2025 Federal Budget: AMT Reform, Housing Measures, and SR&ED Changes

Key takeaways

• AMT exemption indexed to inflation; no structural AMT changes in 2025
• SR&ED eligible expenditure base broadened to include more capital expenditures for CCPCs
• New Canada Rental Protection Fund supporting affordable housing acquisition
• EI premium freeze extended for a second year
• Carbon rebate amounts confirmed for 2025-26

The April 2025 federal budget was tabled against the backdrop of capital gains rate uncertainty and an election cycle that had constrained ambitious policy announcements. The budget focused on housing affordability and targeted measures for small business, with fewer sweeping personal tax changes than the 2024 budget.

SR&ED: expanded eligibility

The Scientific Research and Experimental Development investment tax credit program received its most significant update in years. The 2025 budget broadened the definition of eligible SR&ED expenditures for CCPCs to include a wider range of capital expenditure — machinery, equipment, and certain software used directly in qualifying R&D activities.

The enhanced ITC rate for CCPCs remains 35% on the first $3 million of SR&ED expenditures (fully refundable), with the basic 15% rate applying above that threshold. The 2025 changes primarily help early-stage companies that have significant capital investment alongside their R&D activities.

Housing measures

The Canada Rental Protection Fund — a $1.5 billion program providing low-cost financing to non-profit housing operators acquiring at-risk affordable rental buildings — was formalized in the 2025 budget. This is primarily a spending measure with no direct personal tax implications.

A new First Home Purchase Tax Credit top-up was proposed, adding $500 to the existing credit for buyers in communities with housing prices more than 50% above the national median. The measure acknowledges affordability disparities across different cities.

AMT update

The 2025 budget confirmed that the Alternative Minimum Tax exemption amount ($173,205 as restructured in 2024) would be indexed to inflation going forward. No structural changes to the AMT were made in 2025. The 2025 exemption, after indexing, is approximately $177,882.

The CRA also released updated guidance on the interaction between the new AMT structure and charitable giving. Donors who give appreciated securities directly to registered charities should note that 100% of the capital gain is included in the AMT base — even though the donor's regular tax capital gain inclusion is zero on direct donations to registered charities.

Employment and EI

The EI premium freeze, introduced in 2024, was extended through 2025. The employee EI premium rate held at 1.66% of insurable earnings in 2025, with the employer rate at 2.324%. The maximum insurable earnings threshold increased to $65,700.

No changes were made to the Employment Insurance benefit structure, benefit rates, or qualifying hours thresholds. The self-employed EI program — available on an opt-in basis for special benefits — also remained unchanged.

Carbon rebate 2025-26

The Canada Carbon Rebate for the April 2025–March 2026 period was confirmed. Annual amounts for a family of four range from $1,800 in Saskatchewan to $760 in Ontario, delivered in quarterly payments. Rural residents receive an enhanced supplement of 20% above the base amount.

The rebate is not taxable income and does not affect eligibility for income-tested benefits. It is paid automatically to individuals who file a T1 return.