November 6, 2026

Federal Budget 2026 Highlights

 Key Takeaways

• Canadians will have more time to file taxes, make payments and object to Canada Revenue Agency’s assessments.

• The government plans to merge the RRSP and RRIF into a single “RRSP for life,” removing the need for RRIF conversion at age 71.

• A new capital gains exemption would allow individuals to claim a tax exemption on capital gains realized on the disposition of qualifying shares of a qualifying corporation, up to a $15-million limit.

 Budget 2026 introduces a wide range of proposed changes that will simplify and enhance the way Canadians save, invest, plan for retirement and manage their tax obligations.

Personal Income Tax Measures

RRSP For Life

Budget 2026 proposes modernizing Canada’s registered retirement savings rules by combining the core features of RRSPs and RRIFs under the Income Tax Act into a single “RRSP for life.” Under the proposal, individuals would no longer need to convert their RRSP to a RRIF when they turn 71, although those over age 71 would continue to be required to make minimum withdrawals.

As part of the proposed changes, the government is considering:

• Introducing a “successor holder” option for RRSPs. Similar to provisions available for other registered vehicles, this could allow a spouse or common-law partner to become the successor holder of an RRSP. The RRSP could then remain open until the successor holder’s death, avoiding the value of the RRSP property being included in the deceased holder’s income.

• Allowing direct tax-free transfers following death. The government is considering whether the current indirect RRSP “rollover” provisions, which involve an income inclusion and an offsetting deduction for a qualifying survivor, could be replaced with rules permitting direct tax-free transfers to qualified registered vehicles of qualifying survivors.

The government is seeking Canadians’ views on the proposal.

More Time to File Income Tax Returns and Pay Balances Due

Budget 2026 proposes to change the T1 filing and balance-due dates to May 15 for all individuals, including self-employed individuals and their spouses or common-law partners.

These measures would apply to the 2027 and subsequent taxation years.

More Time to Object to CRA’s Assessment of Tax Returns

Taxpayers currently generally have 90 days to file a notice of objection to an income tax assessment. For individuals and graduated rate estates, the deadline is the later of 90 days after the assessment or one year after the tax return filing due date. In most cases, taxpayers can also request an additional year to file an objection.

Budget 2026 proposes giving most taxpayers one year from the date a notice of assessment is sent to file an objection. Individuals and graduated rate estates would have until the later of that date or two years after their tax return filing due date.

The change would simplify the process for individuals and businesses and eliminate the need for the CRA to review and approve requests for extensions.

Higher Threshold for Foreign Property Reporting (T1135)

Budget 2026 proposes to increase the threshold above which Form T1135 must be filed from $100,000 to $200,000. The CRA would also increase the threshold for simplified reporting from less than $250,000 to less than $500,000.

These measures would apply to taxation years or fiscal periods that end after 2026.

Canada Growth Incentive – Capital Gains Exemption

Budget 2026 proposes a new Canada Growth Incentive (CGI) capital gains exemption that would allow Canadian-resident individuals to claim a tax exemption on capital gains realized from the sale of qualifying shares of a qualifying corporation, up to a $15-million limit. The $15-million limit would apply separately to each qualifying individual for each business. Note that farming, fishing and many professional businesses are specifically excluded from this new measure.

The proposed CGI exemption would interact with the Lifetime Capital Gains Exemption (LCGE). Claiming the CGI exemption on qualifying shares of a corporation would limit an individual’s ability to claim the LCGE on the sale of shares of that same corporation. Similarly, claiming the LCGE on shares of a corporation would limit the individual’s ability to claim the CGI exemption on shares of that same corporation.

Mineral Exploration Tax Credit and Critical Mineral Exploration Tax Credit

Flow-through shares allow corporations to renounce or “flow through” Canadian exploration expenses (CEE) and Canadian development expenses (CDE) to investors, who can deduct the expenses in calculating their own taxable income. CEE is deductible at a 100% rate, while CDE is deductible at a 30% rate on a declining-balance basis. Budget 2026 proposes to increase the deduction rate for CDE from 30% to 100%.

Trust Distributions to Non-Residents: Closing a Loophole

Current rules generally prevent a trust from rolling out property to a non-resident beneficiary, apart from a limited group of assets that remain subject to Canadian tax. This helps ensure that Canada can tax gains that accrued while the property was held in the trust, either when the property is distributed or later when it is disposed of by the beneficiary.

However, certain tax-avoidance arrangements have been used to transfer trust property to non-resident beneficiaries indirectly. For example, property may be rolled out to a Canadian-resident corporation whose shares are held by a non-resident person. This type of planning can result in Canadian tax being deferred indefinitely or avoided permanently.

Budget 2026 proposes broadening the existing rollout denial rule to capture these indirect distributions to non-resident beneficiaries. The rollout would be denied when property is transferred to a corporation or partnership that has a direct or indirect non-resident shareholder or partner.

The change would apply to distributions of property occurring on or after Budget Day.

Registered Disability Savings Plan (RDSP)

The RDSP is a tax-assisted savings plan designed to support the long-term financial security of beneficiaries who are eligible for the Disability Tax Credit. Generally, an adult beneficiary is the holder of their own RDSP.

If an adult beneficiary does not have the contractual capacity to enter into an RDSP because of a mental impairment, the plan holder must generally be a legal representative authorized under provincial or territorial law to act on the individual’s behalf.

For individuals who do not have a legal representative, a temporary measure currently allows a qualifying family member to open an RDSP and act as the plan holder if, after reasonable inquiry, the RDSP issuer believes the individual’s contractual capacity to enter into the plan is in doubt. A qualifying family member can be a parent, spouse or common-law partner, or sibling. This temporary measure is currently scheduled to remain in place until the end of 2026.

