The 2025 Federal Budget provided long-awaited clarity on several tax changes that had been under review. Instead of introducing sweeping new reforms, the government chose to pause, defer, or cancel a number of previously announced measures, while moving forward with targeted updates focused on affordability, investment, and tax compliance.

Underused Housing Tax (UHT) Cancelled

The government has officially eliminated the Underused Housing Tax, effective January 1, 2025.

• No UHT returns or payments will be required for 2025 and beyond.
• All UHT obligations remain in effect for 2022 to 2024, including filing and penalties.

Bare and Deemed Trust Reporting Deferred

• Enhanced trust reporting rules will proceed, but their effective date has been deferred to taxation years ending on or after December 31, 2026. As such, there are no reporting requirements for these trusts for 2025.

Capital Gains Inclusion Rate: No Planned Changes

• The current inclusion rate of 50% continues to apply.
• The previously announced two-thirds inclusion rate for corporations, trusts, and individuals (with gains over $250,000) has been cancelled.

Luxury Tax on Aircraft and Boats

• This has been ended for aircraft and vessels purchased after Nov 4, 2025.
• The luxury tax on vehicles remains.

Personal Tax Measures

• Personal Support Workers Tax Credit:
  • 5% refundable credit on eligible earnings, up to $1,100 per year for the years 2026–2030.
  • Not available for earnings in BC, NL, and the NWT due to separate federal agreements.
• Home Accessibility Tax Credit (HATC):
  • Starting in 2026, expenses claimed under the Medical Expense Tax Credit can no longer be claimed under the HATC.

Registered Plans and Investment Rules

• Qualified investment rules simplified and harmonized across RRSPs, RRIFs, RESPs, RDSPs, TFSAs, and FHSAs.
• RDSPs gain access to small business investments, expanding planning flexibility for beneficiaries with disabilities.

Business Tax Measures

• Immediate Expensing: 100% deduction for eligible manufacturing and processing buildings acquired after Budget Day and used before 2030.
• SR&ED Credit Expansion: Enhanced refundable credit limit increased to $6 million.
• Tiered Corporate Structures: New rules to prevent tax deferral on investment income through mismatched year ends in corporate chains

Clean Economy Incentives

• Expanded eligibility for Critical Mineral Exploration Tax Credit and Clean Technology Manufacturing Investment Tax Credit.
• Extended full credit rates for Carbon Capture, Utilization, and Storage (CCUS) expenditures to 2035.

Accounting and Advisory Support for Business Owners

At KWB, we help business owners navigate tax changes with clarity and confidence. Schedule an introductory meeting today to learn more about how we can help you simplify your accounting, improve your profit, and achieve your goals.