The Ontario R&D tax credits cover capital again. Ontario's 2026 Fall Economic Statement, released October 29, 2026, confirms that capital expenditures on property acquired on or after December 16, 2024 are eligible for the Ontario Innovation Tax Credit (OITC) and the Ontario Research and Development Tax Credit (ORDTC), matching the federal SR&ED change.
The change took effect automatically when federal Bill C-15 received Royal Assent on March 26, 2026. Ontario estimates it adds more than $50 million in tax support over the next three years for about 700 businesses.
Below: what changed, which assets count, what to prepare, the mistakes we expect to see, and when to act if your 2025 return went in without capital.
What changed in the Ontario R&D tax credits
Ontario says it is restoring the eligibility of certain capital expenditures for the ORDTC and the OITC, consistent with recent changes to the federal SR&ED program. Its examples are software and hardware testing tools, high-performance computing equipment, prototyping equipment, and certain property or lease costs, claimed alongside eligible labour for R&D carried on in Ontario.
Both Ontario credits are built on the federal claim, so the change follows the federal rule: SR&ED capital expenditures are eligible again for property acquired after December 15, 2024. Ontario provides over $500 million a year through its R&D tax credits; this change widens the base those credits apply to.
The ontario.ca OITC page has not caught up. As of October 30, 2026 it still says capital expenditures made after December 31, 2013 are no longer qualified expenditures. The Fall Economic Statement annex is the newer statement. Capital acquired from 2014 up to December 15, 2024 stays outside the Ontario credits.
Who should look at this now
This matters most to Ontario corporations that buy equipment for their R&D:
- Hardware companies building and testing prototypes
- Teams running test rigs, fixtures and validation benches
- Software and AI teams that buy their own high-performance computing equipment
- Labs equipping space for experimental work
The second group is companies that filed 2025 returns with no capital in the claim. If you bought qualifying equipment on or after December 16, 2024 and left it out because the rules were unsettled when you filed, look at it again.
How to scope which assets count
Start with the federal test, because the Ontario credits rely on the federal claim. Under CRA's Capital Expenditures Policy, the property must be depreciable and used in SR&ED in Canada for all or substantially all of its expected useful life, which CRA generally reads as 90% or more. A prototyping machine that sits in the lab and only runs experiments fits that pattern. A server that also runs your production environment usually does not.
Next, check the date. Only property acquired on or after December 16, 2024 is in scope, so older equipment does not come back into the claim because of this change.
Then check the Ontario connection. To claim either credit, the corporation must have a permanent establishment in Ontario, carry on SR&ED in Ontario, be eligible for the federal SR&ED investment tax credit, not be tax-exempt, and file Form T661 for the year.
What stays out:
- Land and buildings (other than special-purpose buildings prescribed by regulation)
- Leasehold interests, which CRA's 2026 Form T661 instructions exclude (do not confuse these with the “certain property or lease costs” Ontario mentions)
- Property acquired before December 16, 2024
- Equipment that does not meet the all-or-substantially-all test
How the two credits stack on the same asset
The OITC is 8% and refundable on up to $3 million of qualified expenditures (a maximum credit of $240,000). The limit shrinks when prior-year federal taxable income is above $500,000 (gone at $800,000) or prior-year taxable capital is above $25 million (gone at $50 million), and associated corporations share it. The ORDTC is 3.5% and non-refundable: it only reduces Ontario corporate income tax, with unused credit carried back 3 years or forward 20 years.
The OITC counts as government assistance for the ORDTC, so you calculate the OITC first and apply the ORDTC to the reduced base.
One open point: Ontario has not yet published how much of a capital cost counts toward the OITC. Before 2014 the OITC base included 40% of capital expenditures and 100% of current expenditures. Until Ontario or CRA publishes guidance, model both cases.
