Canada’s 2025 Federal Budget: Building Canada Strong

Prepared by Zakus Financial, November 2025

On November 4, 2025, Finance Minister François-Philippe Champagne tabled the first federal budget entitled “Building Canada Strong” under Prime Minister Mark Carney’s leadership – a budget that arrives at a pivotal moment for Canada.

Against a backdrop of global economic and trade uncertainty, rising geopolitical tensions, and domestic affordability challenges, Budget 2025 was expected to chart a course that balances fiscal prudence with investment.

This year’s budget aimed to reallocate government spending while delivering targeted support to Canadians and businesses, containing several key themes, including:

Fiscal Spending and Public Sector Reporting: As announced in October, Budget 2025 introduces a new fiscal reporting framework with operational spending separated from capital spending. For this framework, capital spending is broadly defined as any government expenditure or tax incentive that contributes to public or private sector capital formation, while operating spending refers to ‘day-to-day’ operational spending.

For 2025–26, Budget 2025 anticipates an operating deficit and capital spending deficit of approximately $33 billion and $45 billion, respectively. The combined total deficit is projected at roughly $78 billion. The government seeks to balance the operating budget by 2028–29, while the capital deficit is expected to total approximately $60 billion. The federal debt-to-GDP ratio remains a key fiscal anchor, expected to reach 42.4% for 2025–26. Lastly, the government confirmed its intention to move to a fall budgeting cycle, starting with Budget 2025.

Empowering Workers and Building Infrastructure: The budget expands the Union Training and Innovation Program and introduces a Personal Support Workers Tax Credit to support apprenticeship training in Red Seal trades and recognize essential service providers.

Supercharging Growth: Measures include increasing expenditure limits for the Scientific Research & Development (SR&ED) Incentive Program and implementing various forms of immediate expensing for investments in manufacturing and processing assets and other productivity-enhancing assets, including patents.

Housing and Affordability: Building on prior commitments via the “Build Canada Homes” initiative, the budget addresses housing supply and affordability through new fiscal tools and policy levers, including public-private sector collaboration and GST rebates for first-time home buyers.

This review focuses on the most significant income tax measures affecting individuals, families, and Canadian private companies. References are based on publicly available information and may be subject to legislative or regulatory amendments. At this time, the measures are proposals only and may not be enacted into law as described or at all.

Summary of Personal Income Tax Measures

Personal Support Workers Tax Credit. Budget 2025 proposes a temporary Personal Support Workers Tax Credit, under which eligible personal support workers employed by eligible health care establishments could claim a refundable tax credit equal to 5% of eligible earnings, with a maximum value of $1,100 per year.

Amounts earned in British Columbia, Newfoundland and Labrador, and the Northwest Territories would not be eligible due to existing bilateral agreements providing wage funding over five years. This tax credit would be available for the 2026–2030 taxation years.

Automatic Federal Benefits for Lower-Income Individuals. Budget 2025 proposes granting the CRA discretionary authority to pre-fill income tax returns for eligible lower-income individuals (excluding trusts). Eligible individuals would have 90 days to review and adjust the return before filing. Opt-out options are available, and returns filed in error would be deemed not filed. This measure is open for consultation until January 30, 2026, and would apply to 2025 and subsequent taxation years.

Top-Up Tax Credit. To preserve the value of personal non-refundable tax credits after the “middle class tax cut,” Budget 2025 proposes a non-refundable Top-Up Tax Credit, maintaining a 15% rate on amounts above the first income tax bracket. Applicable for 2025–2030 taxation years.

Home Accessibility Tax Credit. Budget 2025 modifies the credit to prevent dual claims with the Medical Expense Tax Credit, effective 2026 and subsequent years.

Critical Mineral Exploration Tax Credit (CMETC). Expanded to include additional critical minerals for eligible flow-through share agreements entered between November 4, 2025, and March 31, 2027.

Personal Trusts and the 21-Year Rule. Budget 2025 broadens anti-avoidance rules to include indirect transfers of trust property to new trusts, applying to transfers on or after November 4, 2025.

Measures Affecting Registered Plans

Qualified Investments for Registered Plans. Budget 2025 simplifies and harmonizes the rules for small business investments across RRSPs, RRIFs, TFSAs, RESPs, RDSPs, FHSAs, and DPSPs. The second, more restrictive set of rules will be repealed, effective January 1, 2027, while broader rules will be applied to all registered accounts, including RDSPs.

Registered Investment Regime. The current CRA registration requirement will be repealed as of November 4, 2025, replaced with two new categories of qualified investments. Simplified rules will apply to six types of registered plans, effective January 1, 2027.

Proposals Affecting Canadian Private Companies

Tax Deferral Through Tiered Corporate Structures. Budget 2025 proposes to suspend dividend refunds when interposed corporate structures are used to defer personal tax, while maintaining exceptions for bona fide commercial transactions.

Immediate Expensing for Manufacturing & Processing (M&P). Buildings Acquisitions made on or after November 4, 2025, can be immediately expensed (100% CCA) if first used for M&P before 2030. The enhanced rate phases out after 2030, with recapture rules applying on change of use.

Other Corporate Measures

• SR&ED expenditure limits increased to $6 million.

• Expansion of Clean Technology Manufacturing ITC and Clean Electricity ITC.

• Extension of CCUS ITC availability to 2035/2040.

• Extension of patronage dividends in agricultural cooperatives until 2030.

Previously Announced Measures

Budget 2025 confirms the government’s intention to proceed with several previously announced tax measures:

• Lifetime Capital Gains Exemption increase to $1.25 million

• GST relief for first-time home buyers

• Capital gains rollover for small business investments

• Tax exemption for sales to Employee Ownership Trusts and Worker Cooperatives

• Extension of the Mineral Exploration Tax Credit

• Repeal of Underused Housing Tax and luxury tax on aircraft and vessels

This 2025 Federal Budget Review was prepared by Zakus Financial. For additional insights, visit BLOG | Zakus Financial

This document is a summary of the Federal Budget and does not represent Zakus Financials'

views on the policies expressed. It is provided for informational purposes only and does not constitute legal, accounting, tax, or financial advice. While care has been taken to ensure accuracy as of publication, information is general and subject to change. Individuals should seek professional advice for specific circumstances.