The Tax Blog for Smart Canadians

Middle-class tax cut

Tax rate for the first tax bracket (income gained up to $57,375) is reduced from 15% to 14.5% and will be further reduced to 14% in 2026. This can represent a tax savings of up to $286 for 2025

Due to this change, the rate applicable for non-refundable tax credits is also reduced to 14.5% for 2025, and 14% for 2026.

Top-up tax credit

Due to the decrease of the non-refundable tax credit rates to 14.5% with the introduction of the middle-class tax cut (see above), the top-up tax credit will temporarily re-establish the tax credit rate to 15% for taxpayers who are in the second tax bracket (income of over $57,375 and up to $114,750) and are claiming certain tax credits. It prevents taxpayers with large credits (e.g., medical, tuition) from losing value due to proposed reductions in the lowest tax rate.

This credit will be applicable between 2025 and 2030.

Canada Disability Benefit

The Canada Disability Benefit is a new monthly tax exempt benefit that provides direct financial support to people with disabilities who are between 18 and 64 years old. The payments started as of July 2025. To be eligible:

• you must be between 18 and 64 years old
• you must have been approved for the disability tax credit
• you and your spouse or common-law partner (if applicable) must have filed your 2024 federal income tax return
• you must be a Canadian resident for income tax filing purposes

you must be one of the following:

• a Canadian citizen
• a permanent resident
• an individual registered or entitled to be registered under the Indian Act
• a protected person
• a temporary resident who has lived in Canada throughout the previous 18 months

You must apply in order to receive the benefit.

Automatic Federal Benefits for Lower-Income Individuals

The Federal government will produce tax returns on behalf of individuals to ensure they receive their federal benefits. These benefits usually require a filing of a tax return in order for them to be paid out. The individual must meet all the following criteria:

• the individual's taxable income for the taxation year is below the lower of either the federal basic personal amount ($16,129 on the federal tax return) or provincial equivalent, plus, where applicable, the age amount (up to $9,028) and/or disability amount (up to $10,138);
• all income of the individual for the taxation year is from sources for which specified information returns have been filed with the CRA (official T-slip is emitted);
• at least once in the preceding three taxation years, the individual has not filed a return;
• the individual has otherwise not filed a return for the taxation year prior to, or within 90 days following, the tax filing deadline for the year;

Prior to filing a return on behalf of an eligible individual, the CRA would provide the individual with the information it has available at the time in respect of their tax return. The eligible individual would have 90 days to review the information and submit changes to the CRA. If the eligible individual does not confirm the information (with or without changes) by the end of the 90 days, the CRA could file a tax return on the individual's behalf. The CRA would then issue a notice of assessment and subsequently determine and issue the individual's credit and benefit entitlements.

If you meet the criteria above, you can also use UFile to file for free and get your benefits right away.

Individuals would be able to opt out of automatic tax filing.

Canada Groceries and Essentials Benefit

The Canada Groceries and Essentials Benefit, is a new benefit that enhances the Goods and Services Tax (GST) Credit through:

• A one-time top-up payment equivalent to a 50% increase this year to be paid by June 2026
• Increasing its amount by 25% for five years beginning in July 2026.

Individuals eligible for the GST credit will be eligible for this benefit

Accelerated Investment Incentive (AII) (Depreciation expense for businesses)

Businesses who acquire and put to use depreciable properties between 2025 and 2029 can triple the allowable first year depreciation expense they can deduct off their business income. This incentive is only applicable in the first year the property is put to use. Let’s look at an example to understand this new incentive:

John runs a business and buys a vehicle to be used for deliveries for $30,000. In the first year of purchase, John can deduct 15% (rate set by the government) of the purchase price of the vehicle as a depreciation expense (CCA or Capital Cost Allowance). With the Accelerated Investment Incentive (AII), John can triple the first-year depreciation rate of the vehicle, which means he can now deduct 45% (15% X 3) of the purchase price of the vehicle as a depreciation expense.

Immediate Expensing (Depreciation expense for businesses)

Businesses who acquire specific depreciable properties (see below) and put them to use between 2025 and 2029 can claim 100% of the purchase price of these properties as a depreciation expense against their business income. These properties are:

• Manufacturing or processing machinery and equipment
• Clean energy generation and energy conservation equipment
• Zero-emission/electric vehicles

For example, if a person buys an electric vehicle to use in their business at $50,000, they can expense the $50,000 as a depreciation expense against their business income.

Canada Child Benefit

In the case of a death of a child, the federal government will extend the payments of the Canada Child Benefit (CCB) for six months after the child's death.

This new rule will apply for deaths that occur after 2024.

Digital news subscription tax credit

The digital news subscription tax credit has been abolished for 2025.

Quebec

Family allowance

In the case of a death of a child, the Quebec government will extend the eligibility of the Family Allowance payments, Supplement for Handicapped Children (SHC), the Supplement for Handicapped Children Requiring Exceptional Care (SHCREC) for 12 months.

English services

Revenu Québec will introduce a new form (LM-91) for individuals or individuals in business to apply for an exception under the Charter of the French language to receive services in English.

Exceptions:

• been declared eligible to receive instruction in English in Québec.
• an Indigenous person
• do not live in Québec
• an immigrant who has been in Québec less than six months

An individual or individual in business is considered to have an acquired right if RQ were communicating with them in English before May 13, 2021.

Tax credit for career extension

The tax credit for career extension is a non-refundable tax credit given to older workers based on their employment income

For 2025 onward, the age of eligibility has been raised from 60 to 65.

Abolished measures

The following measures have been abolished as of March 25, 2025:

• Foreign researcher tax holiday deduction
• Foreign expert tax holiday deduction
• Tax holiday for foreign specialists assigned to operations of an international financial centre
• Tax holiday for seamen engaged in international transportation of freight
• Tax credit for patronage gifts (donations credit)

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