Top Three Takeaways from the 2026 Ontario Budget

Ontario Small Business Corporate Income Tax Rate Cut

Ontario is proposing to reduce the small business corporate income tax rate for the province from 3.2 per cent to 2.2 per cent effective July 1, 2026. This would result in an overall effective tax rate of 11.2 per cent on the first $500,000 of taxable income that is eligible for the small business deduction earned by a Canadian-controlled private corporation.

To align with the reduction in Ontario’s small business corporate income tax rate, the non-eligible dividend tax credit rate would be reduced accordingly, effective January 1, 2027.

HST Relief on New Homes

Ontario is proposing to temporarily remove the 13 per cent HST (in the form of a rebate) on qualifying new homes (with specific construction timelines) purchased for up to $1 million, for one year, from April 1, 2026 to March 31, 2027.

For qualifying new homes purchased for an amount in excess of $1,000,000, the following rebate structure would be applicable:

• $1.0M – $1.5M:

  Flat rebate of $130,000

• $1.5M – $1.85M:

  Rebate declines proportionally from $130,000 down to $24,000

• Over $1.85M:

  Rebate of $24,000 (same as prior rules) 

Note that the rebate remains subject to the federal government making the applicable changes to the Excise Tax Act.

Accelerated Tax Depreciation for Capital Assets

Ontario is proposing to follow the proposed federal changes to accelerate the income tax deduction for the cost of depreciable assets, effective January 1, 2025. This would include an immediate write-off for manufacturing & processing (“M&P”) equipment and buildings, and an enhanced first year deduction of up to three times the regular amount for most other depreciable assets.