Ottawa proposes raising the luxury tax threshold for fully electric and hydrogen vehicles from $100,000 to $150,000

What is Ottawa proposing?

Canada's luxury tax generally applies to passenger vehicles valued above $100,000. It is imposed on sales, importations, leases and certain improvements of those vehicles (Finance Canada). On November 12, Finance Minister François-Philippe Champagne announced that the government is "proposing to exempt more fully electric and hydrogen-powered vehicles from the luxury tax," by raising their threshold to $150,000. The department says the change "recognizes the higher upfront cost of zero-emission vehicles."

Champagne said in the release: "By updating this measure to reflect today's vehicle market, we are supporting the transition to a cleaner, more competitive economy."

Finance Canada: the threshold "would increase from $100,000 to $150,000" for fully electric and hydrogen-powered vehicles.

Which vehicles qualify?

The legislative proposals for the Select Luxury Items Tax Act add a new term, "qualifying electric vehicle." It means a motor vehicle that is fully electric, fully powered by hydrogen, or a prescribed motor vehicle. A qualifying electric vehicle gets the $150,000 threshold. Every other subject vehicle keeps the $100,000 threshold. The draft doesn't name plug-in hybrids, and they aren't fully electric, so as written they would stay at $100,000 unless a regulation later prescribes them.

When does it start?

Finance Canada says the measure is effective as of November 13, 2026, subject to parliamentary approval. Under the draft legislation, the new threshold applies to a sale completed after the announcement date, a vehicle imported after that date, a vehicle registered after that date, and a lease or similar arrangement where the person first has the right to use the vehicle after that date (draft legislation). That means a deal completed on or before November 12 is under the old $100,000 threshold.

This is a proposal, not law yet. Parliament still has to pass it.

What does it mean in dollars?

Here's an illustrative example using Finance Canada's formula, not a specific vehicle. A fully electric car valued at $120,000 would previously have owed the lesser of 10 per cent of $120,000 ($12,000) and 20 per cent of the $20,000 above the old threshold ($4,000), so $4,000 in luxury tax. With the threshold at $150,000, the same car would owe no luxury tax. Your dealer's paperwork is what counts on a real purchase, so ask how they're applying the change.

The luxury tax is separate from the federal rebate. EVs at these prices are well above the $50,000 transaction-value cap in Transport Canada's Electric Vehicle Affordability Program unless the vehicle is made in Canada. See our explainer on the January 2027 EVAP change and our EV rebates guide.

Anything else in the announcement?

The release repeats that Budget 2026 committed $587 million over five years, starting in 2027-28, to install more than 55,000 EV chargers through a renewed Zero Emission Vehicle Infrastructure Program, plus a proposed $45 million over five years, starting in 2027-28, for charging research and development (Finance Canada).