2026 Federal Budget Tax Highlights

On November 5, 2026, Canada’s Finance Minister, François-Philippe Champagne, delivered the 2026 Federal Budget: Masters of Our Destiny. Budget 2026 introduces a broad package of tax changes affecting individuals and businesses.

A notable theme running through many of the proposals is simplification. The Government is seeking to reduce administrative requirements while using targeted incentives to encourage Canadian investment, innovation and business growth.

Crowe MacKay LLP’s trusted advisors highlight the key personal, business, and international tax measures introduced in the 2026 Federal Budget and what they may mean for Canadian taxpayers and businesses. If you require assistance, contact our team.

Mineral Exploration Tax Credits

Budget 2026 proposes to extend both the Mineral Exploration Tax Credit (METC) and the Critical Mineral Exploration Tax Credit (CMETC) for an additional five years, making them available for eligible flow-through share agreements entered into on or before March 31, 2032. 

Budget 2026 also proposes adding antimony to the list of minerals eligible for the CMETC. This expansion would apply to qualifying expenditures renounced under eligible flow-through share agreements entered into after Budget Day and on or before March 31, 2032.

Canada Growth Incentive: Capital Gains Exemption

Budget 2026 proposes to introduce the new Canada Growth Incentive (CGI). This new incentive allows Canadian-resident individuals to claim a capital gain exemption on capital gains realized through the disposition of qualifying shares of qualifying businesses. Qualifying individuals could realize up to $15 million of capital gains tax-free on successful qualifying investments. 

Eligibility is subject to specific requirements for the qualifying individual, the qualifying shares being disposed of and the underlying business. For individuals considering a future sale or investment, the eligibility requirements, ownership structure and interaction with other capital gains provisions should be reviewed well in advance of a transaction. Several businesses, whose principal assets would be the reputation or skills of certain key employees, have been excluded from this incentive. Examples of these excluded businesses include consulting services, a professional practice of an accountant, lawyer, notary or healthcare professionals, real estate, food and accommodation, arts, recreation, and entertainment sectors; and business that are operating under a licensing or franchising agreement.

An exemption claimed under this incentive would have a 30 percent inclusion rate for Alternative Minimum Tax purposes. Any claim under this incentive would also affect the individual’s lifetime capital gains exemption claim for shares of the same corporation.

Canada Growth Incentive: Small Business Investment Rollover

Budget 2026 proposes enhancements to the existing small business investment rollover, which allows individuals to defer capital gains realized on a qualifying disposition of eligible small business corporation (ESBC) shares when proceeds are reinvested in replacement ESBC shares. The proposals extend the time commitment to allow investors more time and flexibility to reinvest proceeds in Canadian small businesses.

For entrepreneurs and investors who plan to move capital from one Canadian small business to another, the timing of the disposition, reinvestment and acquisition of replacement shares will be important when determining whether the rollover is available.

These measures apply to qualifying dispositions that occur on or after January 1, 2027.

Tax Instalment Thresholds

Budget 2026 proposes increasing the installment threshold from $3,000 to $7,500 for corporations and individuals residing outside Quebec, and from $1,800 to $4,500 for individuals residing in Quebec, with indexing for inflation going forward and rounded to the nearest $500.

The Government also proposes a simpler installment regime for self-employed individuals, including the ability to make a single payment equal to two-thirds of net tax owing by December 31. The remaining installment would be due on the balance-due date. The changes would begin with the 2028 taxation year.

For many taxpayers, this should mean fewer required instalments and less administration throughout the year.

New May 15 Personal Tax Deadline

One of the most visible administrative changes in Budget 2026 is a common May 15 deadline for both filing personal income tax returns and paying balances owing. Currently, most individuals have an April 30 deadline, while self-employed individuals and their spouses or common-law partners have until June 15 to file, although their balances remain payable April 30.

Beginning with the 2027 taxation year, Budget 2026 proposes May 15 as the new filing and payment deadline for all individuals, including those who are self-employed. This means that the first affected annual filing deadline would be May 15, 2028.

