Canada’s income tax landscape is constantly evolving, with new rules and adjustments emerging each year. As compliance and reporting obligations become more complex, staying informed about the latest changes is essential. To support you, we’ve highlighted some of the key 2025 updates to help you navigate these developments with clarity and confidence.
CRA is Going Paperless for Businesses
Effective May 2025, the CRA has transitioned to online mail as the default method of delivering correspondence for any business number accounts. This applies to all business accounts, including corporations and sole-proprietorship businesses that are registered for GST/HST. If this applies to you, you should have started to receive all CRA correspondence through CRA’s secure online portal (My Business Account) even if you were previously registered for mail delivery. We strongly recommend ensuring you have access to your online My Business Account and your email address in your account is up to date to get notified when new correspondence is uploaded by the CRA. For more information on these changes, please see this post on CRA’s website.
CRA is Requiring a Backup Multi-factor Authentication (MFA) Method
Starting in February 2026, the CRA will require all CRA My Account users to have a backup MFA option on file. This means that in addition to the primary MFA method (such as receiving a code via text), you must also set up a secondary MFA method (such as a passcode grid or a third-party authenticator app). This change is being implemented to increase the security of your CRA My Account, and to avoid situations where users are locked out of their CRA My Account if that primary MFA method becomes unavailable (such as losing your phone or lacking cellular service). For more information on these changes and how to set up a backup MFA method, please see this post on CRA’s website.
Expanded Trust Reporting
Expanded trust reporting became law effective for the 2023 taxation year, but bare trusts were previously exempted from filing trust income tax returns for the 2023 & 2024 taxation years. Based on the Federal Budget released November 4, 2025, and CRA commentary in December 2025, bare trusts income tax return filings will be deferred for another year, such that they will not be required to file for the 2025 tax year. It is expected that this filing requirement will commence in the 2026 tax year.
Included below are some examples of arrangements that could be considered a bare trust:
- A parent who adds an adult child on legal title of a property. In these circumstances, there may be no change in beneficial ownership from the parent to the child if the child is holding the property in favour of the parent and there was no intention to gift. There are certain filing exemptions if personal-use properties.
- Bare trustee arrangements where the legal title owner of property does not also hold beneficial ownership.
- Shares of private corporations held “in trust” by a parent or other individual. These arrangements are common where minor children are shareholders in private corporations, particularly professional corporations where only individuals are permitted as shareholders.
- Bank or investment accounts held “in trust” by a parent or other individual. These accounts may have been created to hold the funds of a minor child. There are certain filing exemptions for accounts under certain thresholds.
Even if there was no activity in the trust for the year, if the trust income tax return is not filed by the deadline, a penalty of up to $2,500 or 5% of the trust assets per year can apply. For more information about these trust reporting rules, please see this post on our website.
Elimination of the Underused Housing Tax (UHT)
The UHT took effect on January 1, 2022 and applied to certain owners of vacant or underused residential property in Canada, generally non-resident, non-Canadians. The UHT was imposed on an annual basis at a rate of 1% on the value of the property. The Federal Budget released November 4, 2025, proposes to eliminate the UHT as of the 2025 tax year. As such, no UHT would be payable & no UHT returns would be required for the 2025 & subsequent tax years.
UHT requirements would continue to apply for the 2022 – 2024 tax years, and penalties and/or interest for failing to file UHT returns, if required, would still apply for these tax years.
Alternative Minimum Tax (AMT)
AMT is not a new concept in Canadian income tax system; however, many taxpayers are not aware of AMT as it does not generally impact them. Every year a calculation is performed “behind the scenes” to determine if the AMT is applicable. AMT applies when a taxpayer claims certain tax-preferred deductions or credits such as the lifetime capital gains exemption. The updated AMT rules came into effect for the 2024 tax year, and will continue to affect more Canadians in 2025, particularly for those who have the following situation(s):
- Capital gains
- Lifetime Capital Gains Exemption
- Stock option deduction
- Donated publicly listed securities
- Large donations
- Interest expenses
- Investment management fees
Accelerated Capital Cost Allowance (CCA)
The CCA system determines the deductions a business may claim each year in respect of the capital cost of its depreciable property. Depreciable property is divided into CCA classes with each having its own CCA rate, generally aligning with the expected useful life of the assets. The Federal Budget released November 4, 2025, proposes to increase the CCA that may be claimed for many CCA classes for assets acquired on or after January 1, 2025.
Personal Support Workers Tax Credit
The Federal Budget released November 4, 2025 proposes to introduce a Personal Support Works Tax Credit for the 2026 to 2030 taxation years. Eligible personal support workers could claim a refundable tax credit equal to 5% of their eligible earnings, up to a maximum credit of $1,100 per year. To qualify for the tax credit, one must meet the following conditions:
- Work as a personal support worker providing one-on-one care and assistance with daily living and mobility under direction of a regulated health care professional or health organization.
- Be employed by an eligible health care establishment (hospital, nursing home, etc.)
- Earn eligible employment income from this work (excluding income earned in B.C., Newfoundland and Labrador, and the Northwest Territories).
- Have your eligible earnings certified by your employer.
- File a tax return for the year.
CRA’s Interest Rates on Unpaid Taxes
The CRA’s prescribed interest rate on unpaid or outstanding overdue taxes has continued to slowly decline. The rate had reached a recent high of 10% in 2024 but has now declined to 7% as of January 1, 2026 The interest rate is published every quarter. We always encourage our clients to file on time and pay their income tax instalments and amounts owing on time to avoid what can be significant non-deductible interest and penalties charges.
Increases to the TFSA and RRSP Contribution Limits
Canadian resident taxpayers saw their TFSA contribution limit increased by $7,000 effective January 1, 2025, and an additional $7,000 effective January 1, 2026.
The maximum RRSP annual dollar limit for the 2025 tax year is $32,490, however your RRSP deduction room will ultimately depend on a number of factors and should be reviewed prior to making a contribution.
