Canada plans to raise the luxury tax threshold for electric and hydrogen-powered vehicles from CAD 100,000 to CAD 150,000 from 13 November 2026, subject to parliamentary approval, to make more zero-emission vehicles eligible for tax relief.
Canada’s federal government plans to exempt more electric and hydrogen-powered vehicles from the luxury tax. Finance Minister François-Philippe Champagne announced the proposal on 12 November 2026.
Under the plan, the price at which the tax applies would rise from CAD 100,000 to CAD 150,000 for these vehicles.
What changes for buyers
The change would take effect on 13 November 2026, subject to approval by Parliament. All other vehicles would stay at the CAD 100,000 threshold. The luxury tax applies to passenger vehicles valued above CAD 100,000. It covers sales, imports, leases and certain improvements. The tax is the lesser of two amounts: 10% of the vehicle’s full value, or 20% of the value above CAD 100,000.
Why the government is acting
Officials say zero emission vehicles cost more up front, and the higher threshold reflects that reality. The move also supports the global shift toward electric vehicles, which are projected to make up nearly 40% of global car sales within five years.
The government points to Canada’s electricity system as a strength. About 80% of the national grid is clean, and electricity demand is expected to double by 2050.
Champagne said Budget 2026 expands the electricity system, cuts emissions and opens new investment in clean technology. He added that updating the luxury tax measure to match today’s vehicle market supports a cleaner and more competitive economy.
