must meet asset and holding-period tests at the time of sale. Those tests are checked at the moment of the transaction, so purification work has to happen before a deal, not during it.
In forcePersonal tax · 14.5% for 2025 · 14% for 2026 onward
3. The lowest federal personal tax rate dropped from 15% to 14%
The bottom federal personal income tax bracket fell from 15% to 14.5% for the 2025 tax year, and to 14% for 2026 and later years.
The bottom federal bracket, before and after the cut.
What changed
The reduction took effect 1 July 2025. Because it applied for only half of that year, the CRA applies a blended rate of 14.5% to the 2025 return — 15% for January to June, 14% for July to December — and the full 14% from 2026.
Who it affects
Every individual who pays federal income tax, since the first bracket applies to everyone. It also changes payroll withholding and the value of non-refundable credits, which are calculated at the lowest rate.
What to do about it
Employers should confirm their payroll software is on the current tables. Owner-managers modelling salary versus dividends should rerun the comparison, because the personal side of that calculation moved.
In forceGST/HST · Agreements entered into on or after 20 March 2025, before 2031
4. A new GST rebate for first-time home buyers, worth up to $50,000
First-time home buyers pay no GST (or no federal part of the HST) on a new home valued up to $1 million, and a reduced amount on a new home valued between $1 million and $1.5 million. The maximum saving is $50,000.
Full relief to $1M, phasing to nil at $1.5M.
What changed
This is a new rebate, separate from the long-standing GST/HST new housing rebate. Relief is full below $1 million then reduces on a straight line, so a $1.25 million home sits at the midpoint and attracts roughly half. It is available once per individual, and a person whose spouse or partner has already claimed it is not eligible.
Who it affects
First-time buyers purchasing a newly built or substantially renovated home, or having one built. Builders need to know it exists because it affects how a sale is priced and documented.
What to do about it
Eligibility turns on the date of the agreement of purchase and sale, not the closing date. Agreements before 20 March 2025 do not qualify, so the paperwork date is the first thing to check.
In forceCorporate tax · Property acquired on or after 4 November 2025
5. Manufacturing and processing buildings can be written off in full in year one
Eligible manufacturing or processing buildings qualify for a 100% first-year deduction, rather than being depreciated over decades. The full rate applies where the building is first used before 2030, then steps down.
The full write-off steps down after 2029.
What changed
A building used in manufacturing or processing has historically been a slow write-off. This allows the full cost in the first year, reducing to 75% for 2030 and 2031, 55% for 2032 and 2033, and no enhanced rate after that. At least 90% of the floor space must be used to manufacture or process goods, and the building must be new to the taxpayer.
Who it affects
Corporations that manufacture or process goods and are buying, building or expanding premises.
What to do about it
The deduction depends on when the building is acquired and when it is first used, so the timing of a purchase or a completion date can change the deduction materially. It is worth modelling before committing to a closing date.
In forceCorporate tax · Tax years beginning on or after 16 December 2024
6. The SR&ED enhanced credit limit doubled to $6 million, and capital costs are back
The expenditure limit for the enhanced 35% refundable SR&ED credit rose to $6 million, from $3 million under the previous rules. Capital expenditures are eligible again after years of exclusion.
What changed
A $4.5 million limit was announced in December 2024; Budget 2025 superseded it with $6 million, so the effective move from the old law is $3 million to $6 million. The taxable-capital phase-out range also widened to $15–$75 million, and eligibility for the enhanced rate was extended to certain Canadian public corporations.
Who it affects
CCPCs carrying out eligible development work — a far broader group than "laboratories", regularly including software, process and product development.
What to do about it
Businesses that stopped claiming because they hit the old ceiling should revisit, and so should any that wrote off capital purchases as ineligible. Contemporaneous documentation remains the practical hurdle: the claim is won or lost on records made at the time, not reconstructed afterwards.
