What Federal Budget 2026 means for you

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Budget 2026 leaves personal and corporate tax rates unchanged. It is billed as the first stage of a broader effort to simplify the tax system, paired with incentives for growing Canadian companies. Three things stand out: one tax deadline, with personal returns and payments both due May 15 starting with the 2027 tax year; a $15 million capital gains exemption for founders and investors in qualifying new shares; and less paperwork, through higher instalment and T1135 thresholds and flat-amount options for common claims.

Filing, paying and disputing your taxes

A single May 15 deadline. Today most people pay by April 30, and the self-employed file by June 15. Under the proposal, everyone files and pays by May 15, including self-employed people and their spouses. This applies from the 2027 tax year, so the first May 15 season is spring 2028.

Fewer people need instalments. The threshold rises from $3,000 to $7,500 of tax owing, for individuals and corporations, then indexed. You must still exceed it this year and in one of the two prior years. Years starting 2028.

One instalment for the self-employed. If business, professional or commission income is your main income, you may pay one instalment by December 31 — two-thirds of the year's tax — instead of four, with the rest at filing. From 2028.

More time to object. The objection deadline grows from 90 days to one year after the assessment is sent; for individuals and graduated rate estates, the later of that or two years after the filing due date. The option to ask for an extension goes away, because it is no longer needed. Applies to assessments sent on or after the day three months after royal assent.

Tax debts and your credit. CRA could report income tax or GST/HST debts over $50,000 to credit bureaus, once appeal rights have run out and after 30 days' written notice. CRA must first have tried to collect and given you a chance to propose reasonable payment terms. Applies on royal assent.

Foreign property reporting. The T1135 filing threshold doubles from $100,000 to $200,000 of foreign property cost; the simplified form applies below $500,000. Years ending after 2026.

Individuals and families

Caregiver credit becomes refundable. Caregivers with little or no tax owing will receive the full credit as a refund. Amounts stay the same — $9,001 for parents and other adult relatives in 2027. From 2027.

Flat amounts instead of receipts. Optional from 2027: moving $1,000 per move; trades labour mobility $1,500 a year; home accessibility $1,000 once; adoption $1,200 per child; clergy residence $1,000 a month.

Simpler medical claims. Optional flat amounts for gluten-free food ($1,000), incontinence products ($500) and service dogs ($2,000). From 2026, items such as insulin and CPAP machines no longer need a prescription.

More deductions for some employees. Commission employees can claim vehicle and travel costs and their other expenses together. Employed artists lose the $1,000 cap on expenses. From 2027.

Benefits. A one-time Groceries and Essentials Benefit top-up in early 2027, up to $223 per adult and $117 per child. The Canada Workers Benefit is enhanced and renamed, with advance payments phased out.

RRSP for life. Ottawa plans to merge RRSPs and RRIFs so you no longer have to convert at 71, and is consulting on letting a surviving spouse take over the plan. Minimum withdrawals would continue.

Business owners and incorporated professionals

Corporate instalments. No instalments unless federal tax exceeds $7,500 — now $3,000 — in both the current and the previous year. The threshold is indexed and rounded to the nearest $500. Years starting 2028.

Preferred share dividends. Dividends paid by Canadian-controlled private corporations are exempt from Part VI.1 tax, removing a compliance headache common in estate freezes. From November 5, 2026.

Individual pension plans. Plans for family members count as IPPs however many members they have, from 2027. From 2028, IPPs face the same investment rules as RRSPs: the controlling individual pays a tax of 50% of the value of any non-qualified or prohibited investment the plan acquires, and 100% of the value of any advantage. Also from 2028, an IPP whose assets exceed 200% of its pension liabilities becomes a “revocable plan” — CRA must give at least 30 days' notice before revoking, which leaves time to withdraw the excess and fix it.

Revoking a pension plan. This is a change for every registered pension plan, not just IPPs. A plan revoked after 2026 pays 10% of the value of its assets, though CRA can waive that, and is then treated as a retirement compensation arrangement.

Small business rollover. If you sell qualifying small business shares and reinvest, you now have the year of sale plus three years to reinvest, or five with a SAFE-type agreement. Sales from 2027.

