Our Canadian income tax system is overly complex. To wit, the latest version of the Income Tax Act, which landed with a thud at my door last month, comes in two volumes, weighs just under five kilos and spans some 2,860 pages. Contrast that to my copy of the original 1917 “temporary” Income Tax War Act, which runs all of six pages.
Our personal T1 income tax return has grown to include 14 federal and provincial schedules and multiple sections, reflecting decades of accumulated rules and numerous tax preference items. As a result, each year Canadian taxpayers spend hours of time navigating complex tax rules, deadlines and payment requirements, often turning to tax professionals, sometimes at great cost.
The good news is that last week’s federal budget announced a variety of measures to help simplify our tax system. Let’s review some of them.
Simplifying various credits and deductions
Having to keep track of multiple receipts throughout the year can be quite burdensome, and in some cases, can discourage taxpayers from claiming deductions and credits to which they’re entitled.
To address this, the federal budget introduced a series of measures that would allow eligible taxpayers to claim fixed dollar amounts for certain expenses and credits without having to retain all their receipts or itemize their actual costs.
Among the deductions and credits targeted is the moving expense deduction, which would allow taxpayers who move for work or school to deduct an optional flat $1,000 as moving expenses, rather than individually itemizing their expenses.
Another credit being simplified is the home accessibility tax credit (HATC), which allows certain eligible individuals to claim up to $20,000 in qualifying home renovation or alteration expenses per calendar year. Expenses must be incurred to improve the safety, accessibility or functionality of a home for a qualifying individual who is age 65 years or older or eligible for the disability tax credit. The budget stated that the government would allow eligible individuals who incur qualifying expenses to calculate the HATC using a one-time optional flat-expense amount of $1,000, rather than keeping detailed receipts for the amounts incurred.
The adoption expense tax credit is also being simplified. This credit allows adoptive parents to claim up to $19,972 (2026 amount) in eligible adoption expenses relating to the adoption of a child under the age of 18. The budget announced the government will allow eligible adoptive parents to calculate the adoption credit using an optional flat expense amount of $1,200 per adopted child in the year an adoption is completed, instead of their actual eligible adoption expenses.
In addition to the above flat amounts, the budget is combining the volunteer firefighters tax credit and the search and rescue volunteers tax credit into a single non-refundable credit, calculated on an amount of $6,000. Flat rate optional amounts were also introduced for the clergy residence deduction, and the labour mobility deduction for tradespeople.
The federal budget also announced that it will be making it simpler for tens of thousands of Canadians, particularly individuals with disabilities and those with ongoing medical expenses, to claim the medical expense tax credit (METC).
Instead of requiring a prescription for each specific device or service, certain qualified medical expenses will require either no medical documentation or only certification of the underlying medical condition. This could allow individuals to use the same certification to claim multiple eligible expenses related to their condition, reducing paperwork for both patients and medical practitioners.
For example, an individual who purchases a device or piece of medical equipment, such as a continuous positive airway pressure (CPAP) machine, designed exclusively for individuals suffering from a severe chronic respiratory ailment, would not require a prescription nor certification of their medical condition by a medical practitioner.
The government is also introducing flat-rate amounts for three categories of medical expenses. Eligible individuals will be able to claim an optional flat $2,000 under the METC for the care, maintenance, and other related expenses incurred for a service dog specially trained to assist them with their disability or medical condition, without the need to track and document these expenses. Individuals with celiac disease will be allowed to claim an optional flat $1,000 under the METC for the incremental cost of gluten-free food, without the need to calculate and document these extra costs. And, an optional flat amount of $500 relating to expenses incurred for diapers, disposable briefs, catheters, catheter trays, tubing or other similar products authorized by a medical practitioner due to incontinence could be claimed without needing to save any receipts.
Simplified uniform tax deadline
The government is taking steps to make tax filing simpler and more accurate by setting May 15 as the single due date for filing returns and paying taxes owing, including for self-employed individuals and their spouse or partner, who previously had until June 15 to file, but their balance due date was still April 30, the current general filing date.
The new May 15 deadline, which will start applying to the 2027 and subsequent tax years, would provide tax filers and the CRA with additional time to receive and process tax slips, and is meant to reduce the number of reassessments and minimize interactions with the CRA for many individuals and small-business owners. The measure is expected to save Canadians about $230 million in interest and penalty payments over five years, starting in 2026-27.
Easing instalments
Under the Income Tax Act, individuals who receive income from sources that are not subject to withholding may have to pay income tax in quarterly instalments. Quarterly tax instalments are required for this tax year if your balance due for 2026 will be more than $3,000 ($1,800 for Quebec tax filers) and was greater than $3,000 ($1,800 for Quebec) in either 2025 or 2024.
The budget proposed to increase the threshold from to $7,500 (from $3,000) for corporations and individuals resident outside Quebec, and to $4,500 (from $1,800) for individuals resident in Quebec. The thresholds would be indexed to inflation and rounded to the nearest $500, and the measure would apply to 2028 and future tax years.
In addition, to help individuals whose primary source of income is from a business (including professional or commission income), the government is proposing to allow those individuals to make a single annual instalment payment, instead of quarterly instalments, beginning in 2028. The single instalment payment would equal two-thirds of their combined federal-provincial net tax owing for the year, and be due by December 31. The remainder would be due on the normal balance due date.
As a result of these changes, nearly 1.1 million individual taxpayers and 185,000 small incorporated businesses would no longer be required to pay taxes in instalments, and 190,000 self-employed individuals will only have to worry about making one annual instalment.