A “Canada Strong” Budget Focused on Growth and Modernization
The 2025 Federal Budget, titled “Canada Strong,” emphasizes defence investment, economic competitiveness, and “right-sizing” government operations to pre-pandemic levels.
Spending remains elevated, but targeted toward manufacturing, clean technology, housing, and productivity incentives.
For business owners and incorporated professionals, Budget 2025 offers both new opportunity and increased scrutiny: enhanced credits for innovation, but tighter anti-avoidance rules for trusts and tiered corporate structures.
Gifford Carr’s Take: The federal approach rewards reinvestment and modernization. Companies that innovate or transition to clean-tech processes stand to benefit most.
Download your copy of our advisors’ key insights below:
For Business Owners & Entrepreneurs
Enhanced SR&ED Credits
The Scientific Research & Experimental Development (SR&ED) program expands:
- The annual expenditure limit for the enhanced 35% credit increases from $4.5 million to $6 million
- Eligibility extends to certain public corporations.
Planning Insight: For incorporated professionals and small- to mid-sized firms, this effectively increases refundable R&D support and encourages in-house innovation.
Immediate Expensing for Manufacturing & Processing Buildings
A new temporary incentive allows a 100% capital cost allowance (CCA) deduction in the first year for manufacturing buildings first used before 2030 (75% in 2030–31; 55% in 2032–33).
Example: A $2 million new facility placed in use 2029 could yield a $2 million first-year deduction.
Gifford Carr’s Take: For family-owned or private manufacturing firms, the next five years are prime for capital expansion and modernization planning.
Clean-Technology & Critical Mineral Incentives
The Budget expands investment tax credits for clean-technology manufacturing, carbon-capture projects, and critical minerals such as tin, tungsten, and manganese.
Planning Insight: These programs favour firms reinvesting in equipment or facilities that support net-zero or resource-processing capacity.
Tiered Corporate Structures – Closing the Deferral Gap
Budget 2025 closes a long-used deferral tactic in multi-tiered holding structures with mismatched fiscal year-ends. The new rule suspends dividend refunds within affiliated groups where timing creates a tax deferral.
Action Step: If your corporation uses multiple holding entities or staggered year-ends, review the flow of inter-corporate dividends before 2026.
Cancellation of the Canadian Entrepreneurs’ Incentive
Originally planned to cut the inclusion rate on $2 million of gains to 33⅓%, this program is cancelled. Entrepreneurs planning to sell shares in small-business corporations will now rely on the existing $1.25 million Lifetime Capital Gains Exemption.
Gifford Carr’s Take: Business-succession planning remains critical—speak with your advisor before initiating share sales or reorganizations.
Enhanced Transparency for Non-Profit Organizations
Broader annual filing requirements begin 2027 to increase visibility into NPO finances.
Why It Matters: Corporate or foundation-owned entities with community or charitable arms should prepare for expanded disclosure.
For Individuals & Families
Middle-Class Tax Relief and Top-Up Credit
- The first federal bracket decreases from 15% to 14.5% in 2025 and 14% in 2026.
- A new Top-Up Tax Credit ensures personal credits tied to the old rate are not reduced.
Example: A $55,000 income could see roughly $275 in annual savings.
Phase-Out of Canada Carbon Rebate
Quarterly Carbon Rebate payments end April 2025.
No future payments will apply to returns filed after October 30, 2026.
GST Relief for First-Time Home Buyers
Full GST rebate on new homes up to $1 million and partial relief up to $1.5 million.
Example: On a $900,000 new build, the GST savings ≈ $45,000.
Gifford Carr’s Take: This directly supports younger Canadians re-entering the housing market as rates stabilize.
Home Accessibility Tax Credit Restriction
Starting 2026, expenses already claimed under the Medical Expense Tax Credit cannot be double-claimed for accessibility upgrades.
New Personal Support Worker Credit
From 2026 to 2030, eligible PSWs can claim a refundable credit equal to 5% of earnings (max $1,100).
Automatic Tax Filing
Beginning with 2025 returns, the CRA may automatically file for individuals meeting specific low-income criteria. The overall impact, individual measures are modest but collectively simplify filing and improve affordability for first-time buyers and lower-income Canadians.
For Investors, Trusts & Private Clients
Expanded 21-Year Trust Rule
Trust-to-trust transfers that indirectly move property through corporations now trigger a deemed disposition aligned with the original trust’s 21-year anniversary.
Gifford Carr’s Take: Estate plans using multiple trusts or corporations should be reviewed immediately to avoid unintended capital gains events.
Simplified Qualified Investment Rules
Registered plan investment categories will be consolidated and the outdated “registered investment regime” ended. Expect improved clarity for holding private shares within RRSPs and TFSAs.
Elimination of the Underused Housing and Luxury Taxes
- The Underused Housing Tax ends 2025.
- Luxury taxes on aircraft and vessels are repealed effective November 5, 2025.
International Tax Alignment
Canada will modernize transfer-pricing rules to match OECD guidelines, affecting cross-border corporate owners and global families.
Additional Highlights and Opportunities
- Clean Electricity Investment Tax Credit: 15% credit for low-emission power projects now available to the Canada Growth Fund ($15B).
- Carbon Capture, Utilization and Storage Credit: Full credit rates extended to 2035; reduced rates to 2040.
- Agricultural Co-op Deferral Extension: Tax deferral on patronage shares continues to 2030.
- Department of Justice Savings Target: 15% cost reduction, including exploring AI for efficiency – early signal of digital transformation across government.
Gifford Carr’s Take: Incentives are heavily targeted—manufacturing, clean tech, and infrastructure stand out. Owners investing in productivity enhancements or succession should act within this window (2025–2030).
Download your copy of our advisors’ key insights below:
Planning Checklist
- Review corporate year-ends and dividend timing for the new Part IV rules.
- Confirm trust structures comply with expanded anti-avoidance rules.
- Assess eligibility for SR&ED enhancements and immediate expensing.
- Consider clean-tech or carbon-capture projects for new credits.
- Evaluate personal tax changes when setting salaries or dividends for 2025.
- Update home purchase plans to capture the GST rebate.
Let’s Connect. Our advisors can help you understand how these measures impact your business or personal strategy. Book a virtual or in-person session to review how we can support you.
This summary is for general information only and does not replace personalized financial, legal, or tax advice. Please consult your advisor or accountant before making decisions based on this material.
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