2026 Tax Changes – How They Affect Your Life & Your Retirement Plan

Taxes are far more complex today than they were 10 years ago — and 2026 adds another layer.

There were not many headline changes this year, but several could meaningfully affect your retirement plan, home buying strategy, and long-term tax planning. Complexity is becoming the real story.

In this post and video, you’ll learn:

• What’s new & relevant for you in tax for 2026?
• How will the changes affect your life?
• How will the changes affect your retirement plan?
• What is Ed’s advice on the FHSA vs Home Buyers’ Plan?
• What is the latest on ITF accounts & joint name principal residences?
• What is Ed’s view on these changes? Why were they done?

Small tax reduction

• We always like tax reductions, even small ones.
• No change in tax rates, except .5% reduction from 15% to 14.5% tax rate for the lowest tax bracket. It is a reduction of 1% to 14% effective July 1, so half the savings are in 2025. The average tax rate for the lowest tax bracket is 14.5% for income below $57,000. Saves a maximum of about $200/year for people earning $57,000 or more.
• Reduces refundable tax credits by the same .5% amount. If you get large tax credits, they could theoretically fully offset the lower tax rate.
• Top-up tax credit – Makes sure you don’t pay more from the lower tax credit rate than you save from the lower tax rate. There are a lot of larger tax credits, so this could happen if your tax credits are more than your income after deductions.  The tax credits include medical expenses, CPP & EI contributions, tuition, student loan interest, donations, dividend tax credit, disability & caregiver credits, pension credit, HST credit, and First-Time Home Buyers’ credit.

Home Buyers Plan increase

• Home Buyers Plan (HBP) increased to $60,000 with first repayment 5th year after withdrawal (not 2nd).
• This means a couple can save up to $200,000 in accounts where they get a tax deduction for contributions, including $60,000 each they can borrow from their RRSP and $40,000 each they can contribute to their First Home Savings Account (FHSA).
• My advice here is that essentially everyone should use the FHSA and get a tax-free withdrawal, but try not to use the Home Buyers’ Plan if you can get your 20% down without it, since you are borrowing from your RRSP at the rate of return that your investments in your RRSP make. If you are an equity-focused growth investor, like most of our clients, that rate of return is likely much higher than your mortgage rate.
• This is welcome given how very hard it is for young people to buy their first home today with how much house prices have risen. I feel for young people and any first-time home buyers today who need both a large down payment and to qualify for a large mortgage. House price surged for a few reasons, but mainly it was driven by a classic imbalance: demand outpacing supply. Demand for homes from a larger population mainly because of higher immigration was 3-5 times higher than supply, since municipalities resistant to change continued to be restrictive with building permits.
• The HBP increase is welcome, but does show how slow governments are. It should have been done a few years ago, since the large price increases generally happened from 2019-2022. House prices actually came down significantly in 2025 and are expected to decline further in 2026.

“Bare Trust Debacle” relief

• New rules on “bare trusts” in 2023 would have required onerous additional tax reporting for many people, except that every year since then the government announced the rules won’t be enforced this year (but remained for next year).
• The new rules affected parents saving for their kids in “in trust for” (ITF) accounts and family joint ownership of real estate, such as parents adding their name to kid’s mortgage to help qualify for a home or adult kids going on title for aged parents’ home for estate planning purposes.
• It was called a “debacle” because the first draft would have applied to millions of Canadians most of which were unaware, and the announcement of the extra filing not being required this year was made on the deadline day for 2023 and late in the years since then. We didn’t know during much of any year what would end up being enforced.
• We finally have some relief! Bare Trust onerous reporting is NOT required for 2025 but is still required for 2026 (just like prior years), but the areas we were worried about for our clients will be essentially exempt. For “In trust accounts (ITFs)” with parents saving for children, they are effectively exempt if the value of each account is less than 250,000 for the full year. The wording is a bit unclear, but it appears to be for each parent & child. For example, a family with 2 kids could have 4 separate ITF accounts and up to $250,000 exempt for each account, if the father & mother each have an ITF account for each kid.
• Family joint ownership involving related people with principal residences are exempt, which includes parents on a child’s mortgage to help them qualify for a mortgage and children on title of aging parent’s home for estate planning purposes.
• These rules are proposed, but not passed yet.
• We are part way through 2026 and don’t know for sure the 2026 rules yet or how they might be applied, but it appears the bare trust rules should essentially not apply for our clients.

