Haida Gwaii reclassified to Northern Zone

Summary#

These final regulations, titled Regulations Amending the Income Tax Regulations (Northern Residents Deductions) (registered as SOR/2025-97), move Haida Gwaii from the Intermediate Zone into the Northern Zone for the Northern Residents Deductions. The change takes effect for the 2025 and later taxation years and lets eligible Haida Gwaii residents claim up to the full value of the deductions instead of only half.

What it does#

• Changes the Income Tax Regulations so that Haida Gwaii is listed as part of the Northern Zone rather than the Intermediate Zone.
• Removes Haida Gwaii from the list of places in the Intermediate Zone.
• Applies to the 2025 and subsequent taxation years.
• In practice, this means:
  • The basic residency deduction is $11 per day in the Northern Zone instead of $5.50 per day in the Intermediate Zone.
  • Travel deductions (for up to two vacation trips a year and unlimited medical trips) are available at the full amount in the Northern Zone rather than being cut in half in the Intermediate Zone.
• The Canada Revenue Agency will update its guidance, and tax software publishers may update instructions to reflect the change.

Who's affected#

• People who live on Haida Gwaii (about 4,000 residents in total).
• Indigenous residents of Haida Gwaii who have taxable income; some Indigenous people may not benefit if their income is tax-exempt under the Indian Act.
• Tax filers who claim Northern Residents Deductions (they will indicate Northern Zone instead of Intermediate Zone on their returns).
• The Canada Revenue Agency and makers of tax software (for guidance and instruction updates).
• It is unclear that this change directly affects other regions.

Why it matters#

• Eligible Haida Gwaii residents who pay income tax should see lower tax bills and higher after-tax income because they can claim larger Northern Residents Deductions.
• More disposable income could modestly increase local spending and economic activity on the islands.
• Some people will not benefit (for example, those with tax-exempt income under the Indian Act).
• Administrative costs are expected to be minimal (mostly updates to webpages and software).
• The government noted there could be small, indirect effects on population movement and community resilience, but those impacts are uncertain.