For 2026, there have been a number of changes that have come into effect and have a key role when it comes to filing your taxes, so you should be aware to verify that you have everything you need to file.
Income Tax Packages
As of 2024, the income tax and benefit packages from the Canada Revenue Agency have been reduced. These packages no longer include line-by-line instructions. That said, the What’s New section of the package is still included. By removing the line-by-line instructions, the package is now around 20 percent smaller. About 30 pages have been removed.
This mainly affects those who mail in their returns to the CRA. Not everyone is administering this package because taxes can also be done online through your web browser and through an accountant.
Advanced Canada Workers Benefit
Form RC201 is no longer required to receive advanced Canada worker’s benefits. If you received this benefit for the previous tax year, the payments will be automatically issued.
Deduction for Tools
For tradespersons and apprentice mechanics, the maximum employment deduction has increased. It used to be $500, but that amount has now increased to $1000. This also means that the threshold for expenses eligible for deductions has also changed.
COVID-19 Benefit Repayments
If you made any repayments to federal, provincial or territorial COVID-19 benefits in due to error, you can claim them. These can be claimed as a deduction on line 23200 when you file your return. This is important because you can receive a portion of those deductions on your return, and every cent counts right now, along with the cost of inflation.
FHSA Accounts
FHSAs, also referred to as First Home Savings Accounts, are registered accounts that allow you to save for your first home. Because these accounts are registered, they’re also tax-deductible. If you opened or made contributions to your FHSA in 2025, you can claim these on your tax returns.
Home Office Expenses
2023 was the last year you could use the temporary flat rate method to deduct home office expenses. Now, you’re required to file using the detailed method of form T2200, Declaration of Conditions of Employment. The employer must also sign this.
Multigenerational Home Renovation Tax Credit
This is a new refundable tax credit that allows those who are eligible to claim certain costs of creating a secondary unit in an eligible dwelling for a qualifying individual (senior or an adult who qualifies for the disability tax credit) so they can live with their qualifying relation.
If you do qualify, you can claim up to $50,000 in qualifying expenditures for each renovation that qualifies and get up to a maximum of $7,500 for each qualifying renovation. A percent is calculated based on the total spent.
Residential Property Flipping Rule
As of January 1, 2023, one of the new tax measures is that any profits you gain from selling a home you owned for less than a year are considered business income instead of capital gains.
The only exceptions are if the property was considered inventory of the taxpayer or if the sale occurred due to life events. Normally, the value of your property that’s considered your primary residence isn’t subject to capital gains.
Farmer’s Tax Credit Changes
The return of fuel to farmers’ tax credit is now available to self-employed farmers. It’s also available to individuals who are members of a partnership owning a farming business. That said, they have to have at least one permanent establishment in Alberta, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, PEI, or Saskatchewan.
Tax Increases for 2026
For 2026, there are some increases that you need to be aware of. The first is the increase in EI premiums. The Canada Employment Insurance Commission sets this rate every year and has set it to $1.66 per $100 for the earnings of workers and $2.32 for the earnings of employers.
There’s also the new alternative minimum tax. These taxes ensure that high-income individuals still pay a minimum amount of tax. Currently, there is an alternative minimum tax rate of 20.5 percent. There used to be a $40,000 exemption amount, and now is the threshold for the third income tax bracket.
New Benefits As Of 2024
For 2024, the new benefit was the Canada Revenue Agency’s Canada Dental Benefit. Instead of just being available for dental services to children, it became available to all eligible Canadians and started in 2024. Many Canadians will start receiving instructions on how to apply. That said, this program became available as of May 2024.
With this program, it’s important to know who this program is available to. In order to qualify, you’ll have to have no dental insurance and an Annual Family Net Income below $90,000. Those who are 87 or older should have received information on applying in December of 2023.
Those between 77 and 86 should have received application information in February of 2024, and those 70 or older should have received information in March. After that, other eligible individuals will start receiving information.
2026 Income Tax Brackets
Just like every year, the 2026 federal tax brackets have risen. These marginal rates dictate how much tax you pay based on your annual income. Let’s take a look.
| Taxable Income Amounts | Marginal Tax Rate |
| On the portion of the income from $0 – $58,523 | 14% |
| On the portion of income, that’s $58,523 – $117,045 | 20.5% |
| On the portion of income that’s $117,045 – $181,440 | 26% |
| On the portion of income that’s $181,440 – $258,482 | 29% |
| On the portion of income, that’s $258,482 plus | 33% |
Personal Exemption for 2026
Another thing that has changed in 2026 is the personal exemption amount, also referred to as a basic personal amount. What exactly is this, though? Well, the basic personal amount is a non-refundable tax credit that everyone can claim. It provides a full reduction for those who have an income below the basic personal amount and a partial reduction for those who have an income above the basic personal amount. For 2026, this amount is $16,452.