Northern Residents Deductions

Budget 2026 would simplify and broaden access to the Northern Residents Deductions beginning in 2027.

For the residency deduction, the Government proposes removing two existing restrictions: the reduction associated with certain non-taxable employer-provided board and lodging benefits and the limit based on 20% of an individual's net income.

For the travel deduction, it would no longer be constrained by the amount of employer-provided travel benefits or the existing $1,200 standard amount. Eligible claims would continue to be subject to the remaining limits, including actual travel costs and the lowest available return airfare to the nearest designated city.

These changes may be particularly meaningful to individuals living and working in Canada's northern and remote communities.

Optional Flat Amounts for Personal Tax Deductions and Credits

Beginning with the 2027 taxation year, Budget 2026 proposes optional flat-rate claims for several deductions and credits. Taxpayers could generally choose the simplified amount rather than itemizing all of their eligible expenses.

The proposed amounts include:

Moving Expense Deduction	$1,000 per eligible relocation.
Clergy Residence Deduction	$1,000 for each eligible month, up to $12,000 annually and subject to remuneration limits.
Labour Mobility Deduction for Tradespeople	$1,500 annually for an eligible temporary relocation.
Home Accessibility Tax Credit	A one-time optional $1,000 expense amount.
Adoption Expense Tax Credit	$1,200 per adopted child.
Medical Expense Tax Credit	$2,000 for eligible service dog expenses and $500 for medically required incontinence products.
Celiac disease expenses	An optional $1,000 amount for incremental gluten-free food costs, beginning with the 2026 taxation year.

The simplified amounts will not necessarily produce the best result for every taxpayer. Where actual qualifying expenses are materially higher, maintaining detailed records and using the existing calculation could be preferable.

Form T1135 Reporting Threshold

Budget 2026 proposes raising the cost threshold for filing Form T1135, Foreign Income Verification Statement, from $100,000 to $200,000 of specified foreign property.  This results in taxpayers only having to disclose and file the T1135 form to the CRA when the total cost of the specified foreign property exceeds $200,000 at any time in the applicable taxation year.

The simplified reporting threshold would also increase from less than $250,000 to less than $500,000. As a result, the simplified reporting method would be for specified foreign property between $200,000 and $500,000.

These changes would apply to taxation years or fiscal periods ending after 2026 and could remove the T1135 filing requirement for a meaningful number of taxpayers with modest specified foreign property.

Private Foundations and Excess Corporate Holdings

Budget 2026 proposes eliminating the excess corporate holdings regime for private foundations.  The change is intended to reduce administrative complexity for private foundations and allow them to focus more of their resources on charitable and grant-making activities. It would apply beginning with the 2027 taxation year.

Notice of Objection Deadlines

Budget 2026 proposes to extend the deadline for filing a notice of objection to one-year after the date a notice of assessment is sent. Individuals and graduated rate estates would have until the later of that date or two years after their tax return filing deadline.The proposal would also remove the need for taxpayers to separately request an extension of time under the existing framework.  This amendment would apply to assessments sent on or after the day that is three months after royal assent.

Trust Rollover Rules Involving Non-Residents

Budget 2026 expands changes affecting tax-deferred transactions and non-residents, including measures intended to simplify compliance where taxable Canadian property is transferred in circumstances that qualify for a tax-deferred rollover. These new proposals would take affect on distributions occurring on or after November 5, 2026.

Because these rules can interact with non-resident withholding, reporting and other provisions of the Income Tax Act, taxpayers contemplating transactions involving Canadian property and non-resident parties should consider the proposed rules as part of their transaction and structured planning.

RRSP and RRIF Rules

Budget 2026 proposes to address the tax rules governing RRSPs and RRIFs into an "RRSP-for-life" framework.

Under the proposal, individuals would no longer need to convert an RRSP into a RRIF at age 71. A surviving spouse or partner could also become the successor holder of an RRSP, while tax-free transfers to qualifying survivors would be simplified.