New 2nd Alternative Minimum Tax (AMT)

• New 2nd Alternative Minimum Tax (AMT). This means your tax returns are calculated 3 times – once the normal way and once for each of the 2 AMT rules. You pay the highest of the 3. The new rules mostly affect large capital gains and large donations.
• You may get this tax back over up to 7 years if the high capital gain or donation is a one-time event. 
• We are not fans because it can make tax significantly more complex. Taxes are far more complex than 10 years ago and seem to get continuously more complex. Major tax reform has been needed for decades and has not been done since the 1960s. In many cases, the government may not even collect more tax, since the taxpayer might get it back in future years.
• Who is affected by this 2nd AMT?
• Large capital gains are usually on real estate, such as when a cottage or rental property bought many years ago is sold. They can also be on large stock options for top employees or stock market gains. Stock market gains tend to be larger, but investors rarely hold specific investments for decades and they can easily sell a bit each year to spread out the gains.
• Large donations are generally older wealthy people supporting charities, often using some advanced, commonly-used tax planning methods. The AMT change does not allow claiming tax credits for flow-through shares commonly used for large donations. See Ed’s video “How to Donate 10 Times More with the Donation Flow-Through Strategy”. This is expected to reduce large donations for many charities.

3 Technical Rules

• Removed luxury tax on boats and airplanes, but not on cars >$100,000. Luxury boats & airplanes bought by Canadians were mostly made here, so this affected those manufacturing industries a lot. It still applies to luxury cars.
• Eliminated Federal Underused Housing Tax (UHT). The 1% annual tax on the value of vacant or underused residential properties owned by non-resident, non-Canadians was eliminated effective for the 2025 calendar year. It was deemed inefficient and too costly to administer. They passed the federal foreign buyer ban, so the tax was essentially redundant.
• Family Trust 21-year rule – Can’t transfer family trust to a corporation owned by another trust. This is a technical issue for complex tax situations that would apply to few people.

New Canada Disability Benefit (CDB)

• Canada Disability Benefit (CDB) — A new benefit for working-age Canadians (18-64) eligible for the Disability Tax Credit, providing up to $2,400/year (max $200/month), income-tested.
• People who already have the Disability Tax Credit (DTC) can apply separately for this new income benefit with a maximum $200/month tax-free. Effective July 1, 2025 for single people with a net income less than $23,000 and married people with a family net income less than $32,500. The benefit is reduced by 20% of your net income, except employment income where you can earn up to $10,000 before having your benefit reduced.

CRA Service

• Service for calls to CRA continues to be slow. They hired more employees and now answer about 70% of calls. However, there has been no attempt to simplify tax rules that have become significantly more complex the last few years.
• Training of new employees has been inadequate. For general individual tax questions (e.g., non-personalized advice on rules, deductions, or filing): Agents provided accurate answers only 17% of the time. This means information was incorrect or incomplete in 83% of cases tested!
• CRA now generally takes 4-8 months to respond to reassessments, which is far too long. If your tax return is filed in April and you get a reassessment in May and respond in June, it might be the next year before CRA responds. You could be into a new year and still not have your tax refund for the last year!
• Bottom line: If you have tax questions, ask your accountant or tax specialist. Don’t ask CRA.

Expected changes that did NOT happen

• RRIF minimum withdrawals were not reduced. This would have helped retirees plan to have their RRIFs last longer. This will be needed as life expectancy rises with new medicine and AI. It looks like life expectancy may rise dramatically in the next 5-10 years with AI expected to find cures for most major diseases and possibly even figure out why our cells age at all. The government had promised they would reduce the RRIF minimum withdrawals.
• Capital gains inclusion rate increase from 50% to 67% – Cancelled. This is a relief! This would have been a highly negative tax increase for our clients and the economy. There was a lot of buzz from wealthy people planning to look into complex tax planning or leaving Canada. The rule was considered unfair because large capital gains tend to be on real estate where the growth is mainly inflation.
• Canada Entrepreneurs’ Incentive – Cancelled. This was related to the capital gains inclusion rate increase, so it was cancelled when the inclusion rate increase was cancelled. It was intended to reduce the cost of the higher capital gains tax on specific types of entrepreneurs selling an on-going business.

Ed