Recent Tax Changes 2025-2026

1. Capital gains inclusion rate — STAYS AT 50% (Cancelled)

The 2024 federal budget proposed raising the inclusion rate to 2/3 on corporate gains and on individual gains above $250,000 per year, effective 25 June 2024. The change was never enacted by Parliament. On 21 March 2025, Prime Minister Carney announced the proposal was cancelled. The CRA confirmed the 50% inclusion rate continues to apply for 2024 and 2025. Taxpayers who filed under the 2/3 assumption can request reassessment.

2. Lifetime Capital Gains Exemption — $1,250,000 (Enacted)

LCGE on Qualified Small Business Corporation shares and qualified farm/fishing property increased from $1,016,836 to $1,250,000, effective for dispositions on or after 25 June 2024. Indexation resumes in 2026.

3. Canadian Entrepreneurs' Incentive (CEI) — Status uncertain

The CEI was announced alongside the (now-cancelled) capital gains changes. It would reduce the inclusion rate to 1/3 on up to $2M of lifetime gains on qualifying founder-held shares, phased in from 2025 to 2034. The cancellation of the broader capital gains package leaves CEI status uncertain pending fresh enabling legislation. Treat as not in force for planning.

4. AMT reform (Enacted)

Budget Implementation Act 2024, No. 1 (Bill C-69, royal assent 20 June 2024) enacted the AMT redesign for 2024 and later years:

• Rate: 20.5% (up from 15%)
• Exemption: $173,205 (2024), $177,882 (2025) — indexed
• Capital gains inclusion in AMT base: 100%
• LCGE recognition: 70%
• Charitable donations: 80% credit (was 100%)
• Stock-option deduction: 50% allowed (full benefit included)
• Carry-forward: 7 years

5. CPP2 second-tier (Enacted, second year)

The second-tier CPP contribution applies on earnings between the YMPE and YAMPE. For 2025: YMPE $71,300, YAMPE $81,200. Additional CPP2 of 4% employer + 4% employee on the $9,900 band, or 8% combined for self-employed (max $792). 2024 was the first year, 2025 is the first fully phased-in year.

6. Bare trust T3 reporting

Expanded trust reporting under the 2018 enhanced rules came into force for taxation years ending after 30 December 2023. CRA suspended bare-trust filing requirements for 2023 and 2024 due to widespread confusion. For 2025, the Department of Finance has signalled revised rules and a planned filing requirement; monitor announcements before December 31. Treat 2025 bare-trust filings as required unless suspended in writing by CRA before year-end.

7. Underused Housing Tax (UHT)

UHT continues as a 1% annual tax on Canadian residential property owned by non-resident, non-Canadian owners. Most Canadian-citizen and permanent-resident owners are excluded owners with no filing requirement (2023 amendments). Filing deadline: 30 April. Penalties for missed UHT-2900 filings are punitive — $1,000 to $5,000 minimum even where no tax is owed.

8. Lowest federal rate cut — 15% → 14% (Enacted mid-year)

The lowest federal bracket rate was reduced from 15% to 14% effective 1 July 2025. The 2025 T1 will use a blended rate of 14.5% for the full calendar year. The change cascades through every non-refundable credit (which is calculated at the lowest rate): the BPA credit, age, pension, medical, donation first tier, etc. all recompute at 14.5% for 2025 and 14% for 2026+.

9. 2025 indexed amounts (federal)

• Basic personal amount: $16,129 (full); reduced at top bracket to $14,538
• Age amount: $9,028 (reduced above $44,325 net income)
• OAS clawback threshold: $93,454
• RRSP dollar limit: $32,490 (18% of 2024 earned income up to this cap)
• TFSA contribution room: $7,000
• FHSA annual: $8,000 (lifetime $40,000)
• CPP YMPE: $71,300; YAMPE: $81,200
• Federal bracket thresholds: $57,375 / $114,750 / $177,882 / $253,414

10. Watch list — items moving through Parliament

• Digital Services Tax (DST) repeal — under negotiation with USTR
• Clean Economy Investment Tax Credits — refundable for CCPCs
• EI premium rate freeze — annual notice
• Carbon rebate adjustments — see Carbon Pricing & Self-Employed