Feds Propose Luxury Tax Break for EVs Under $150,000

Ottawa wants to give buyers of pricier electric vehicles a break on the federal luxury tax, raising the cutoff from $100,000 to $150,000 CAD.

The proposal would apply to fully electric and hydrogen-powered vehicles, while the threshold for other vehicles would stay at $100,000, reports Tesla North. Finance Canada announced the change on November 12 and wants it to take effect November 13, 2026, subject to subsequent parliamentary approval.

That last part is worth keeping in mind if you’re about to buy. The government has announced a proposal, not a completed change to the law. Buyers should check how it would apply to their purchase before counting on a lower bill.

The luxury tax has been a sore point for expensive EVs for years. When the Liberals first proposed the tax in 2019, we looked at what it could mean for Tesla’s Model S and Model X. The Cybertruck later arrived in Canada with a starting price well above $100,000, too.

Under the current formula, the tax is whichever amount is lower: 10% of the vehicle’s full value, or 20% of the portion above $100,000. For a taxable vehicle valued at $120,000, that works out to $4,000. A qualifying EV at that same taxable value would fall below the proposed $150,000 cutoff, bringing its luxury tax to zero if the change is approved and applies to the transaction. That’s an illustration, not a quote for a specific car.

The tax isn’t limited to buying a car outright. Finance Canada says it also applies to imports, leases and certain improvements to vehicles covered by the tax. Those situations have their own rules, so the purchase example above shouldn’t be treated as a calculation for every lease or import.

Finance Canada says the higher threshold would account for the greater upfront cost of zero-emission vehicles. It could make a difference for shoppers considering an EV above the current cutoff, although a six-figure vehicle is still a six-figure vehicle.

For most EV shoppers, this won’t change much. Vehicles priced below $100,000 are already below the luxury-tax threshold, and raising it doesn’t mean a new rebate or the removal of other taxes. The benefit would depend on the vehicle and the rules Parliament ultimately approves.

For drivers shopping below that price range, the charging plans in Budget 2026 may be more relevant. The government says it has committed $587 million over five years, starting in 2027–28, to help install more than 55,000 additional EV chargers. It says that would roughly double the number of federally supported chargers, though these are planned additions, not chargers already available to use.

Would this change your EV shopping plans, or is $100,000 already well beyond your budget?