The Mark Carney government’s 2025 federal budget is reworking the math on what Canadians pay and what they get back at tax time.
The budget, should it pass the confidence vote the week of Nov. 17, will touch almost every taxpayer, from low-income Canadians who rarely file a tax return and first-time homebuyers to the owners of luxury yachts and private jets.
The budget steers clear of major tax hikes or benefit cuts, focusing instead on a handful of tax perks.
First-time homebuyers to get GST relief
As part of legislation tabled before Parliament in June, Tuesday’s federal budget confirmed measures to lower the cost of first-time home ownership for more Canadians.
The government plans to eliminate the five per cent Goods and Services Tax (GST) on new homes priced up to $1 million, offering first-time buyers a rebate of up to $50,000, while gradually reducing the tax for homes priced between $1 million and $1.5 million.
To qualify for the GST rebate, first-time buyers must sign a purchase agreement with a builder between May 27, 2025, and Jan. 1, 2031, with construction starting before 2031, completed, and ownership transferred by Jan. 1, 2036.
No rebate is available for homes priced above $1.5 million.
Lower marginal personal income
The Liberal government announced a “middle-class tax cut” in May, currently included in Bill C-4 before Parliament, that would lower the first marginal personal income tax rate to 14.5 per cent from 15 per cent for 2025, and to 14 per cent for 2026 and beyond.
The budget also introduced a new Top-Up Tax Credit to ensure the middle-class tax cut does not reduce the rate used to calculate non-refundable tax credits, preventing any unintended increase in taxes.
It preserves the 15 per cent rate for non-refundable tax credits on amounts above the first tax bracket, helping Canadians smoothly adjust to the lower rate from 2025 to 2030.
Automatic tax filing for low-income Canadians
Starting in 2027, the Canada Revenue Agency (CRA) will begin automatic tax filing for about 1 million low-income Canadians for the 2026 tax year to help them get the government benefits — from GST/HST credit and Canada Child Benefit to Canada Work Benefit — they are entitled to.
The CRA will generate tax returns for eligible Canadians using data it receives from employers and financial institutions, and give individuals a chance to review and confirm a pre-filled income-tax return.
The program will roll out gradually, reaching 5.5 million people by 2029, and will target those earning below the federal or provincial basic personal amounts. For example, in Ontario, that threshold is $12,747 in 2025.
Tax credit for personal support workers
Budget 2025 offers a temporary Personal Support Workers Tax Credit of up to five per cent of eligible earnings for qualifying personal support workers.
From 2026 to 2030, a worker could receive a tax rebate of up to $1,100, with the program expected to cost the government $1.48 billion over six years.
Taxpayers in British Columbia, Newfoundland and Labrador, and the Northwest Territories will not qualify, as these provinces and territories have separate five-year agreements with the federal government to boost personal support workers’ wages.
One-time boost for disability benefit recipients
For those who have applied for the Disability Tax Credit, the budget proposes a one-time $150 payment for each certification or re-certification.
The payment will be retroactive to the program’s launch in June 2025, with the first supplemental payments expected before the end of 2026-27.
Removal of the underused housing tax
Carney’s budget plans to eliminate the Underused Housing Tax, introduced in 2022, which imposed a one per cent annual levy on certain vacant or underused properties, primarily owned by non-residents.
The budget attributes the tax cut to efforts to simplify the tax system and to complement other measures, such as the federal foreign-buyer ban and local vacant-home taxes.
Luxury taxes on boats and aircraft are gone
The federal government currently levies a tax on vehicles and aircraft valued over $100,000 and on vessels, such as boats, valued over $250,000, calculated as the lesser of 10 per cent of the total value or 20 per cent of the amount above the threshold.
Effective Nov. 4, 2025, the budget proposes eliminating these taxes to support the aviation and boating industries and streamline the luxury tax framework.
