2026 Federal Budget: Every Tax Change That Affects You

Key takeaways

• Capital gains inclusion rate confirmed at 50% for individuals on gains up to $250,000; two-thirds above that threshold
• TFSA annual limit remains $7,000; cumulative room is now $102,000 for eligible Canadians
• RRSP dollar limit increases to $33,810 for the 2026 tax year
• New first-time homebuyers refundable credit of up to $1,500 introduced
• Small business deduction limit stays at $500,000; passive income rules unchanged

The 2026 federal budget, tabled March 28, delivers a mix of minor adjustments and meaningful structural changes after several years of pandemic-era spending and the capital gains inclusion rate debate. For most Canadians, the practical impact is modest — but for business owners and investors, the details matter.

Capital gains: the two-rate world

After a prolonged legislative saga, the 2026 budget formally legislates what the CRA has been administering: individuals pay tax on 50% of capital gains up to $250,000 per year, and two-thirds on the excess. Corporations and most trusts are subject to the two-thirds rate on all gains.

The $250,000 threshold is not indexed to inflation, which means over time more Canadians will face the higher rate. Taxpayers who sold investment properties or a business in 2025 but have not yet filed should note that the rate applied to the date of disposition — not the filing date.

The annual capital gains exemption for qualified small business corporation shares increases to $1,375,000 for 2026, up from the 2025 figure indexed to inflation.

RRSP and TFSA updates

The RRSP contribution limit for the 2026 tax year is $33,810, based on 18% of 2025 earned income up to the dollar ceiling. Your actual limit appears on your 2025 Notice of Assessment. The RRSP contribution deadline for the 2026 tax year is March 2, 2027 — not December 31.

The TFSA annual limit is unchanged at $7,000. Canadians who have been eligible since the program launched in 2009 and have never contributed now have $102,000 of cumulative contribution room available.

Housing measures

The budget introduces a refundable First Home Purchase Credit of $1,500 for qualifying buyers who close on a first home in 2026 or later. This stacks on top of the existing First-Time Home Buyers' Tax Credit, which provides a non-refundable credit worth up to $1,500.

The Home Buyers' Plan withdrawal limit, which was increased to $60,000 in 2024, remains unchanged. The two-year RRSP seasoning rule still applies — funds contributed in the year of withdrawal or the preceding year are not eligible.

Business tax changes

The small business deduction limit stays at $500,000. The passive income grind — which reduces the SBD by $5 for every dollar of adjusted aggregate investment income above $50,000 — is unchanged. Associated corporations continue to share the $500,000 limit.

The general corporate tax rate remains 15% federally. Combined with provincial rates, most provinces have a total rate between 23% and 27% on income above the SBD threshold.

Payroll changes effective January 1, 2026

The CPP maximum pensionable earnings ceiling rose to $73,200 for 2026. The CPP2 upper earnings limit is $83,300. Employee and employer CPP contribution rates are both 5.95%. The EI maximum insurable earnings is $65,700, with an employee premium rate of 1.64%.

These changes took effect January 1, 2026 and should already be reflected in payroll software. Employers who did not update their systems in January may face over- or under-remittance adjustments.

What was not in the budget

The budget did not introduce new wealth taxes, did not change the principal residence exemption rules, and did not alter the dividend tax credit rates. The CRA's enhanced audit focus on offshore assets and unreported income, announced administratively, is separate from the budget and is already in effect.

For taxpayers expecting a change to the Alternative Minimum Tax threshold, the 2025 budget had already increased the AMT exemption to $173,205. That amount is indexed for 2026 but no structural changes were made in this budget.