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Written by Mackenzie Tax and Estate Planning Team
"For a strong Quebec"
On March 25, 2025, Quebec's Minister of Finance, Eric Girard, released Quebec's budget for 2025-2026.
Nearly 170 tax measures were examined over the past year to determine what actions should be taken to increase the efficiency of Quebec's tax system.
As part of the budget, the government outlined efforts to improve the tax system, which will unlock nearly $3 billion over five years. These measures aim to optimize tax assistance for businesses, simplify and update the tax system and promote the financing of public services.
Find below the measures that are relevant to our clients:
1. Personal tax measures
1.1. Enhancement of the family allowance for bereaved parents.
The refundable tax credit for an allowance to families (RTCAF), consisting of the Family Allowance, the Supplement for Handicapped Children (SHC), the Supplement for Handicapped Children Requiring Exceptional Care (SHCREC) and the Supplement for the Purchase of School Supplies, will be amended to extend for 12 months instead of three months, to the month following the death of an eligible dependent child.
This applies only to children who were already receiving Family Allowance, SHC or SHCREC payments at the time of their death. This measure takes effect after June 30, 2025.
1.2. Changing the age of eligibility for the refundable tax credit for child care expenses.
In an effort to refocus tax assistance on families with younger children, the age limit for an eligible child will be lowered from 16 to 14. This measure takes effect from January 1, 2026.
1.3. Clarification of the term "practitioner" in relation to health professionals.
To better align with the federal tax credit, the budget excludes medical expenses from alternative medicine services, such as those offered by homeopaths, osteopaths, naturopaths and psychotherapists. Only medical expenses resulting from health services provided by practitioners who are members of a professional order governed in Quebec will be eligible for the two tax credits for medical expenses (the refundable tax credit related to the special health-related needs for low-income taxpayers and the non-refundable tax credit related to significant expenditures). This change takes effect January 1, 2026.
1.4. Amendment to the Cooperative Investment Plan deduction.
The government has made the decision to reduce the Cooperative Investment Plan (CIP) deduction. For calculation purposes, the adjusted cost will now be equal to the cost of the security rather than 125% of the cost of the security, as previously used. The limit of 30% of total income applicable to the deduction relating to the CIP remains unchanged. This amendment applies in respect of a qualifying security acquired after March 26, 2025.
1.5. Conversion of the residence deduction of a clergy or religious order to a non-refundable credit.
Amounts included in the income of a member of the clergy or religious order in respect to the residence or dwelling occupied by reason of their office or employment can no longer be deducted. Instead, they will be entitled to a non-refundable tax credit of 14%. This change takes effect from January 1, 2026.
1.6. Transformation of the deduction of financial assistance for the payment of tuition fees for adult basic education into a non-refundable tax credit.
Individuals may longer deduct the financial assistance received from their taxable income; the deduction is replaced by a non-refundable tax credit of 14%. It will take effect in 2026.
1.7. Abolition of the tax shield.
The Minister considers that the tax shield does not achieve its initial objective of encouraging people to work. This credit will be eliminated starting with the 2026 taxation year.
1.8. Elimination of the non-refundable tax credit for municipal political contributions.
Following a thorough review, this non-refundable tax credit will be eliminated for all contributions made starting in 2026.
1.9. Abolition of the tax credit for sponsorship donations.
This credit allows an individual (other than a trust) to claim, instead of the donation tax credit and the additional tax credit for a first major cultural gift, a 30% non-refundable tax credit applicable to the total of patronage donations made by the individual to an eligible cultural donor.
This tax credit will be abolished as of March 26, 2025. An individual (or their estate) who has registered such a pledge by March 25, 2025, will be able to continue to benefit from the tax credit.
1.10. Introduction of a new reporting requirement for foreign property held outside Canada.
To strengthen Quebec's self-assessment system, Quebec taxpayers must complete a new Revenu Québec form. This reporting obligation will apply as of a specified date following the assent of the related bill.
1.11. Updating the additional registration fee for luxury vehicles.
The government will raise the threshold for the levy on luxury vehicles from $40,000 to $62,500. The fee changes will apply as of December 31, 2026.
1.12. Introducing an annual fee for electric and plug-in hybrid vehicles.
An annual fee of $125 is introduced for electric vehicles and $62.50 for plug-in hybrid vehicles. This measure, indexed annually, is added to the fees payable to put a vehicle into circulation after December 31, 2026, or to the fees payable to maintain the right to circulate after this date.
1.13. Alignment with capital gains measures.
For the sake of simplicity, the Quebec government announced its intention to harmonize with the changes announced by the federal government to increase the capital gains inclusion rate from 50% to 66.7%. For individuals, the changes apply to the portion of capital gains in excess of $250,000.
It was planned that this measure would take effect as of January 1, 2026, however it is currently uncertain when this will take effect.
2. Corporate tax measures
2.1. Elimination of the additional capital gains exemption for certain resource property.
The government has determined that adjustments need to be made to the flow-through share regime. The tax legislation provides for the elimination of the additional capital gains exemption in respect of certain resource property that was available to individuals (other than trusts) to deduct the capital gain resulting from the disposition of certain resource property in computing their taxable income. This measure is applicable from March 26, 2025.
2.2. Taxation of the benefit received from the employer related to public transit reimbursements.
An individual will have to include in the calculation of his or her income the value of the benefit received from his or her employer for eligible transportation, an eligible transit pass fare or the benefit resulting from the use of an intermunicipal transportation service as of January 1, 2028.
2.3. Extending accelerated depreciation measures.
The provincial government confirms its intention to align with the federal government's shared announcement in the 2024 Fall Economic Statement when this measure comes into effect. An additional five-year period is planned starting January 1, 2025, with a four-year phase-out period after 2029.
If you have any questions related to the 2025-2026 Quebec budget, do not hesitate to contact your Mackenzie sales team.
This document may contain forward-looking information which reflect our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of March 25, 2025. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.
This should not be construed as legal, tax or accounting advice. This material has been prepared for information purposes only. The tax information provided in this document is general in nature and each client should consult with their own tax advisor, accountant and lawyer before pursuing any strategy described herein as each client’s individual circumstances are unique. We have endeavored to ensure the accuracy of the information provided at the time that it was written, however, should the information in this document be incorrect or incomplete or should the law or its interpretation change after the date of this document, the advice provided may be incorrect or inappropriate. There should be no expectation that the information will be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise. We are not responsible for errors contained in this document or to anyone who relies on the information contained in this document. Please consult your own legal and tax advisor.