More electric vehicles will now be exempt from Canada’s luxury tax, Finance Minister François-Philippe Champagne said.
In a press release on Friday, the minister said all electric vehicles that cost less than $150,000 would be exempt from the 10 per cent tax.
The price threshold for luxury vehicles subject to the tax was originally set at $100,000 and included electric vehicles over that threshold.
Canada’s luxury tax was originally proposed in the 2021 budget and covers luxury cars, planes and boats bought for personal use and leisure. The tax was rolled out in September 2022 and would amount to either 10 per cent of the taxable amount of the item, or 20 per cent of the amount over the price threshold – whichever is less.
Champagne said by increasing the price threshold for electric vehicles to $150,000, the government “recognizes the higher upfront cost of zero-emission vehicles and supports the global shift to electric vehicles (EVs).”
All other vehicles remain subject to the $100,000 price threshold.
According to the Canadian Automobile Association, the average price of a new electric vehicle in Canada sits around $50,000, but some models from BMW, Mercedes-Benz, Audi, Cadillac and Tesla cost well over $100,000.
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According to Statistics Canada data released in September, zero-emission vehicles made up 3.5 per cent of Canada’s 25.3 million registered light-duty vehicles in 2025. That same year, there were more than 58,000 new registrations of zero-emission vehicles across the country.
The Department of Finance said EVs are projected to account for nearly 40 per cent of global car sales within five years.
Budget 2026 committed $587 million over five years to install more than 55,000 EV chargers which will more than double the availability of federally supported chargers.
“With Budget 2026, we are expanding our electricity system, cutting emissions, and unlocking new investment in clean technologies,” Champagne said in a news release. “By updating this measure to reflect today’s vehicle market, we are supporting the transition to a cleaner, more competitive economy.”
This is not the first time the luxury tax has been amended.
In Nov. 2025, the federal government scaled back the tax on aircraft and boats after budget numbers showed tax revenues for those items did not yield initial government projections.
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