7. The Underused Housing Tax is gone, and so is the return
The Underused Housing Tax has been eliminated effective the 2025 calendar year. No UHT is payable and no UHT return is required for 2025 or later years.
What changed
The UHT caught a large number of owners who owed nothing but still had to file, with substantial penalties for not filing. Both the tax and the filing obligation are now removed.
Who it affects
Corporations, partnerships and trusts holding residential property — the group that mostly owed nil but was still required to file.
What to do about it
Obligations for the 2022, 2023 and 2024 calendar years are not erased by this, and the penalties and interest for failing to file or pay in those years continue to apply. If a required return for an earlier year was never filed, that exposure still exists.
8. The Canada Carbon Rebate for Small Businesses is not taxable
Legislation passed on 26 March 2026 makes the Canada Carbon Rebate for Small Businesses non-taxable for all fuel charge years.
What changed
The treatment of these amounts had been unclear, and some were included in income. The legislation settles it for every fuel charge year, not just going forward.
Who it affects
Canadian-controlled private corporations that received the rebate.
What to do about it
If a rebate was reported as taxable income on a filed return, the treatment should be reviewed, since the change reaches back across fuel charge years rather than applying only prospectively.
In forceInternational · Tax years beginning after 4 November 2025
9. Transfer pricing rules modernised, and the documentation window cut to 30 days
Canada’s transfer pricing rules were aligned more closely with the OECD guidelines. The penalty threshold rose from $5 million to $10 million, and the period to produce documentation on request fell from three months to 30 days.
What changed
The penalty is 10% of the transfer pricing adjustment, and it applies once the adjustment exceeds the threshold — now $10 million rather than $5 million. That part is relief. The 30-day documentation window is not: it is a substantial tightening for any business that prepares documentation only when asked.
Who it affects
Any Canadian business transacting with a related non-resident, including small owner-managed companies with a related entity abroad. This is not only a large-corporate issue.
What to do about it
Documentation now has to exist before a request arrives. Thirty days is not enough time to build a transfer pricing study from scratch.
In forceExcise · Sales, leases, imports and improvements as of 5 November 2025
10. The luxury tax on aircraft and vessels has ended — but not on vehicles
The luxury tax no longer applies to subject aircraft or subject vessels. It continues to apply, unchanged, to subject vehicles priced above $100,000.
What changed
The luxury tax is the lesser of 10% of the total value and 20% of the value above the threshold — $100,000 for vehicles and aircraft, $250,000 for vessels. The aircraft and vessel components are gone; the vehicle component is untouched.
Who it affects
Businesses buying or selling aircraft and boats above the thresholds — and, just as importantly, anyone buying a high-value vehicle who has heard "the luxury tax was scrapped".
What to do about it
The vehicle luxury tax still applies. A company buying a vehicle over $100,000 should not read this change as covering that purchase, because it does not.
CRA administrative positionTrusts · No filing for 2023–2025 · new rules for years ending on or after 31 December 2026
11. Bare trusts: no T3 for 2025, but the rules return for 2026
The CRA does not expect bare trusts to file a T3 return with Schedule 15 for tax years ending in 2023, 2024 or 2025. Amended legislated rules apply to tax years ending on or after 31 December 2026.
What changed
The reporting requirement was introduced, then suspended administratively year by year. Bill C-15 amended the trust reporting rules, and from the 2026 return there are several exemptions — among them, where all beneficiaries are legal owners of the property and all legal owners are beneficiaries; where the legal owners are related individuals and the property could be designated a principal residence of one of them; and certain small holdings. Whether a particular arrangement is caught turns on which exemption, if any, it fits.
Who it affects
Anyone holding property in name only for someone else: a parent on title to help a child qualify for a mortgage, a nominee corporation holding real estate, a professional holding assets for a client.
What to do about it
The relief for 2025 is administrative, not a repeal. Identify the arrangements now rather than in early 2027 — the 2026 return falls due 90 days after the year end, and finding every bare trust in a family or corporate group reliably takes longer than that. Do not assume an arrangement is exempt without checking which exemption it relies on.
