Finance Minister Francois-Philippe Champagne released the 2025 Canadian Federal Budget on November 4th. This Budget was remarkable for a few different reasons – the fall timing has been announced as the new “norm” after traditionally being released in the spring (considered not practical earlier this year with the April 28th election that resulted in our current prime minister Mark Carney), a shift in the presentation of the federal government spending in an attempt to separate “operational spending” from “capital investments”, and unapologetically forecasting the largest non-pandemic deficit in history at over $78 billion dollars.
Billed as a “generational” Budget that will allow Canada to weather the increased global and North American uncertainty, improve and prepare our economy for the future and reverse some of the recent significant increases in public service spending, the documents released spend significant effort in analyzing the recent tariff and trade issues with the US. But they also attempt to paint Canada in a positive light compared to other G7 and OECD countries for overall debt and deficit levels to GDP, and emphasizing our strong position for attractiveness to domestic and international investment. Obviously, $78B is a huge amount for the government to forecast as a deficit, but whether this will be judged as a wise investment or a reckless gamble is not likely to be known for years, although it will be hotly debated starting immediately. The full Budget release and supporting documents can be found here.
We have summarized the most relevant tax related announcements below.
Business Tax Announcements
Immediate expensing of manufacturing and processing buildings
Effective Nov 4 2025, qualifying acquisitions of M&P facilities (where >90% of floor space is used for M&P activity) can be 100% deducted against taxable income. This will include alterations or additions to existing buildings, but restricts some related party or tax-advantaged acquisitions. Full benefit is available for acquisitions until 2030, with partial benefits available until 2033.
Increasing and expanding tax credits for research and development
Building on previously announced measures, the current $3.0M annual “expenditure limit” providing enhanced Scientific Research and Experimental Development tax credits will be increased to $6.0M. As well, capital SRED expenditures will once again be included, and more businesses will be eligible. Canadian public companies will no longer be excluded, and the corporate group’s taxable capital limit has been increased to $15M from $10M before eligibility will begin to be reduce. These changes will apply to taxation years starting on or after December 16, 2024.
Extending and expanding tax credits related to clean energy and critical minerals
Several existing programs – Critical Mineral Exploration Tax Credit, Clean Technology Manufacturing Investment Tax Credit, and Carbon Capture, Utilization and Storage Investment Tax Credit – will be expanded. CMETC and CTMITC will apply to additional rare earth and critical mineral expenditures, and CCUS ITC program will be extended for an additional 5 years to allow full benefits through 2035 and partial benefits through 2040.
Restriction of tax refunds related to dividends between affiliated corporations
In certain circumstances, tax refunds that would arise to a dividend paying corporation will be held by the Canada Revenue Agency when the corporate tax payable related to that dividend would not be owing until after the refund would otherwise be repaid where the dividend recipient is an “affiliated” corporation. The refund will be eligible to be issued in the future when qualifying dividends are paid, reducing the advantage of potential deferral of tax in these situations. This change will apply to taxations years that start on or after November 4, 2025
Personal Tax Announcements
Personal Support Workers Tax Credit
A new refundable tax credit equal to 5% of eligible earnings, up to $1,100 annually, for eligible personal support workers at eligible health care establishments. Work responsibilities and facility services details are important, but the intent is for the credit to apply to care workers dealing directly with patients in hospitals/care homes/similar facilities. The credit will be available in the 2026 to 2030 taxation years, but will not be available to individuals in BC, NL, or NWT as those provinces have entered into agreements to increase the earnings of these workers.
Single claim for home renovation related tax credits
As defined in the Income Tax Act, certain costs for home renovations to increase accessibility for seniors or those eligible for the Disability Tax Credit would be eligible for both the Home Accessibility Tax Credit as well as the Medical Expense Tax Credit. Starting in 2026, these costs can only be claimed for one of the two tax credits.
Personal tax return auto-filing program
Subject to consultation period to January 30, 2026, the proposed program would automatically file simple personal tax returns for certain low-income individuals with inconsistent filing history. Many government benefits are only available if a personal tax return has been filed, therefore this automatic filing program would allow benefits to be provided to individuals that would otherwise miss out. The program could begin for 2025 tax year filings.
Other Tax Announcements
Reporting for Bare Trusts
Filing T3 Trust Income Tax Returns for certain bare trust situations has been deferred to taxation years that end on or after December 31, 2026.
Restrictions on avoiding 21 year deemed dispositions for Trusts
Effective for transactions November 3, 2025 and forward, certain scenarios that could be used to defer realization of gains on property held by Trusts that have been in existence for 21 years will no longer be effective.
Elimination of Underused Housing Tax
The UHT has been eliminated effective January 1, 2025, meaning no returns or reporting will be required this year or going forward. Reporting for the 2022 to 2024 taxation years is still required, so penalties and interest related to those periods are still possible.
Reduced application for the Luxury Tax
Subject aircraft and vessels under the Luxury Tax will no longer be taxable effective November 5, 2025. Subject vehicles will still attract the Luxury Tax.
Please reach out to your Virtus Group advisor if you have any questions or to discuss your specific situation. Our team can help you understand the details of the new tax changes.
