The 2026 Federal Budget outlines a range of tax changes, investment incentives and spending commitments at a time of continued economic uncertainty. U.S. trade tensions, geopolitical developments such as the Middle East conflict and inflationary pressures are shaping the economic outlook, with significant implications for businesses, households and government finances. Ottawa’s response includes measures intended to encourage investment, improve productivity, support affordability and simplify aspects of the tax system.
While the budget introduces approximately $142 billion in new spending, it also projects continued federal deficits over the next five years. The budget shortfall for 2025–26 is projected at a better-than expected $39.3 billion, down considerably from the approximately $67 billion forecast in the Spring Economic Update. However, deficits are expected to increase to $62.3 billion in 2026–27 and $62.5 billion in 2027–28, before gradually declining to $52.9 billion by 2030–31.
The federal debt-to-GDP ratio is forecast to remain relatively stable at approximately 40 per cent throughout the period. Real GDP growth is projected at 1.1 per cent in 2026, 1.7 per cent in 2027 and 2 per cent in both 2028 and 2029, before easing to 1.9 per cent in 2030.
Business tax measures and investment incentives
With a focus on driving investment and productivity, several headline measures in Budget 2026 are intended to provide relief to businesses, many of which are reeling from the impacts of the Canada-U.S. trade war. The most notable is the Productivity Mega Deduction. As we covered in an earlier blog, the previously announced measure allows businesses to immediately deduct 100 per cent of the cost of a broader range of eligible capital investments in the year those assets become available for use.
A new proposal in the budget is the Canada Growth Incentive, a capital gains exemption of up to $15 million for Canadian-resident individuals disposing of qualifying shares in eligible Canadian corporations. Eligibility includes requirements relating to Canadian-controlled private corporation status, business activities, asset composition and minimum shareholding periods. Importantly, professional practices, including accounting and legal firms, and several other specified industries such as businesses operating under a franchise agreement, are excluded from the qualifying business definition.
The existing small business rollover provisions would also be expanded, extending the period “… to acquire replacement shares and to introduce a special provision for individuals who have entered into agreements for future equity.” The changes would apply to qualifying dispositions occurring on or after January 1st, 2027.
Research and development: The Scientific Research and Experimental Development (SR&ED) program would be expanded to recognize additional commercialization-related expenditures, including regulatory testing, product certification and costs associated with obtaining and maintaining intellectual property protection. The changes would apply to taxation years beginning on or after November 5th, 2026.
Other business-related measures include:
- Corporate dividends: Exempting Canadian-controlled private corporations from the taxable preferred share regime under Part VI.1 of the Income Tax Act. The dividend allowance would increase from $500,000 to $1.5 million, with the threshold for reducing the allowance increasing from $1 million to $3 million.
- Corporate loss transfers: Introducing consultations to allow qualifying corporations within wholly owned corporate groups to transfer current-year non-capital losses, subject to ownership and provincial allocation requirements.
- Administrative penalties: Increasing certain tax penalties to account for inflation, with significantly higher penalties proposed for medium-sized and large corporations and partnerships that fail to meet specified filing and reporting obligations.
- Interest deductibility: Expanding proposed exceptions to the Excessive Interest and Financing Expenses Limitation (EIFEL) rules for certain purpose-built rental housing and regulated energy utility financing arrangements.
- Business succession: Expanding the intergenerational farm and fishing property rollover to include transfers to nieces, nephews, grandnieces and grandnephews, effective January 1st, 2027.
Additional funding includes $1 billion over six years for the Strategic Response Fund and $181.4 million over four years to expand Invest in Canada’s international investment attraction program.
Personal tax measures, retirement planning and the charitable sector
Budget 2026 introduces several changes affecting household finances, tax credits, retirement savings and tax administration.
