Government of Canada releases Spring Economic Update 2026

On April 28, 2026, the Federal government released its fiscal update entitled Canada Strong For All – Spring Economic Update (SEU). This update introduces several measures addressing affordability, as well as providing an overview of economic and fiscal policies.

Key income tax proposals introduced in the SEU affecting individuals and private corporations include the following:

Disability Tax Credit

The Disability Tax Credit is a non‑refundable federal tax credit designed to recognize the additional costs associated with living with a severe and prolonged disability. For the 2026 tax year, the credit amount is $10,341, resulting in federal tax savings of up to $1,448. To qualify, an individual must have a significant and long‑lasting impairment in physical or mental functions that seriously limits activities of daily living activities.

Addressing challenges with the application process and to improve access to the Disability Tax Credit, the 2026 SEU proposes to:

• Streamline the application process for individuals with a formal diagnosis of certain listed long-lasting medical conditions.
• Expand the list of medical practitioners who can certify eligibility for the Disability Tax Credit and broaden the types of impairments than can be certified by other health professionals.

The streamlined application process will apply for 2026 and subsequent tax years.  The expanded list of medical practitioners will apply to Disability Tax Credit certificates issued for the 2027 and subsequent tax years.

Home Buyers’ Plan

The Home Buyers’ Plan (HBP) enables eligible individuals to withdraw up to $60,000 from their registered retirement savings plan (RRSP) to purchase or build their qualifying first home, or a home for a specified disabled person, without having to pay tax on the withdrawal. Amounts withdrawn under the HBP must be repaid to their RRSP over a period not exceeding 15 years, starting the second year following the first withdrawal.

The Federal government previously introduced a grace period that allowed the start of the 15‑year repayment schedule to be deferred until the fifth year after withdrawal, applicable to withdrawals made between 2022 and 2025. The 2026 SEU proposes to extend the five‑year grace period for repayments under the HBP to include withdrawals made between January 1, 2026 and December 31, 2028.

Employee Ownership Trust

An Employee Ownership Trust (EOT) is a defined trust vehicle used to facilitate the sale of a privately owned business to its employees. EOTs have emerged as a new succession planning alternative for business owners that offer significant tax benefits. Individuals may be eligible to qualify for an exemption on up to $10 million of capital gains realized on the sale of a qualifying business to an EOT, where certain conditions are met. The exemption was introduced in the 2023 Fall Economic Statement as a temporary measure applying to qualifying dispositions of shares to an EOT that occur after 2023 and up to the end of 2026. 

The 2026 SEU proposes to make this tax exemption permanent.

Previously Announced Measures

The 2026 SEU also confirms the government's intention to proceed with several previously announced tax and related measures, including:

• Legislative proposals to streamline and simplify the Qualified Investments Regime for Registered Plans;
• Expanding specific anti-avoidance rules for personal trusts around the ’21-year Rule’;
• Immediate expensing for manufacturing and processing buildings; and
• Addressing tax deferrals through tiered corporate structures by suspending dividend refunds of Canadian-controlled private companies.

For more information regarding these proposals, including a link to the full economic update, please see the Department of Finance release: Government of Canada releases 2026 Spring Economic Update: Canada Strong For All - Canada.ca

To read a special report from BMO Economics, click here (available in English only).

 

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