Prime Minister Mark Carney’s first federal budget passed a razor-thin confidence vote in November, and MPs are set to begin implementing its tax measures when Parliament resumes later this month.
Unlike previous Liberal budgets, this one shifts away from new social programs and instead focuses on investment, productivity, competitiveness, and defence spending — with several tax changes that will directly affect individuals, homeowners, and investors.
1. Middle-class tax cut (already in effect)
- The lowest federal income tax rate is reduced by 1 percentage point starting in 2026
- A two-income family could save up to $840 per year
- Actual savings depend on income level and tax bracket
2. Automatic benefits for low-income Canadians
Starting with the 2026 tax year, the federal government will automatically enroll eligible low-income Canadians in certain benefits, including:
- Canada Child Benefit (CCB)
- GST/HST Credit
📌 About 5.5 million people are expected to benefit
📌 Designed to help those who miss out because they don’t file or don’t know they qualify
📌 CRA funding: $71 million over five years
3. Carbon tax eliminated — and so are rebates
- The consumer carbon tax is fully eliminated
- Canadians will save at the gas pump
- But carbon rebate cheques will stop
This is a major affordability shift, especially for households that relied on rebate payments.
4. Changes to the Home Accessibility Tax Credit
- Seniors and people with disabilities can no longer claim the Home Accessibility Tax Credit if the same expense was already claimed under the Medical Expense Tax Credit
- Prevents “double dipping” on the same renovation costs
5. Underused Housing Tax (UHT) eliminated
- The Underused Housing Tax, introduced in 2022, is being scrapped
- It charged a 1% annual tax on vacant or underused homes, mainly targeting foreign owners
- Required extensive reporting — even from many Canadians it wasn’t meant to target
Tax experts called it costly, complex, and inefficient
6. GST eliminated for first-time home buyers (new homes)
- No GST on new homes up to $1 million
- Applies to first-time buyers
- Aimed at improving affordability and boosting housing supply
7. Luxury Tax on aircraft and vessels scrapped
- Eliminated tax on:
- Aircraft worth more than $100,000
- Boats and vessels worth more than $250,000
- Originally introduced in 2022
- Signals a shift away from symbolic or “boutique” taxes
8. CRA no longer mailing paper tax packages
The Canada Revenue Agency will:
- Stop automatically mailing paper tax packages
- Continue supporting online filing
- Remove nearly a dozen low-use schedules from paper returns, including:
- Capital gains/losses
- Canada Workers Benefit
- Donations and gifts
Paper filers can still request forms if needed.
9. Investment rule changes coming to registered accounts (from 2027)
Proposed changes — not in effect until 2027 — will simplify what registered plans can invest in, affecting:
- RRSPs & RRIFs
- TFSAs
- RESPs
- RDSPs
- FHSAs
- DPSPs
Goal: simplify and harmonize investment rules across plans
10. Canadian Entrepreneurs’ Incentive cancelled
- The previous government’s incentive to lower capital gains taxes for entrepreneurs selling businesses is being scrapped
- Originally meant to encourage startups to scale
- The Carney government is not proceeding with it
Big picture takeaway
This budget marks a clear policy pivot:
- Fewer boutique or symbolic taxes
- Less focus on new social credits
- More emphasis on investment, productivity, housing, and competitiveness