Importantly, the proposal would not eliminate the minimum withdrawal requirements that apply after age 71.

Consultations of these proposals are underway and are not final tax changes.

Intergenerational Transfers of Farm and Fishing Property

The existing rollover rules for these types of properties permit qualifying farm and fishing property to pass to certain family members on a tax-deferred basis.

Budget 2026 proposes widening the family relationships that qualify. In addition to children and descendants already covered by the rules, the rollover would extend to a taxpayer's or their spouse or common-law partner's, niece, nephew, grandniece or grandnephew.

The expanded rules would apply to transfers occurring on or after January 1, 2027.

Clean Electricity and Clean Technology Investment Tax Credits

Budget 2026 proposes extending the Clean Electricity and Clean Technology investment tax credits to eligible property that becomes available for use before 2041.

The Clean Electricity investment tax credit currently provides a refundable credit of up to 15% on eligible investments. The Clean Technology investment tax credit provides a refundable credit of up to 30%, subject to the applicable conditions. For Clean Technology, the reduced 15% rate in the final year of the program would now apply in 2040 rather than 2034.

The government also proposes expanding the Clean Electricity investment tax credit to certain high-voltage transmission property located entirely within a province or territory. Qualifying voltage thresholds would vary by jurisdiction, and the measure would apply to property acquired on or after Budget Day.

The longer time horizon provides greater certainty for companies considering significant clean energy and infrastructure investments where planning and construction can span several years.

Scientific Research and Experimental Development Tax Incentive Program

Budget 2026 proposes broadening the scope of activities that can qualify for the SR&ED program.

In particular, qualifying activities could include certain testing, technological validation and studies needed to satisfy regulatory requirements for the initial approval or certification of a new product or process, provided they relate directly to a project that otherwise qualifies for SR&ED.

Eligible expenditures associated with these activities could include wages and salaries, materials, contracting costs, overhead costs, machinery and equipment, consistent with the broader SR&ED framework.

For innovative businesses, the change could help bridge an important gap between experimental development and the regulatory work required to bring a new product or process to market.

Taxable Preferred Shares

Budget 2026 proposes several changes intended to simplify the taxable preferred share regime:

• dividends paid by Canadian-controlled private corporations would be exempt, for dividends paid after Budget Day;
• the dividend allowance would increase from $500,000 to $1.5 million for all other private corporations; and
• the threshold at which that allowance begins to be reduced would increase from $1 million to $3 million, for taxation years ending after 2026.

The government will also consult on broader changes to the preferred share regime.

Corporate Tax Elections

Corporations making certain income tax elections or agreements currently face a procedural requirement to provide a certified copy of the directors' resolution authorizing the election or agreement.

Budget 2026 proposes eliminating that requirement. Although relatively administrative in nature, it should simplify the process and reduce documentation associated with affected elections.

Corporate Loss Transfers

The government intends to introduce a new corporate loss transfer rule and is seeking stakeholder input on the proposed framework. No commencement date had been indicated as a consultation period is launched. 

The concept would allow, in certain situations, current-year non-capital losses to be transferred within a wholly owned corporate group. The objective is to provide a more straightforward alternative to the loss-consolidation transactions that corporate groups may currently undertake.

The details will be important. Corporate groups should therefore monitor the consultation and subsequent legislation before determining how the proposals could affect their tax planning.

Administrative Penalties

Budget 2026 proposes updating fixed penalties across federal tax statutes to account for inflation since those penalties were originally introduced. These existing penalties would increase by a factor of two or three annually depending on when they were introduced. Fixed amounts would subsequently be indexed to inflation once every five years.

Further changes would better align certain penalties with a taxpayer's ability to pay and introduce additional consequences for repeated non-compliance.

Budget 2026 further proposes to modify penalty amounts depending on the size of the taxpayer to ensure that penalties are adequate for medium and larger corporations and partnerships.