Capital Gains
Another new change to be aware of is the inclusion rate of capital gains. This change was made in 2024 and affects dividends, capital property, and all other types of capital gains. For corporations, all capital gains now have an inclusion rate of ⅔. For personal capital gains, the inclusion rate for all gains is $250,000 or lower; the rate is still ½. Anything above this amount is taxed at the rate of ⅔.
Contribution Limits
Another change for the 2026 year is the contribution limits for RRSPs, TFSAs and FHSAs. All of these accounts are registered accounts and, therefore, have annual and lifetime limits. The limits will change depending on which type of account you have. Let’s take a look at each one.
RRSPs
RRSPs, also known as Registered Retirement Savings Plans, are tax-deferred registered accounts that allow you to save money for retirement. Any funds you contribute to your RRSP are tax-free until you start withdrawing. Since your annual income will likely be lower when you retire than when you’re working, the tax you pay on your RRSP income will also likely be lower.
However, there are contribution limits to RRSPs. These limits are based on your annual income. You can put up to 18 percent of your annual income in RRSPs. That said, though, that amount can’t exceed $33,810. Any contributions above that will be subject to a penalty of 1% per month on contributions that exceed your limit by more than $2,000.
TFSAs
TFSAs, also known as Tax-Free Savings Accounts, are registered accounts where you can save your money and earn interest without having to pay any taxes. Unlike other registered accounts, though, you can withdraw funds from your TFSA whenever you like. However, there are annual limits as to how much you can contribute.
For TFSAs, the annual limit for 2026 is $7,000. If you have any unused contributions from previous years, though, you’re able to carry those forward from the previous tax year. For any contributions that exceed your contribution limit, there is a penalty of 1 percent per month on the highest excess amount.
FHSAs
FHSAs, also known as First Home Savings Accounts, are new registered accounts as of 2023. These accounts allow Canadians who haven’t purchased a home to save funds to purchase their first home. The annual contributions for this account are $8,000, with a lifetime limit of $40,000.
With FHSAs, all contributions are tax-free. As long as these contributions are used for eligible withdrawals, then the withdrawals are also tax-free. Once the contributions have been made on an eligible withdrawal, then the account must be closed within a year from your first eligible withdrawal.
The account must also be closed 15 years from the time you open the account or the year you turn 71 years of age. When you close the account, though, you don’t have to withdraw the funds. You can transfer them to an RRSP or a RRIF.
Canada Pension Plan Changes 2026
Another thing to know for 2026 is that the maximum pensionable earnings is $74,600 for CPP, and the amount of the basic exemption will stay at $3,500. However, there’s also a second earnings ceiling of $81,200. This is used to determine CCP2 contributions.
Incomes between $74,600 and the maximum insurable earnings ceiling of $85,000 will be subject to CCP2 contributions. High-income earners above $85,000 aren’t able to make contributions on pensionable earnings on amounts over and above.
2026 EI Maximum
Every year in Canada, the maximum insurable earnings adjust every year. Here’s what it looks like for 2026.
- The maximum insurable earnings are $68,900
- The maximum annual employee premium is $1,123.07
- The maximum annual employer premium is $1,572.30
Tax Credits for Personal Support Workers
At the end of 2025, the Personal Support Tax Credit was introduced. This federal income tax credit allows for tax savings for personal support workers. On your personal income taxes, you can claim 5% of your eligible earnings with a maximum tax savings of $1,100 per year.
In order to qualify for this credit, you must work an eligible health care establishment and provide one-on-one care with assistance with daily living. If you qualify, this credit is non-refundable which means you can get the credit whether you owe taxes or not.
Impact of Tax Rate Reduction on Low-Income Earners
In 2025, Prime Minister Mark Carney and the liberal government reduced the lowest federal tax bracket in the marginal tax rate system. Due to this, the federal tax rate was reduced to 14% which provides many Canadian taxpayers with relief on their income tax return. This can also increase some tax payable, though for some, you have non-refundable tax credits.
The main goal of reducing the income tax rate for the lowest tax rate was to help with financial planning and financial relief for those in the first bracket. Those who go above this income level will still pay the same amount on the rest of their income.
This was intended to be a middle-class tax cut due to the higher rates found in the Consumer Price Index. Many Canadians in all income brackets were having a hard time making ends meet, and not paying the same amount in taxes is a great incentive for many people. Even if you have a spouse or common-law partner, each of the employees or business owners has their own tax rates. This means that your taxes owed aren’t affected by your partner’s income.
As we mentioned, for many in the lowest income bracket, this could have the opposite effect, and they could end up owing more money. If you expect this may be affecting you, a tax professional will be able to help you figure out your tax situation.
