Canada proposes raising the EV luxury tax threshold to $150,000

The Canadian government has proposed raising the federal luxury tax threshold for fully electric and hydrogen-powered vehicles from $100,000 to $150,000. Finance Minister François-Philippe Champagne announced the change on Thursday, with the higher threshold taking effect Friday, subject to parliamentary approval, according to the Department of Finance Canada.

How the luxury tax works

Canada's federal luxury tax applies to qualifying passenger vehicles valued above $100,000. The tax is calculated as the lesser of 10% of the vehicle's full taxable value or 20% of the amount exceeding the threshold. Under the proposal, the calculation stays the same — the $150,000 threshold simply applies to eligible zero-emission vehicles. Gasoline-powered vehicles and other vehicles not covered by the proposal remain subject to the existing $100,000 threshold.

The government says the change is meant to reflect the higher starting prices of zero-emission vehicles, which have generally sat above the line that gas equivalents clear comfortably.

Who benefits most

The bigger threshold moves the line that separates a taxed vehicle from an untaxed one. At the proposed $150,000, several premium EVs that currently trigger the luxury tax would clear it at their starting prices:

• Lucid Air Touring — starts at $112,800, below the new threshold
• Lucid Gravity Touring — starts at $113,500, below the new threshold
• Lucid Gravity Grand Touring — starts at $139,500, below the new threshold
• Rivian R1T and R1S — Canadian configurations priced below $150,000

Buyers of more expensive models, including the $161,200 Lucid Air Grand Touring, would see their tax bills reduced rather than eliminated.

What it means for Tesla buyers

For Tesla, the change has limited impact. The Model S and Model X were discontinued earlier this year, and the Cybertruck presents a unique situation as production nears its end. The Cybertruck Premium AWD was last listed at $139,990 before Tesla stopped accepting new orders, and the Cyberbeast remained available at $167,990. If the luxury tax applied to those starting prices, the proposed change would reduce the Premium AWD's tax from $7,998 to zero, while the Cyberbeast's tax would fall from $13,598 to $3,598.

The proposal is not yet law. It takes effect Friday only if Parliament approves it, and the Department of Finance has not published a detailed transition guide. Canadian buyers shopping for a premium EV above the current $100,000 line should confirm the applicable threshold with their dealer at the time of purchase.

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