What’s New for 2025 and Beyond
Tax laws continue to evolve, impacting both individuals and businesses. This update covers key changes for 2024, as well as a look ahead to 2025 and beyond.
Staying informed can help you plan effectively and avoid surprises.
New for 2025 and Beyond
Federal Personal Tax Rates and Credits
- Federal “middle-class” tax cut (lowest bracket): The federal lowest personal marginal rate is being reduced from 15% to 14.5% (2025) and to 14% (2026 and later).
- Top‑Up Tax Credit: A new Top‑Up Tax Credit is intended to prevent certain taxpayers (in relatively rare situations with unusually large non-refundable credits) from being worse off due to the reduced lowest marginal rate—by effectively maintaining a 15% credit rate on amounts above the first bracket threshold.
- Volunteer firefighter/search & rescue amounts increased: The Volunteer Firefighters’ Amount and the Search and Rescue Volunteers’ Amount are $6,000 (you can claim one or the other, not both, if eligible).
Capital Gains and Business Exits
- Capital gains inclusion rate: The inclusion rate remains 50%, and the previously proposed increase has been cancelled.
- Lifetime Capital Gains Exemption increased: The LCGE for qualified small business corporation shares and qualified farm/fishing property increased to $1.25 million for qualifying dispositions after June 24, 2024, with indexation resuming after 2025 (CRA guidance also references resuming indexation in 2026).
- Canadian Entrepreneurs’ Incentive: Although previously announced, the Canadian Entrepreneurs’ Incentive was cancelled in Budget 2025 (i.e., not moving forward as a measure).
Housing and Real Estate
- Federal anti-flipping rule (365-day rule): If you sell a housing unit (or a right to acquire one) you owned for less than 365 consecutive days, the gain is generally treated as business income (fully taxable) rather than a capital gain, and the principal residence exemption generally does not apply, subject to certain life‑event exceptions.
- BC Home Flipping Tax (separate from federal): BC’s Home Flipping Tax applies to profit from selling certain BC residential property (including some presale assignments) held for less than 730 days, with the tax in effect starting January 1, 2025, and exemptions in specific circumstances.
- Non-compliant short-term rentals: For tax years after 2023, expenses related to non-compliant short-term rentals can be denied for income tax purposes (CRA has also outlined transitional relief for 2024 in certain cases).
- Home Buyers’ Plan: The HBP withdrawal limit is $60,000. Temporary repayment relief can delay the start of the 15-year repayment period for certain participants (CRA describes relief for first withdrawals made between Jan 1, 2022, and Dec 31, 2025).
- Underused Housing Tax: For 2025 and later, the federal UHT provides that no tax is payable and generally no return is required, with repeal proposed for a later date.
- BC Property Transfer Tax – purpose-built rental exemption: BC provides an exemption from general property transfer tax on purchases of new qualifying purpose-built rental buildings between January 1, 2025, and December 31, 2030 (with related rules and eligibility requirements).
Trust Reporting
- Bare trusts: CRA indicates it does not expect bare trusts to file a T3 return for tax years ending in 2025, and that certain bare trusts will be required to file for tax years ending on or after December 31, 2026 (details and exclusions apply).
Savings and Registered Plans
- FHSA reporting: If you had FHSA activity (including opening an account), FHSA totals are reported using CRA’s FHSA reporting and Schedule 15 (with T4FHSA information from your issuer).
- TFSA contribution room: CRA emphasizes monitoring contribution room (and publishes annual dollar limits).
BC Credits
- BC Renter’s Tax Credit: A refundable credit of up to $400 per year is available for eligible low‑ and moderate-income renters (introduced starting 2023; eligibility criteria apply).
CRA Administration and Filing Changes
- Direct deposit updates: CRA no longer accepts direct deposit updates/changes through the tax return (effective March 24, 2025). Updates must be made through CRA online services, your financial institution, or CRA’s direct deposit forms.
- Business correspondence moving online: CRA has transitioned to online mail as the default for most business correspondence through My Business Account (starting May 2025).
- Voluntary Disclosures Program: CRA’s revised VDP took effect October 1, 2025, aimed at simplifying applications and expanding accessibility, with updated rules around interest relief and eligibility.
- Automatic tax filing/benefit delivery initiative: Budget 2025 describes an approach where CRA would automatically prepare returns / calculate benefits for some lower-income individuals, with a review window before filing.
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