Spring Economic Update 2026: key tax and affordability measures

The federal government released its Spring Economic Update 2026 (Canada Strong for All) on April 28, 2026. The update includes a combination of measures that are already in effect, measures announced as the government’s intention (requiring legislation or regulations), and consultations that may lead to future changes. 

The update was released amid ongoing trade uncertainty and higher global energy prices. Canada’s economy grew 1.7% in 2025. Inflation was 2.4% in March and has remained within the Bank of Canada’s 1–3% target range for more than two years. The 2025–26 deficit is now projected at $66.9 billion (2.1% of GDP). 

Personal income tax measures

Middle-class tax cut: 

The reduction to the lowest personal income tax rate, first announced in Budget 2025, is in effect. 

Disability Tax Credit (DTC) streamlined access: 

For the 2026 and subsequent tax years, the government proposes to streamline the DTC application process for individuals with certain long-lasting medical conditions (listed in the supplementary information) by allowing a qualified practitioner to certify the diagnosis, without having to complete detailed sections on functional impacts (the eligibility criteria themselves are not changing). The update also proposes (for DTC certificates issued after 2026 for the 2027 and subsequent tax years) to expand who can certify certain impairments (e.g., adding podiatrists for walking impairments and expanding impairment types that certain practitioners can certify). Provincial and territorial public guardians and trustees would also be recognized as qualified to certify for adults in their care (for 2026 and subsequent tax years), subject to conditions. 

Home Buyers' Plan extended grace period (proposed): 

Budget 2024 temporarily increased the grace period before Home Buyers' Plan (HBP) repayments must begin from two years to five years for participants making a first withdrawal between January 1, 2022 and December 31, 2025. The update proposes extending that five-year grace period to cover first withdrawals made between January 1, 2026 and December 31, 2028. 

Labour Mobility Deduction for Tradespeople increased limits: 

Effective for the 2026 and subsequent tax years, the maximum annual deduction for eligible temporary relocation expenses is increased from $4,000 to $10,000 (indexed to inflation going forward). The minimum distance threshold is also reduced from 150 kilometres to 120 kilometres. 

Canada Student Grants and Loans extended increases: 

For the 2026–27 academic year, full-time Canada Student Grants are maintained at $4,200 (up from $3,000) and interest-free Canada Student Loans at $300 per week (up from $210). Increases are proportionally extended to part-time students, students with disabilities, and students with dependents. 

Business and investment tax measures 

SR&ED pre-claim approval process launched: 

Effective April 1, 2026, the Canada Revenue Agency (CRA) introduced an elective pre-claim approval process for Scientific Research and Experimental Development (SR&ED) projects. Businesses can seek an eligibility determination in four steps within eight weeks before undertaking work or incurring costs. For claims submitted through this elective process that require an expenditure review, processing time is expected to be reduced from 180 days to 90 days. 

Carbon Capture, Utilization, and Storage (CCUS) Investment Tax Credit proposed expansion to enhanced oil recovery (EOR): 

The update proposes making EOR an eligible use for the refundable CCUS investment tax credit (subject to the designation of an eligible jurisdiction by the Minister of the Environment). For EOR, the effective credit rates would be set at one half the standard rates: 30% (direct air capture equipment), 25% (other capture equipment), and 18.75% (transportation, storage and use equipment) from the date of the update to the end of 2035; and 15%, 12.5%, and 9.375%, respectively, from 2036 to the end of 2040. Projects would be required to permanently store captured CO₂. 

Employee Ownership Trust (EOT) tax exemption (proposed to be made permanent): 

The update proposes to make permanent the $10 million capital gains exemption on the sale of a qualifying business to an employee ownership trust or worker cooperative corporation. The exemption currently applies to qualifying dispositions of shares that occur after 2023 and up to the end of 2026. 

Accelerated Capital Cost Allowance (CCA) for low-carbon LNG facilities: 

The update proposes implementation details for Budget 2025’s proposed reinstatement of accelerated CCAs for eligible liquefied natural gas equipment and buildings. Facilities with expected on-site emissions intensity at or below 0.20 tCO₂e per tonne of LNG produced would qualify for an accelerated CCA rate of 50% on liquefaction equipment (Class 47) and 10% on related non-residential buildings (Class 1). Eligible assets would generally need to be acquired on or after November 4, 2025 and before 2035, and the facility would need to be certified by the Minister of Energy and Natural Resources. 

Advance income tax rulings (priority focus): 

The CRA will prioritize advance income tax ruling requests related to large-scale nation-building projects (e.g., housing and infrastructure), as well as requests related to productivity-enhancing investments and clean economy investment tax credits.

Indirect tax measures 

GST/HST relief for first-time home buyers: 

The removal or reduction of the GST for first-time buyers on newly built homes, announced in March 2025, remains in effect for eligible agreements of purchase and sale entered into on or after March 20, 2025 and before 2031. The measure can provide savings of up to $50,000 on eligible purchases up to $1 million. 