For 2026 the year’s maximum pensionable earnings is $74,600 and the CPP contribution rate is 5.95%, giving a maximum contribution of $4,230.45 each for employee and employer. Second CPP contributions apply between $74,600 and $85,000.
Contribution rates and ceilings for the 2026 calendar year
Item
Employee
Employer
Year’s maximum pensionable earnings (YMPE)
$74,600
$74,600
CPP contribution rate
5.95%
5.95%
Maximum CPP contribution
$4,230.45
$4,230.45
CPP2 earnings range
$74,600 – $85,000
$74,600 – $85,000
CPP2 rate
4%
4%
Maximum CPP2 contribution
$416
$416
EI premium rate (per $100 of insurable earnings)
$1.63
$2.28
EI maximum insurable earnings
$68,900
$68,900
Maximum annual EI premium
$1,123.07
—
What changed
Both the CPP and EI ceilings rose. EI maximum insurable earnings increased from $65,700 to $68,900. Adding CPP2, an employee at or above the ceiling contributes $4,646.45 in total CPP for 2026, and the employer matches it.
Who it affects
Every employer, and every incorporated owner-manager paying themselves a salary.
What to do about it
For an owner-manager, CPP and CPP2 are a real cost on both sides of the salary decision, since the corporation pays the employer half. They belong in the salary-versus-dividend calculation rather than being treated as a payroll detail.
13. The base CPP contribution rate falls from 9.9% to 9.5% in 2027
The base Canada Pension Plan contribution rate drops effective 1 January 2027. The employee and employer rates each fall from 4.95% to 4.75%, and the self-employed rate — which is both halves — falls from 9.9% to 9.5%.
What changed
The 9.9% figure quoted in most coverage is the self-employed rate. An employee sees 4.95% fall to 4.75%, and their employer sees the same reduction on its side. This is the base CPP rate and does not change the separate CPP2 contribution.
Who it affects
Every employer and employee, and self-employed individuals, who pay both halves themselves.
What to do about it
Nothing changes for 2026 payroll — the reduction starts with the first pay period of 2027. It is worth building into a 2027 budget, but confirm your payroll software has picked it up before relying on the withholding.
In forcePersonal tax · 2026 and subsequent tax years
14. The tradesperson relocation deduction rises from $4,000 to $10,000
The Labour Mobility Deduction for Tradespeople increased from $4,000 to $10,000 for 2026, indexed annually from 2027, and the minimum distance test fell from 150 kilometres to 120 kilometres.
The new cap, against the one it replaced.
What changed
The deduction covers temporary relocation costs — travel, temporary lodging and meals — for tradespeople and apprentices travelling to a job. Both the cap and the distance threshold moved, and the distance change brings in trips that previously fell just short of qualifying.
Who it affects
Tradespeople and apprentices in construction who travel to temporary work locations. This is the single most directly useful measure on this page for anyone in the trades.
What to do about it
Keep receipts and a travel record through the year. The deduction cannot be reconstructed from memory at filing time, and at $10,000 the record-keeping is now worth considerably more than it was.
In forcePersonal tax · First withdrawals made before the end of 2028
15. The Home Buyers’ Plan five-year repayment grace period is extended to 2028
The Home Buyers’ Plan withdrawal limit is $60,000 per eligible person. The temporary five-year grace period before repayments begin — which would otherwise have reverted to two years after 31 December 2025 — now covers first withdrawals made up to the end of 2028.
What changed
The ordinary grace period is two years. A temporary measure extended it to five, and that extension was due to lapse; it now runs for first withdrawals through 2028. The relief is to cash flow in the years right after a purchase, which is when it is tightest.
Who it affects
First-time buyers using RRSP funds toward a home purchase.
