Canada's 2026 budget exempts purpose-built rental financing from interest deduction limits

The federal budget tabled Nov. 5 by Finance Minister François-Philippe Champagne includes an exception to the EIFEL interest-deductibility limits for purpose-built rental housing, according to an analysis by law firm McCarthy Tétrault. The exception covers interest and financing costs incurred before 2036 on money borrowed to acquire, build or convert property into purpose-built rentals in Canada. It is broader than the earlier proposal, extending to borrowing used by another entity in the same related or affiliated group or by a partnership in which the group holds at least a 40% interest.