March 04, 2026
Tax Highlights from the 2026 Nova Scotia Budget
Minister of Finance John Lohr tabled the 2026/27 Nova Scotia provincial budget on February 23, 2026.
The budget projects a deficit of $1.24 billion (after contingency) for the upcoming 2026/27 fiscal year, declining to $1.1 billion for 2027/28 and $1.0 billion for 2028/29. The forecast deficit for the nearly completed 2025/26 fiscal year now stands at $1.25 billion, compared to the previously projected deficit of $697.5 million.
The province’s net debt is expected to increase to $27.9 billion for the 2026/27 fiscal year, up from $24 billion for 2025/26. This increase reflects investments under the 2026/27 capital plan and the anticipated budget deficit. The net debt-to-GDP ratio is projected to reach 39.4% in 2026/27, up from 35% in 2025/26.
On the income tax front, no changes are proposed to personal or corporate income tax rates. However, the budget includes an increase to the financial institution capital tax, a new levy on electric and hybrid vehicles, and an extension to the capital investment tax credit.
The following pages summarize the changes announced in the budget. Please note that these changes remain proposals until they are passed into law by the provincial government.
Personal Tax Matters
Personal Income Tax Rates and Tax Brackets
There are no proposed changes to personal income tax rates. However, tax brackets and other amounts have been indexed by 1.6% to account for inflation. The table below outlines Nova Scotia’s personal income tax rates and brackets for 2026.
| TAXABLE INCOME RANGE | 2026 TAX RATES |
|---|---|
| First $30,995 | 8.79% |
| Over $30,995 to $61,991 | 14.95% |
| Over $61,991 to $97,417 | 16.67% |
| Over $97,417 to $157,124 | 17.5% |
| Over $157,124 | 21% |
The table below outlines the highest combined federal and provincial marginal tax rates for various types of income in 2026.
| INCOME TYPE | 2026 COMBINED TAX RATES |
|---|---|
| Regular income | 54% |
| Capital gains | 27% |
| Eligible dividends | 41.58% |
| Non-eligible dividends | 49.99% |
Corporate Tax Matters
Corporate Income Tax Rates
There are no proposed changes to corporate income tax rates. The table below outlines the Nova Scotia corporate tax rates and small business limit for 2026.
| CATEGORY | 2026 TAX RATES |
|---|---|
| General rate | 14% |
| Manufacturing and processing rate | 14% |
| Investment income rate | 14% |
| Small business rate | 1.5% |
| Small business limit | $700,000 |
The table below outlines the 2026 combined federal and provincial corporate income tax rates applicable to various types of income earned by a Canadian Controlled Private Corporation (CCPC).
| INCOME TYPE | 2026 COMBINED TAX RATES |
|---|---|
| Small business income | 10.5% |
| Active income over $500,000 / $700,000 | 16.5%/29% |
| Manufacturing and processing income | 29% |
| Investment income | 52.67% |
Financial Institutions Capital Tax
The Financial Institutions Capital Tax (FICT) has levied a 4% tax on taxable capital applicable to banks, loans, and trust corporations with a permanent establishment in the province. It does not apply to credit unions or life insurance corporations. Effective for tax years beginning on or after November 1, 2026, the FICT tax rate will increase to 6%.
Other Initiatives
Electric and Hybrid Vehicle Levy
To ensure owners of electric and hybrid vehicles contribute to road construction and maintenance costs in the province, a new levy will be implemented effective October 1, 2026. The levy will be payable upon registration of a prescribed vehicle and every two years thereafter upon renewal of the vehicle registration. Fully electric vehicle owners will pay $500 every two years, while hybrid vehicle owners will pay $250 every two years.
Vaping Product Tax Harmonization
Effective April 1, 2026, a new provincial duty will be collected by the federal government under a Coordinated Vaping Product Taxation Agreement (CVPTA). The provincial duty will be equal to the federal duty: $1.12 per 2ml/gr of vaping substance for the first 10ml/gr of vaping substance in a device or container, and $1.12 per 10ml/gr for any additional amount.
The CVPTA leverages federal regulatory and collection capabilities to capture a broader pool of manufacturers and importers supplying the Nova Scotia market, including through online sales. The existing provincial vaping product tax will end on March 31, 2026.
Capital Investment Tax Credit
Government will extend the sunset date for the tax credit to December 31, 2035. The credit will also be authorized for qualified property acquired after the sunset date, provided that a pre-approval application was received before the sunset date and is approved by the Minister based on the prescribed criteria
Next Steps
For tailored tax and legal advice on how these measures affect you or your business, your own tax lawyers and accountants are best positioned to advise on these proposals. Your financial advisor can also assess the impact of these proposals on your personal finances or business affairs and show you ways to take advantage of their benefits or ease their impact, align your investments accordingly, and help coordinate the right specialist for your circumstances.
About the Author
The Tax, Retirement and Estate Planning (TREP) team is a specialized group of experienced legal, accounting and planning professionals dedicated to providing the tax, retirement and estate planning insight and expertise that advisors need in order to better serve their clients. As your trusted partner in planning, our TREP team is committed to exploring important issues and commentary on these matters through articles, presentations and other means.
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