Investment and research. The Productivity Mega Deduction is confirmed — immediate write-off of the full cost of a much broader range of capital assets, with limited exclusions for certain long-lived buildings and intangibles, some passenger vehicles, regulated gas distribution pipelines and resource properties. SR&ED is extended to cover testing and studies needed for a product's initial regulatory approval, and the cost of registering and maintaining IP protection — though not litigation to enforce it. The SR&ED change applies to tax years beginning on or after November 5, 2026, so a December year end first gets it in 2027.

Higher penalties. Most fixed-dollar penalties rise two to three times, then are indexed. Larger corporations pay three to eight times the base penalty, and repeat failures double it. Years ending after 2027.

The Canada Growth Incentive

A new exemption shelters up to $15 million of capital gains per person, per business, on qualifying shares issued from November 5, 2026 to 2036. It is aimed at founders, employees and early investors in growing Canadian companies.

Who can claim. An individual, not a trust, 18 or older when acquiring the shares, resident in Canada. Shares must be issued directly to you, for cash or for your work, and held at least 36 months.

Which companies qualify. Canadian-controlled private corporations where the combined carrying value of the company's assets and those of all related corporations is $100 million or less, immediately before and after the shares are issued. The company must carry on a qualifying business primarily in Canada — see the exclusions below — and further asset, Canadian-activity and holding-period tests apply while you hold the shares and when you sell.

Businesses that don't qualify. Consulting and professional practices — accountants, lawyers, doctors and other health practitioners, engineers, architects; businesses built on the skill of their people; real estate; food and accommodation; recreation, arts and entertainment; finance and insurance; farming, fishing, forestry, mining and utilities; and any franchise or licensing business.

Does this replace an estate freeze to a family trust? Generally no. Trusts can't claim the exemption, existing shares don't qualify, and many family businesses are in excluded sectors. Freezes remain the right tool for most of our clients. Where it can help is a new company in an eligible sector, such as technology, manufacturing or e-commerce, with a large expected sale. Using it also reduces your lifetime capital gains exemption on the same company.

Anti-avoidance rules still to come. Further rules are promised to stop the $15 million limit being multiplied by splitting one business across several companies. The details are to be released at a later date, and nothing in this measure has been written into draft legislation yet.

GST/HST and non-residents

Massage therapy becomes GST/HST exempt. Licensed or certified massage therapists stop charging GST/HST on qualifying services supplied after November 5, 2026. They also stop claiming input tax credits on related costs, so registration and pricing should be reviewed.

Non-residents selling Canadian property. Withholding on sales by non-resident corporations drops from 25% to 15%, and from 50% to 30% for certain property. Fully tax-deferred section 85 rollovers are exempt from withholding only if, within 30 days of the sale, the section 85 election is filed and the purchaser gives CRA notice of the transaction and the vendor. From January 1, 2027.

Rollovers that get undone. An existing rule cancels the deferral and brings the gain as at the rollover date back into tax if the property is sold again — or a sale is arranged — within three years, and one of the main purposes was to keep that later gain out of Canadian tax, often under a treaty. For non-residents rolling over Canadian property the window stretches to five years, and the rule also reaches a later sale of other property, such as shares of a holding company, where more than half its value comes from what was rolled over at any point in those five years. For rollovers done on or after January 1, 2027.

Key dates at a glance

November 5, 2026. Growth Incentive shares can be issued; Part VI.1 exemption for Canadian-controlled private corporations; the trust rollout denial extended to indirect distributions to non-residents.

November 6, 2026. Massage therapy GST/HST exempt — the exemption applies to supplies made after budget day, so November 5 is still taxable.

2026 tax year. Simpler medical expense documentation; T1135 threshold $200,000, for years ending after 2026.

2027 tax year. Refundable caregiver credit; flat-amount options; commission employee and artist deductions; IPP definition widened; small business rollover window extended.

Spring 2028. First May 15 deadline for filing and paying 2027 personal returns.

2028. $7,500 instalment threshold; single December 31 instalment option; new IPP investment and surplus rules; higher penalties for years ending after 2027.

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