2025 Federal Budget: Securing Canada's Future

Technical amendments refine the enhanced AMT formula introduced in Budget 2023. The AMT rate remains at 20.5% applied against an expanded income base, but the exemption amount is clarified and certain charitable donation carryforward rules are adjusted. High-income Canadians who rely on large capital gains or stock option deductions may still face minimum tax obligations despite these adjustments.

New financing through the Canada Mortgage and Housing Corporation supports construction of 100,000 rental units over five years. The Apartment Construction Loan Program is expanded and interest rates for qualifying projects are reduced. Municipalities that increase housing density around transit corridors receive additional infrastructure funding.

Budget 2025 proposes a one-time additional $8,000 FHSA contribution room for eligible account holders who opened an account before April 1, 2025. This brings total available lifetime room to $48,000 for those who have maximized contributions since the account launched. Withdrawals used for a qualifying home purchase remain tax-free.

The Scientific Research and Experimental Development tax incentive program receives its most significant update in a decade. Eligible expenditure categories expand to include cloud computing and data costs directly used in experimental development. The overhead proxy rate is increased from 55% to 60% of direct labour costs for CCPCs electing the traditional method.

A 15% refundable investment tax credit supports construction of non-emitting electricity generation, storage, and transmission projects. Nuclear, wind, solar, hydro, and tidal projects are eligible. The credit requires compliance with prevailing wage and apprenticeship requirements and is available to taxable corporations and Crown corporations.

The CCUS investment tax credit rates are enhanced for direct air capture projects, which receive a 60% credit rate on eligible capture equipment. Storage equipment for direct air capture projects qualifies at 37.5%. The enhanced rates recognize the higher capital costs of removing CO₂ directly from the atmosphere versus point-source capture at industrial facilities.

Canada's 3% Digital Services Tax on revenues earned from Canadian users by large digital corporations takes effect retroactively to January 1, 2022. Corporations with global revenues above €750 million and Canadian digital services revenues above CAD $20 million are subject to the tax. The DST applies to revenues from online marketplace, social media, online advertising, and user data services.

The Canadian Dental Care Plan expands to cover all uninsured Canadians with family net income under $90,000, up from $70,000. The program now includes orthodontic treatment for children under 18. Participating dental providers receive fee schedule payments directly from Health Canada, reducing out-of-pocket costs for eligible families.

A $10 million capital gains exemption applies to qualifying business owners who sell their business to an Employee Ownership Trust. This provides a tax-efficient succession planning option for small and medium-sized business owners approaching retirement. The trust must maintain employee ownership and meet governance requirements for at least five years post-transfer.