Federal Budget Passed: Major Tax Rule Changes Ahead
Ottawa, Jan. 8, 2026 — With the federal budget now passed, the government has announced several tax changes that will affect Canadians and businesses in 2026 and beyond.
Officials say the rules aim to support taxpayers, increase fairness, and adapt to shifting economic conditions.
The budget includes changes to personal income taxes, tax credits, automatic filings, and corporate rules. These measures are part of the government’s plan to balance growth with fairness.
Personal Income Tax Updates
One key change lowers the lowest federal income tax rate.
The rate drops from 14.5 per cent in 2025 to 14 per cent in 2026 for the first bracket. Tax brackets for higher income levels also rise slightly to reflect inflation.
Canadians can now earn more before reaching higher tax rates.
The basic personal amount—the income people can earn tax-free—also rises in 2026.
It increases to $16,452, meaning more income escapes federal taxation before rates apply.
New Tax Credits and Filing Changes
The budget proposes a new temporary tax credit for personal support workers, offering up to $1,100 in refundable tax relief per year from 2026 to 2030.
Officials say this credit will support front-line health care workers.
Another proposal allows the Canada Revenue Agency (CRA) to automatically file tax returns for some low-income individuals.
This measure helps eligible people receive benefits and credits without filing manually.
The budget also introduces a Top-Up Tax Credit to protect some taxpayers from losing non-refundable credits due to lower tax rates.
This applies from 2025 to 2030.
Other Notable Tax Measures
Budget 2025 proposes changes to tighten rules on trusts and prevent certain tax avoidance.
It also updates eligibility for home accessibility and medical expense credits starting in 2026.
For businesses, the budget authorizes immediate expensing for qualifying manufacturing and processing buildings.
This lets companies write off costs faster, aiming to spur investment and productivity.
What It Means for Canadians
These tax changes take effect gradually, starting in 2026.
Officials say the goal is to help families keep more of their income while ensuring fairness across the system.
As details are finalized, the CRA will issue guidance to help taxpayers adjust.