Temporary suspension of the federal fuel excise tax: 

For the period April 20 to September 7, 2026 (inclusive), the federal excise tax on gasoline, diesel, unleaded aviation gasoline, and aviation fuel is temporarily suspended (tax rate reduced to $0.00 per litre). The update indicates this is expected to reduce costs by up to 10¢/L on regular gasoline and up to 4¢/L on diesel. Tax rates return to their normal levels ($0.10/L for gasoline and $0.04/L for diesel) on September 8, 2026. 

Alcohol excise duty relief extended: 

Effective April 1, 2026 and running for two additional years (through to March 31, 2028): 

• The 2% cap on the annual inflation adjustment for excise duties on beer, wine, and spirits is extended. 

• The 50% reduction in excise duty rates on the first 15,000 hectolitres of beer brewed in Canada is extended for craft brewers. 

Canadian Journalism Labour Tax Credit: 

The government has announced a consultation on extending the Canadian Journalism Labour Tax Credit to audio and audiovisual news production. Further details will be published by the Department of Finance. 

Key affordability measures

Canada Groceries and Essentials Benefit: 

The existing GST Credit is being restructured into the new Canada Groceries and Essentials Benefit for more than 12 million Canadians: 

• A one-time top-up equivalent to a 50% increase in the 2025–26 GST Credit amount will be issued June 5, 2026. 

• Beginning July 2026, the benefit amount will increase by 25% for five years. 

• A family of four will receive up to approximately $1,890 this year, and roughly $1,400 per year for the following four years. A single person will receive up to approximately $950 this year and $700 per year thereafter. 

Canada Pension Plan (CPP) contribution rate reduction: 

With unanimous support from provincial and territorial ministers of finance, the base CPP employee and employer contribution rate will be reduced from 9.9% to 9.5%, effective January 1, 2027. For an employee earning $70,000, this translates to annual savings of approximately $133, with equivalent savings for their employer. Legislation will be introduced to implement this change. 

Improving Housing Supply Act ($1.7 billion to provinces and territories): 

The federal government has introduced Bill C-26, the Improving Housing Supply Act, which proposes to provide $1.7 billion to provinces and territories to reduce barriers to new home construction (e.g., development charges, levies, and related costs). The update highlights an announced partnership with Ontario, including Ontario’s commitment to reduce development charges by up to 50% for three years in its largest and fastest-growing cities and Ontario’s stated intention to provide HST relief (full relief on new homes up to $1 million and partial relief up to $1.85 million) for eligible agreements entered into between April 1, 2026 and March 31, 2027. 

Apartment Construction Loan Program accelerated: 

Over $7 billion in low-cost loans under the Apartment Construction Loan Program is being accelerated to speed up construction of up to 16,500 new rental homes. 

Community Volunteer Income Tax Program (CVITP) Grant: 

While the program was confirmed renewed for 3 years in February of 2026, the update proposes $18.7 million over three years, starting in 2026-27, to renew and expand the CVITP Grant, supporting community organizations that host free tax preparation clinics for individuals with modest incomes and simple tax situations.  

Other previously announced measures confirmed as part of the update 

From the January 29, 2026 legislative package: 

• Reporting requirements for non-profit organizations 

• Qualified investments for registered plans (RRSPs, RRIFs, TFSAs, etc.) 

• 21-year rule for trusts 

• Immediate expensing for manufacturing and processing buildings 

• Expanding eligibility for the Clean Hydrogen Investment Tax Credit to methane pyrolysis 

• Tax deferral through tiered corporate structures (anti-avoidance) 

• Hybrid mismatch arrangements 

• Investment income derived from assets supporting Canadian insurance risks 

From the August 15, 2025 legislative package: 

• Crypto-Asset Reporting Framework and Common Reporting Standard — confirmed but deferred to January 1, 2027 

• Excessive Interest and Financing Expenses Limitation (EIFEL) rules 

• Non-compliance with information requests 

From Budget 2025: 

• Automatic federal benefits for lower-income individuals (pre-filled returns starting 2026 tax year) 

• New GST/HST reverse charge mechanism for the telecommunications sector 

Other earlier measures confirmed: 

• Charities and qualified donees (August 2024) 

• Registered Education Savings Plan rules (August 2024) 

• Avoidance of tax debts / manipulation of bankrupt status (August 2024) 

• Suspension of the Canada–Russia tax treaty (November 2024) 

• Hybrid mismatch arrangements (originally Budget 2021) 

What to watch for next 

Several items referenced in this update are proposed measures, consultations, or stated intentions and may require legislation, regulations, and/or further details. Your Baker Tilly advisor can help you assess potential impacts and prepare for next steps as details are confirmed. 

If you have questions about how these measures may affect your personal or business tax situation, contact your Baker Tilly advisor.