Estimate, Ontario credits only, before federal interactions: an eligible Ontario CCPC under the OITC limits buys $200,000 of prototyping equipment in 2025 that meets the all-or-substantially-all test. If the full cost counts: OITC 8% × $200,000 = $16,000 (refundable); ORDTC 3.5% × ($200,000 − $16,000) = $6,440 (non-refundable). If the old 40% inclusion applied to the OITC: OITC 8% × $80,000 = $6,400; ORDTC 3.5% × ($200,000 − $6,400) = $6,776. Your own figures depend on your limits, assistance received and the federal claim.
What to prepare
The capital part of a claim usually stands or falls on records, not narrative. Before your preparer builds the schedules, pull together:
- An asset list showing each item, its acquisition date, its cost and the invoice or lease agreement behind it
- Usage records showing SR&ED use for all or substantially all of the asset's useful life: equipment logs, booking calendars, compute job records or time sheets tied to the asset
- A short note linking each asset to the SR&ED projects it supported
- The capital expenditure lines on Form T661
- Schedule 566 (OITC) and Schedule 508 (ORDTC), filed with the T2
- A list of government assistance, non-government assistance and contract payments received, since these reduce the Ontario base
If the corporation is associated with other corporations, also confirm how the OITC expenditure limit is shared across the group.
Common mistakes
- Relying on the old ontario.ca line. The OITC page still says capital made after 2013 is not qualified. The Fall Economic Statement annex is the newer statement.
- Including property acquired before December 16, 2024. It remains outside the Ontario credits.
- Claiming mixed-use equipment. An asset that splits its time between SR&ED and commercial work can fall short of the 90% reading of all or substantially all.
- Calculating the ORDTC on the full cost. The OITC reduces ORDTC eligible expenditures.
- Forgetting recapture. If property in a previous claim is later disposed of or converted to commercial use, recapture rules can reverse credits: Ontario applies a 23.56% rate for the ORDTC, and the federal ITC can be recaptured too.
- Missing the shared limit. Associated corporations share the $3 million OITC expenditure limit, and the prior-year taxable income and taxable capital tests reduce it.
Timeline: when to act
The SR&ED reporting deadline is generally 18 months after the end of the tax year (12 months after the return's filing due date), and CRA cannot extend it. If you filed a 2025 return without capital, count from your own year end, talk to your preparer about whether an amended claim fits, and leave time to assemble the asset and usage records before that date. Our guide to claiming SR&ED in 2026 covers the forms and deadlines.
Fiscal-year filers should check their dates now. Equipment bought on or after December 16, 2024 can sit in a tax year that ended in 2025, and for a year ending April 30, 2025 the 18-month window closes at the end of October 2026.
For 2026 purchases, decide before you buy whether the equipment will be used in SR&ED for all or substantially all of its useful life. If it will, start usage logs the day it arrives instead of rebuilding them at year end.
Frequently asked questions
Which capital purchases are eligible again for the Ontario R&D tax credits?
Capital expenditures on property acquired on or after December 16, 2024 that is depreciable and used in SR&ED in Canada for all or substantially all of its expected useful life (generally 90% or more in CRA's reading). Ontario's examples include software and hardware testing tools, high-performance computing equipment, prototyping equipment and certain property or lease costs.
The ontario.ca OITC page says capital is not eligible. Which source is right?
The ontario.ca page has not been updated and still carries the line that capital expenditures made after December 31, 2013 are not qualified. Ontario's 2026 Fall Economic Statement annex is the newer statement and confirms eligibility is restored for property acquired on or after December 16, 2024.
Does equipment we bought in 2023 now qualify?
No. Capital acquired from 2014 up to December 15, 2024 remains outside the Ontario credits.
When did the change take effect?
Automatically, when the federal legislation in Bill C-15 received Royal Assent on March 26, 2026. It applies to property acquired on or after December 16, 2024.
How do the OITC and ORDTC interact on the same asset?
The OITC (8%, refundable) counts as government assistance for the ORDTC, so it reduces the expenditures used to calculate the ORDTC (3.5%, non-refundable). Calculate the OITC first, then apply the ORDTC to the reduced base.
Bought R&D equipment since December 2024?
GovMoney can review your asset list and usage records against the all-or-substantially-all test and build the capital into your T661, Schedule 566 and Schedule 508.
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