Budget 2026 proposes tax changes to simplify filing and expand deductions

Budget 2026 proposes a range of tax changes, including optional flat-rate deductions, a higher threshold for tax instalments and a top-up to the Canada Groceries and Essentials Benefit (CGEB). The federal government says the measures are intended to reduce the time and effort Canadians spend managing their tax affairs. The budget says simplifying deadlines, filings and interactions with the Canada Revenue Agency (CRA) would reduce Canadians’ “time tax.”

**Tax filing and payment deadline moves to May 15**

The budget proposes making May 15 the deadline for both individuals and self-employed workers to file their returns and pay all taxes owed to the CRA. Previously, most Canadians had to file and pay by April 30. Self-employed people had until June 15 to file, but still had to pay any balance owing by April 30. The federal government says bringing the deadlines together would simplify filing and give most people a few extra weeks to gather information and pay.

Rob Jeffrey, Deloitte’s national tax policy leader and a partner, said the change is expected to reduce the number of taxpayers who could face interest and penalties for filing late. Whether people who file late will continue to do so with the extended deadline remains to be seen. The federal government estimates that allowing two more weeks to file and pay will save Canadians $230 million in interest and penalty payments over five years, starting in the next tax year.

Jeffrey said individuals rely on information from several sources when preparing their returns. The extra two weeks could allow more tax slips to arrive automatically and reduce follow-up exchanges or potential disputes after filing.

**One year to file a tax objection**

The budget proposes extending the period to file a notice of objection with the CRA from 90 days to one year. Taxpayers can object if they disagree with how the agency applied tax law, calculated income or deductions, or assessed penalties and interest. Some taxpayers have been able to request an extension of up to a year. The budget says a one-year filing period would remove the need to request an extension and spare the CRA from reviewing and approving those requests.

**Optional flat-rate deductions**

The budget proposes allowing taxpayers to claim preset deduction amounts for certain expenses without providing receipts or other documents to verify the actual costs. Taxpayers could still itemize expenses and submit receipts if they prefer. Deductions reduce the amount of income subject to tax. The budget says the option would ease the burden of complying with a tax system that can discourage eligible people from claiming deductions and credits.

For work-related relocation or travel expenses, taxpayers could continue to submit receipts and itemize costs, or claim a flat $1,000. Tradespeople could claim $1,500 through the Labour Mobility Deduction for Tradespeople. The proposed flat-rate deduction for qualifying renovations under the Home Accessibility Tax Credit is $1,000. Eligible parents who adopt a child could claim $1,200 per child.

Other proposed amounts include a $2,000 flat-rate deduction for service dog care and maintenance under the Medical Expense Tax Credit, and an optional $500 deduction for incontinence products required for medical purposes. People with celiac disease could claim an optional $1,000 for some gluten-free food expenses. Eligible clergy members could claim a $1,000 flat deduction for some housing expenses without tracking and documenting those costs.

**Tax instalment threshold proposed to rise from $3,000 to $7,500**

Budget 2026 proposes raising the threshold for individuals and businesses that pay the CRA in regular instalments, starting in 2028, and indexing it to inflation. The threshold would increase from $3,000 to $7,500. The federal government says the change would mean fewer payments and less complex paperwork. Paying taxes earlier could also improve cash flow for businesses and people’s daily lives.

For example, someone who owes $12,000 in tax a year and now pays $3,000 quarterly could instead make two payments if the proposal takes effect. The budget also says self-employed business owners would be able to make one payment of two-thirds of their net tax owing by the end of the calendar year if the proposed changes come into force in 2028.

The change could also benefit seniors. Income from Old Age Security (OAS), the Canada Pension Plan (CPP) and a Registered Retirement Income Fund (RRIF) is not subject to tax withholding in the same way as most employment income. Many seniors receiving that income must set aside their own tax and pay it to the CRA through instalments; their amounts are currently below the $3,000 threshold. If the threshold rises to $7,500, more seniors could pay in one or fewer instalments and reduce paperwork.

**50 per cent top-up to the Canada Groceries and Essentials Benefit**

Canadians who file taxes with the CRA and meet the income requirements for the CGEB will receive a top-up equal to 50 per cent of their total annual benefit entitlement, calculated using the most recent tax year. The budget says the top-up is expected to reach eligible Canadians by early 2027. Payment dates have not yet been announced.

**Tax measures for small businesses**

Budget 2026 also proposes tax measures for small businesses, self-employed business owners and entrepreneurs. The report says many are dealing with the effect of U.S. tariffs on sales, while higher fuel costs have further squeezed already thin profit margins.

The Productivity Mega Deduction would let businesses of any size permanently deduct the full cost of eligible capital assets in the year they are purchased, rather than over the asset’s useful life. Examples include a new coffee machine for a café, vehicles for a plumbing company or software for a technology startup. Deducting the full cost in the first year would lower taxable income sooner and could free up cash for wages, repairs or other investments.

The budget also proposes the Canada Growth Incentive, which is intended to help Canadian business founders attract investment and grow by exempting up to $15 million in capital gains from tax. Capital gains are profits from selling an investment that are subject to tax. Entrepreneurs could also continue growing their businesses by reinvesting profits from selling a previous business in another Canadian venture.