Affordability, housing and innovation remain Canada’s most pressing concerns in a year of economic volatility—and they are expected to significantly inform Prime Minister Mark Carney’s first federal budget.
The 2025 budget, which was delayed following the prorogation of Parliament and subsequent federal election earlier this year, could include a range of tax measures designed to address these challenges.
Examining Carney’s campaign platform and the August 2025 draft legislation could offer further insights into what this budget may contain, including relief for middle-income Canadians and expanded support for clean energy.
As Canadians across sectors prepare for a dynamic fiscal environment, here is a look at what the federal budget could include.
Personal tax relief and income support
Easing financial pressure for middle-income Canadians appears to be a key focus of the federal government.
This is evident in the government’s proposed reduction of the lowest federal income tax bracket from 15 per cent to 14 per cent, effective July 1, 2025, which could benefit more than 22 million taxpayers.
As the budget announcement approaches, Canadians could see additional commentary on how the proposed reduction will be implemented—if the Bill before the House of Commons does not pass before then.
The upcoming budget could also feature adjustments to Canada’s retirement and senior support programs. Based on Carney’s campaign, Canadians may see changes to registered retirement income funds (RRIFs) that would reduce minimum withdrawal rates; enhancements to the guaranteed income supplement (GIS) would also provide support to low-income seniors.
These measures would reflect a broader commitment to income security and demographic equity.
Housing affordability and construction incentives
Several tax-based solutions to stimulate housing supply and improve affordability could play key roles in the upcoming budget.
The government could include further details on its pledge to eliminate GST on newly built homes under $1 million for first-time buyers, which would lower entry barriers and encourage new construction.
The budget could also introduce a capital gains deferral for property owners who sell to non-profit housing organizations or land trusts—provided the proceeds are reinvested into purpose-built rental housing. This measure would help unlock underutilized assets for affordable housing development.
To further support rental housing, the August 2025 draft legislation proposed an exemption from the excessive interest and financing expenses limitation (EIFEL) rules for debt used to finance purpose-built rental buildings. As this remains in the proposal stages, Canadians should remain vigilant as there may be changes related to this exemption.
The government previously announced plans to revive the multiple unit residential building (MURB) tax incentive, which would allow investors to deduct rental property expenses from other income.
Since these measures aim to galvanize private and non-profit investment in Canada’s rental housing stock, there is a strong likelihood that related commentary will feature in the 2025 budget.
Innovation and R&D Incentives
In line with Carney’s vision for a more innovative economy, the 2025 federal budget could expand the previous August 2025 draft legislation proposals by broadening access to the scientific research and experimental development (SR&ED) program, which was announced as part of the 2024 fall economic statement.
To further incentivize intellectual property development, the government could introduce a patent box regime to offer preferential tax rates on income derived from Canadian-held intellectual property. This measure would target high-growth sectors such as artificial intelligence, biotechnology and clean technology.
Since the Liberal Party’s federal election campaign showed a strong focus on innovation, a new artificial intelligence deployment tax credit could be included in the budget. This credit could provide companies with a 20 per cent incentive for adopting AI solutions that lead to job creation and productivity gains, according to the party’s platform.
Recent draft legislation and the Liberal election platform both signal a continuing shift toward incentive-based climate policy and industrial decarbonization. The budget may introduce expansion around the eligibility for the existing clean economy investment tax credits (ITC) and provide additional commentary for currently proposed ITCs such as the electric vehicle supply chains—which was notably absent in the August 2025 draft legislation.
Corporate tax strategy and enforcement
The 2025 budget may also introduce reforms aimed at improving corporate tax fairness and transparency.
Additional commentary relating to the newly proposed $10 million capital gains exemption that will apply to qualifying sales of businesses to worker co-operatives would complement existing incentives for employee ownership trusts.
To align with international standards, the upcoming budget could provide further details on Canada’s plan to adopt and apply the current Organization for Economic Co-operation and Development’s crypto-asset reporting framework—which was proposed in the August 2025 draft legislation—and update the common reporting standards to enhance tax compliance in the digital economy.
The federal government also plans to update the Global Minimum Tax Act to align Canada with OECD Pillar II standards to curb base erosion and profit-shifting.
As this could represent a pivotal shift for the Canadian economy, the upcoming budget may provide Canadians with further commentary on evolving global proposals—like the U.S. side-by-side system—and outline steps toward adopting the qualified domestic minimum top-up tax (QDMTT).
Corporate tax reform and compliance relief
The 2025 budget may introduce corporate tax simplification and audit reforms that reflect recommendations from the tax community.
With rising compliance burdens from overlapping rules like EIFEL, thin capitalization and the Global Minimum Tax Act, the federal government may propose measures to streamline reporting and consolidate filings across jurisdictions.
Members of the tax community also advocated for improved CRA audit quality and faster dispute resolution—including shifting audit-related cases to the Tax Court of Canada and removing the large corporation rule requiring partial payment of disputed reassessments. These recommendations are intended to enhance fairness and efficiency in Canada’s corporate tax system.