Disclosure of Tax Debt to Credit Bureaus

Budget 2026 proposes to report any tax debt in excess of $50,000 to credit bureaus where specific conditions are met. The conditions include taxpayers going through the objection and appeals routes, having at least 30 days written notice and an opportunity for them to go and make a reasonable payment arrangement with the Agency.

Taxable Canadian Property

Budget 2026 proposes simplifying the withholding and remittance requirements that apply when a non-resident disposes of taxable Canadian property (TCP). These would apply to dispositions that occur on or after January 1, 2027.
Section 85 Elections

Budget 2026 proposes to addressing property transferred by a non-resident undersection 85 of the Income Tax Act. The proposed legislation would exempt vendors and purchasers from the withholding and tax remittance requirements for fully tax-deferred section 85 rollovers of TCP.
Among the conditions of this exemption, the relevant election would  need to be filed within 30 days of the acquisition and the purchaser would need to provide a notice to the CRA setting out required information about the transaction and vendor.

Anti-avoidance

Budget 2026 proposes to strengthen and extend existing anti-avoidance rules applicable to non-resident  tax-deferred rollovers of TCP. Under the existing rules, a tax-deferred rollover is denied if, within three years, there is a subsequent disposition of the transferred property or substituted property, and one of the main purposes of series of transactions was to benefit from an exemption from Canadian tax. The proposed changes extend the three-year period to five years and ensures that a subsequent disposition of property that principally drives its value from the transferred property or substituted property is also subject to the rule.

GST/ HST

Budget 2026 contains several proposed GST/HST measures, including:

Financial institution input tax credit allocation methods

Certain large financial institutions could apply for pre-approval of their GST/HST input allocation methods for three consecutive fiscal years, rather than applying each year. This change would apply for fiscal years beginning after June 30, 2027.

Import relief

Budget 2026 proposes updates  to the Harmonized Commodity Description and Coding System, specifically to the system’s codes and outdated customs regulations. Among the changes, the maximum period for certain temporary imports receiving GST/HST relief would increase from 12 to 18 months. 

Cargo containers

GST/HST relief would be available for cargo containers entering Canada. Qualifying containers could have a minimum internal volume of 1 cubic metre and generally would need to be exported within 365 days.

Health measures:

Budget 2026 proposes exempting qualifying massage therapy services from GST/HST and zero-rating devices specially designed to treat cancer using alternating electric field therapy.

Legislative and regulatory proposals released on September 15, 2026, to implement the Productivity Mega Deduction.

Legislative and regulatory proposals released on July 23, 2026, including the following measures:

• Disability Tax Credit;
• Red Seal Completion Bonus;
• Investment Tax Credit for Carbon Capture, Utilization and Storage;
• Investment Income Derived from Assets Supporting Canadian Insurance Risks;
• Transfer Pricing;Hybrid Mismatch Arrangements;
• Goods and Services Tax/Harmonized Sales Tax (GST/HST) reverse charge mechanism;
  
  • Technical amendments to the Income Tax Act and Income Tax Regulations;
  • Technical amendments to the Global Minimum Tax Act; and
• Technical amendments to the Excise Tax Act, the Excise Act, 2001, the Air Travellers Security Charge Act, the Select Luxury Items Tax Act, and related regulations.
  
  • Legislative proposals released on January 29, 2026, to implement reporting requirements for non-profit organizations.
  • Legislative proposals released on August 12, 2024, with respect to technical amendments to the Income Tax Act.
  • Tax measures relating to non-compliance with information requests, announced in Budget 2024, to be implemented through amendments to the Excise Tax Act, the Air Travellers Security Charge Act, the Excise Act, 2001 and the Select Luxury Items Tax Act.
  • Legislative proposals released on August 4, 2023, with respect to tax-exempt sales of motive fuels for export.
  • Legislative and regulatory proposals released on August 9, 2022, including the following measures:
    • Technical amendments to the Income Tax Act and Income Tax Regulations; and
    • Remaining legislative proposals relating to excise duties.