Budget 2026 proposes to make the qualifying family member measure permanent.

Canada Caregiver Credit

The Canada Caregiver Credit (CCC) is a non-refundable tax credit that recognizes the impact of non-discretionary, out-of-pocket expenses on a caregiver’s ability to pay tax. The amount of tax relief is determined by applying the lowest personal income tax rate to the credit amount. Budget 2026 proposes to make the CCC refundable to ensure that eligible caregivers can receive the full amount even if they have little or no tax liability.

Instalment Payments for Individuals and Corporations

Individuals who receive income that is not subject to withholding, such as certain pension income, business income, dividends, interest, rental income and capital gains, may be required to pay their income tax in quarterly instalments.

Budget 2026 proposes increasing the income tax instalment threshold from $3,000 to $7,500 for corporations and individuals resident outside Quebec, and from $1,800 to $4,500 for individuals resident in Quebec. These thresholds would be indexed to inflation and rounded to the nearest $500. Any remaining tax payable for the year would continue to be due on the applicable balance-due date.

These changes would apply to taxation years beginning on or after January 1, 2028.

Budget 2026 also proposes greater flexibility for individuals whose primary source of income is from a business, including professional or commission income. Rather than making quarterly instalments, these individuals would be allowed to make a single annual instalment payment. This change would apply to the 2028 and subsequent taxation years.

Expansion of the Intergenerational Farm and Fishing Property Rollover

The Income Tax Act allows for a tax deferral (“rollover”) of capital gains on intergenerational transfers of certain farming property and fishing property from a taxpayer to the taxpayer’s child or the child’s spouse or common-law partner. For these purposes, a child includes the taxpayer’s grandchild or great-grandchild. Budget 2026 proposes to expand the rollover so that it is available for transfers to a niece, nephew, grandniece, or grandnephew of the taxpayer or the taxpayer’s spouse or common-law partner.

This measure would be effective for transfers that occur on or after January 1, 2027.

Optional Flat Amounts for Personal Income Tax Deductions and Credits

Individuals need to keep receipts and satisfy other requirements to claim certain deductions and tax credits. To reduce the need for individuals to keep receipts and itemize their expenses to support their amounts claimed, Budget 2026 proposes optional flat-amount calculation methods for certain deductions and credits including: moving expense deduction, clergy residence deduction, labour mobility deduction for tradespeople, home accessibility tax credit, and the adoption tax credit.

Individuals would still need to establish their eligibility. These measures would apply to the 2027 and subsequent taxation years.

Medical Expense Tax Credit (METC) and Disability Supports Deduction (DSD)

Budget 2026 proposes to simplify the METC while maintaining the integrity of the credit by reducing the documentation requirements for certain eligible expenses. The CRA would continue to have the authority to ask for additional documentation or information to verify that all requirements for claiming the METC are met.

Additionally, under the current rules, individuals need to track their expenses and keep receipts to claim the METC and DSD. Budget 2026 proposes to allow individuals to claim an optional flat amount in respect of certain categories of expenses including: gluten-free food expenses, incontinence product expenses, and service dog expenses.

Deductibility of Expenses Against Commission Income

Commission employees who meet certain conditions can currently deduct eligible employment expenses up to the amount of their commission income for the year. However, if they claim any expenses under these commission-employee rules, they cannot also deduct travel or motor vehicle expenses under the general provisions available to all employees. As a result, some commission employees may be better off forgoing the commission-employee rules altogether and instead claiming a larger deduction under the general travel provisions.

Budget 2026 proposes removing this restriction. Commission employees would be able to claim travel or motor vehicle expenses under the general employee provisions while also claiming other eligible employment expenses under the commission-employee rules, up to the amount of their commission income.

The change would apply to the 2027 and subsequent taxation years.

Updates to Mortgage Insurance Rules, Greater Transparency Around Prepayment Penalties

Budget 2026 proposes to amend mortgage insurance rules to raise the home price limit for optional mortgage insurance from $1 million to $1.5 million and permit 30-year amortisations for these insured mortgages, provided that at least one borrower is a first-time home buyer or the home is newly built. These changes would encourage greater competition between lenders and give home buyers more flexibility.

Budget 2026 also announces the government’s intention to consult industry and stakeholders on potential reforms to improve transparency around prepayment penalties for insured mortgages. These reforms would help Canadians better understand and compare the costs of paying off their mortgages early.

2027 Canada Groceries and Essentials Benefit Supplement

The Canada Groceries and Essentials Benefit (CGEB), formerly the Goods and Services Tax (GST) Credit, helps low- and modest-income individuals and families offset the rising cost of food and other everyday essentials and the GST they pay. The CGEB is non-taxable, income-tested, and indexed to inflation.

Budget 2026 proposes to deliver a one-time CGEB supplement, to be delivered in early 2027, equal to half of the maximum annual CGEB amounts for the 2026-27 benefit year.

Corporate Income Tax Update

Corporate Tax Elections

Certain corporate tax elections and agreements currently require a certified copy of a directors’ resolution authorizing the election or agreement. In some cases, corporations must instead provide a certified copy of the authorization from the person entitled to administer the corporation’s affairs. These requirements apply to certain filings, including capital dividend elections.

Budget 2026 proposes eliminating the requirement for corporations to file these certified copies when making certain elections or agreements, helping to simplify the associated filing process.

The change would apply to elections and agreements made on or after the date the enacting legislation receives royal assent.

Bottom Line

From the proposed “RRSP for life” and new capital gains exemption to changes affecting tax filing, credits, deductions and home financing, there is plenty for Canadians to consider in this year’s federal budget.