Affordability and income support: The Canada Groceries and Essentials Benefit Supplement would receive a one-time 50 per cent increase for the 2026–27 benefit year. Eligible recipients could receive up to $339 for a single individual without children and $679 for a couple with two children. Another affordability measure, the proposed Build Canada Workers Benefit, is designed to enhance the Canada Workers Benefit. It would lower the minimum earning threshold for the disability supplement—from $3,000 to $500, and from $1,150 to $200—while increasing the maximum annual benefit to $1,859 for eligible single individuals without children and $3,143 for families.
Housing: Funding for housing-related programs would include $1.8 billion over four years, and $3.2 billion in future years, for the Integrated Supports Fund, along with $3.6 billion over four years, and $6.4 billion in future years, to construct supportive and transitional housing. The Canada Housing Benefit would also be renewed for an additional 10 years, while Build Canada Homes would receive a funding injection of $13 billion over 10 years, beginning in 2028-29.
Caregiver support: The Canada Caregiver Credit would become fully refundable beginning in 2027, providing eligible caregivers with tax relief of up to $1,260 annually.
Other personal tax measures include:
- RRSP for life: Consulting on combining RRSP and RRIF rules to eliminate mandatory conversion at age 71. Minimum withdrawals would remain. The government is also considering successor-holder provisions for surviving spouses and common-law partners.
- Tax installments: Increasing the required installment thresholds from $3,000 to $7,500 for individuals outside Quebec and corporations, and from $1,800 to $4,500 for Quebec residents, with future inflation indexing. Qualifying self-employed individuals could make a single annual installment payment equal to two-thirds of their net tax owing by December 31st. Changes would begin in 2028.
- Tax filing deadlines: Establishing May 15th as the tax filing and payment deadline for all individuals, including self-employed taxpayers, beginning with the 2027 tax year.
- Foreign asset reporting: Increasing the Form T1135 foreign property reporting threshold from $100,000 to $200,000 and the simplified reporting threshold from $250,000 to $500,000.
- Tax objections: Extending the deadline to object to an assessment, generally to one year after the assessment is issued, with additional time for individuals and graduated rate estates.
- Disability savings: Making permanent the ability of qualifying family members to open an RDSP for an adult who cannot establish one independently.
- Simplified deductions: Introducing optional flat claims of $1,000 for qualifying moving expenses and home accessibility renovations, and $2,000 annually for qualifying service-dog expenses. Additional simplified medical expense claims include $1,000 for qualifying gluten-free food expenses and $500 for qualifying incontinence products.
- Charities and not-for-profits: A significant proposal for the charitable sector is the elimination of the excess corporate holdings regime for private foundations. These organizations would no longer face the existing restrictions on corporate shareholdings, but would be prohibited from acquiring control of a corporation, a rule that already applies to public foundations. The changes would apply to taxation years beginning in 2027. The other major announcement was the government’s intention to begin discussions on a new Canada Creative Credit. The measure would support artists with a non-refundable personal income tax credit on as much as $45,000 in income earned for original artistic works. Further details are to come in the Spring Economic Update.
- Other funding commitments for the charity and not-for-profit sector include investments in community recreational facilities ($1.5 billion over nine years for the Build Communities Strong Fund) and local arts and cultural programs ($10 million in 2027-28 for the Building Communities through Arts and Heritage program and $15 million for the Canada Arts Presentation Fund). The budget also provides additional funding for the Local Journalism Initiative and extends the Canadian Journalism Labour Tax Credit to qualifying audio and audiovisual news organizations.
The government also proposes $182.4 million over four years to enhance Canada Revenue Agency enforcement activities, while allowing the CRA to report certain outstanding tax debts exceeding $50,000 to credit bureaus, subject to notice, collection and appeal-related conditions.
Measures contained in Budget 2026 remain subject to legislative approval or further implementation details. Businesses, individuals and not-for-profit organizations should review the proposals with a member of the Adams + Miles team to understand their potential implications and identify relevant planning opportunities.
For complete details, visit the Budget 2026 website.
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