Federal Election 2025 Tax Implications

This spring, Canadians went to the polls in a federal election after a campaign where all major parties had various tax proposals to convince Canadians to lend them their vote.

Many clients, and indeed many Canadians, are wondering what changes to the taxation scheme in Canada will result from these campaign promises. We have reviewed the parties’ tax platforms to summarize how those promises, if passed, will impact Canadians and Canadian businesses.

After the votes were counted, the incumbent Liberal Party formed a third consecutive minority government, with the Conservative Party close behind to form the Official Opposition. Having only achieved a minority government, the Liberal Party will need to gain support of at least one other party – the Conservatives, Bloc Quebecois or the NDP – to pass legislation and achieve their campaign promises, which largely centered around the economic uncertainties of the second Trump presidency, and the ever-increasing cost of living. While the governing party remains unchanged, there are nonetheless likely to be some different policies and priorities coming from Ottawa over this next Parliament. 

Tax Policies

Political parties’ tax policies are often central in most election campaigns, and 2025 was no exception. The Liberal Party pledged to reduce the personal income tax rate for the lowest tax bracket – those making less that roughly $57,000 per year – from 15% to 14%. The Conservatives pledged to cut the same bracket even further, to 12.75%, meaning that this personal income tax cut is likely to pass the House.

Another shared promise between the Liberals and the Conservatives is to reverse the proposed Capital Gains Tax (“CGT”) increase. The CGT is a tax that applies to all profits from the sale of capital property, including stocks and real estate that is not a primary residence. Currently, the CGT applies to 50% of capital gains, but the previous Liberal government proposed increasing that rate to 66.7%. Since both Liberals and Conservatives are now opposed to the increase, the CGT rate is likely to stay where it is for the time being.

Similarly, both the Conservatives and Liberals support eliminating the General Sales Tax (“GST”) on newly built homes under $1,000,000 for first time homebuyers. This also has some support of the Bloc Quebecois, so this measure is likely to pass quickly and may even prompt further cooperation between parties to address the current housing crisis.  

Energy Policies

From an energy perspective, the Liberals pledged to increase clean energy investment tax credits (“ITCs”) for various sectors of the energy industry. While the Conservatives did not specifically support these tax credits for many sectors (things like carbon capture and clean hydrogen), they did campaign on expanding the tax credits for clean technology and clean manufacturing, indicating that the two main parties have common ground on expanding these ITCs.

Pollution pricing (more commonly known as the “Carbon Tax”) has been at the centre of Canadian politics since it was passed in 2018. Before launching the campaign, Prime Minister Mark Carney eliminated the consumer Carbon Tax, but maintained the industrial Carbon Tax. While the Conservatives oppose both the consumer and industrial Carbon Tax, the debate over a consumer Carbon Tax is unlikely to resurface given the current government’s objectives.

Employment

Aimed at attenuating the impacts of the looming tariffs from the USA on Canadian workers, the Government of Canada implemented changes to the current employment insurance (“EI”) scheme to make EI more immediately accessible for laid off workers. The changes include waiving the one week wait period post-termination before EI payments can begin, and suspending the rule that EI payments can only commence after severance payments are exhausted. With the Bloc Quebecois also supporting changes to EI criteria in light of US tariffs, the changes to EI are likely to be maintained for the foreseeable future. The changes took effect on March 30, 2025 and are currently scheduled to end on October 11, 2025.

The Conservatives and Liberals also find common ground when it comes to supporting new apprentices: both parties support grants for individuals enrolling in apprenticeship programs. The Liberals also support maintaining the Apprenticeship Service Program, which provides employers who hire new apprentices with grants between $5,000 and $10,000. Though the Conservative platform doesn’t mention this Program, considering the Conservative support for apprentice grants, this could likely be an area where both major parties could work together .

Notably however, the Conservatives do not support increased funding for Artificial Intelligence (“AI”), while the Liberals proposed a 20% AI Deployment Tax Credit for small and medium sized businesses. This means the Liberals will need to look to the NDP or the Bloc Quebecois to pass this measure. 

Other Liberal proposals that other parties platforms do not address include:

• Broadening critical mineral exploration tax credits
• Increasing scientific research and experimental development (“SRED”) expenditure limits to receive ITCs
• Labour Mobility Tax Deductions so tradespeople who travel more than 120 km from their home to job sites can deduct those travel expenses
• Expanding flow through shares to corporations for AI, quantum computing, biotechnology and advanced manufacturing

The Liberals will have to negotiate with the other parties in order to pass any of these campaign promises.

Time will tell on which legislation the government will bring forward, what it will look like, and which other parties will support it, but the Liberal proposals have the potential to shape how Canadians navigate the looming threats of American tariffs, the housing crisis, and the increasing cost of living.