2026 EV luxury tax Canada: Ottawa proposes $150,000 threshold

The Department of Finance Canada announced on November 12, 2026 that Ottawa is proposing to raise the taxable-value threshold for the federal luxury tax on fully electric and hydrogen-powered passenger vehicles from $100,000 to $150,000. The change would exempt more zero-emission vehicles from the tax. It is a proposal only and needs parliamentary approval before it becomes law.

The announcement came from Finance Minister François-Philippe Champagne, the Minister of Finance and National Revenue. It applies to the Select Luxury Items Tax, which covers sales, leases and importations of subject vehicles. The $100,000 threshold has applied since the tax took effect in 2022.

If the amendment passes, a battery-electric or hydrogen fuel-cell vehicle with a taxable value between $100,000 and $150,000 would no longer trigger the federal luxury tax. Under the Act as it stands, the tax is the lesser of 10 per cent of the vehicle’s total value and 20 per cent of the value above the threshold. The proposal changes the threshold for qualifying zero-emission vehicles and does not alter that formula.

The measure is limited to fully electric and hydrogen-powered vehicles. Plug-in hybrids are not described as qualifying in the announcement text. Until Parliament enacts the change, the existing $100,000 threshold remains the rule.

Finance has posted draft legislative text, titled Legislative Proposals Relating to the Select Luxury Items Tax Act, on its website. The government says the higher threshold recognizes the higher upfront cost of zero-emission vehicles and supports the shift to EVs.

The government also tied the proposal to Budget 2026, which commits $587 million over five years, starting in 2027–28, to install more than 55,000 EV chargers. The money would flow through a renewed Zero Emission Vehicle Infrastructure Program.

The announcement names no makes or models and gives no vehicle prices, so how individual EVs line up against the new threshold is not addressed. It also does not mention provincial taxes or fees. The release is available in English and French on Canada.ca.

Featured image: Centre Block, Parliament Hill, Ottawa by Ken Lund, licensed under CC BY-SA 2.0.