What to do about it
A missed HBP repayment is added to your income for that year rather than carried forward, so the schedule is worth tracking. Knowing which grace period applies to your withdrawal year is the part people get wrong.
The TFSA dollar limit for 2026 is $7,000. Unused room from earlier years continues to carry forward, and amounts withdrawn are added back to room at the start of the following calendar year.
What changed
The annual limit is indexed and rounded to the nearest $500, so it holds steady across some years rather than moving every year. Someone eligible since 2009 who has never contributed has $109,000 of room in 2026.
Who it affects
Every Canadian resident aged 18 or older.
What to do about it
The single most common TFSA error is re-contributing a withdrawal in the same calendar year, which creates an over-contribution penalty. Room from a withdrawal returns on 1 January, not immediately.
17. Brackets and credits were indexed by 2.0% federally, 2.2% in BC
The federal indexing factor for 1 January 2026 is 2.0%. Provincial factors differ: British Columbia is 2.2% and Ontario is 1.9%.
What changed
Indexation moves the bracket thresholds and the personal amounts. It is applied automatically in payroll withholding, whether or not an employee files a new TD1.
Who it affects
Everyone, but it matters most where income sits close to a bracket boundary or where a credit is being claimed near a phase-out threshold.
What to do about it
Because federal and provincial factors differ, a combined rate assumption carried over from last year will drift. Any planning spreadsheet built on prior-year thresholds should be refreshed.
In forceBusiness succession · Permanent, for dispositions after 2026
18. The $10 million employee ownership trust exemption is now permanent
The exemption from tax on up to $10 million of capital gains on a qualifying sale of a business to an employee ownership trust or a worker cooperative has been made permanent, for dispositions after 2026.
What changed
The exemption was time-limited, which made it very hard to plan around: a sale that slipped past the deadline lost the benefit entirely, and these transactions routinely take more than a year to arrange. Permanence removes that cliff.
Who it affects
Owners considering selling to their employees rather than to a third party — a realistic route for owner-managed businesses with no family successor and no obvious buyer.
What to do about it
An employee ownership trust sale is a structural transaction with qualifying conditions attached to the trust, the business and the shares. It takes time to set up properly, so the planning starts well before the intended sale year.
19. A refundable credit for personal support workers, up to $1,100 — but not in BC
The temporary Personal Support Workers Tax Credit is worth 5% of eligible earnings, to a maximum of $1,100, for the 2026 to 2030 tax years. It does not apply in British Columbia — nor in Newfoundland and Labrador or the Northwest Territories — so for a BC worker there is nothing to claim.
What changed
Those three jurisdictions are excluded because each signed a bilateral agreement with the federal government under which it receives funding to raise personal support worker wages directly instead. Roughly $22,000 of qualifying earnings produces the full $1,100.
Who it affects
Eligible personal support workers at eligible health care establishments — outside BC, Newfoundland and Labrador, and the Northwest Territories. For a BC-based worker, this credit is not available.
What to do about it
The claim depends on a certification of eligible remuneration from the employer, so that has to be requested. The credit is refundable, meaning it is paid even where no tax is owed — but only if a return is filed.
20. The CRA can file a return on behalf of some lower-income individuals
The CRA has discretionary authority to file a tax return on behalf of eligible lower-income individuals who have not filed, so that benefits tied to filing are not lost.
What changed
Many benefits — the Canada Child Benefit, the GST/HST credit, provincial supplements — depend on a return being filed. This addresses the group who lose benefits purely by not filing. The rollout is phased: around one million people for the 2026 tax year, scaling toward 5.5 million by 2028, with a period to review or reject the pre-filled return before it is filed.
Who it affects
Lower-income individuals with simple tax situations who have not been filing.
What to do about it
This is a backstop, not a substitute for filing. A CRA-prepared return works from the slips it holds, so deductions and credits it cannot see will not appear on it.
Most of them will not. Tell us what your business looks like and we will tell you which changes actually touch your return — in a free, no-obligation consult.
