Ontario’s Finance Minister released the 2026 Ontario Budget on March 26, 2026. The budget introduces several tax changes that may affect business owners, investors, and individuals over the next two years. Below is a summary of the most relevant measures.

Business Tax Highlights

Small Business Corporate Tax Rate Reduction

• Ontario’s small business corporate income tax rate will be reduced to 2.2% (from 3.2%), effective July 1, 2026.
• Once fully in effect, the combined federal and Ontario small business tax rate will be approximately 11.2%.
• This combined rate applies to the first $500,000 of active business income earned by eligible Canadian‑controlled private corporations (CCPCs).

Expanded Immediate Expensing and Capital Cost Allowance

• Immediate expensing is expanded for:

• Manufacturing and processing equipment and buildings
• Productivity‑enhancing assets
• Research and development (R&D) capital expenditures
• Clean technology and zero‑emission vehicles

• Accelerated capital cost allowance (CCA) is extended to additional asset classes.

Regional Investment Incentives

• The Regional Opportunities Investment Tax Credit (ROITC) will be eliminated effective January 1, 2027. Any eligible expenditures incurred on or before December 31, 2026 will continue to qualify.

Personal Tax Changes

Non-Eligible Dividends

• Effective January 1, 2027, Ontario will increase the personal tax rate on non‑eligible dividends by reducing the provincial dividend tax credit.
• The top marginal tax rate on non‑eligible dividends will increase from 47.74% to 48.89%.
• This change aligns with the reduction in the Ontario small business corporate tax rate.

Housing & HST Measures

Temporary Enhanced Ontario HST Rebate on New Housing

• A temporary enhanced 8% Ontario HST rebate will apply to:

• New homes
• Newly constructed or substantially renovated residential rental properties
• Purpose‑built rental properties

• Purchase agreements signed between April 1, 2026 and March 31, 2027 are expected to qualify.

• The rebate provides:

• Up to $80,000 for homes priced up to $1 million
• The maximum rebate maintained up to $1.5 million
• For higher‑value homes, the rebate continues at the existing minimum amount of $24,000 (the enhanced portion no longer applies)

Other Notable Changes

• Simplified alcohol tax structure effective April 1, 2026
• Changes to Insurance Premium Tax timing for funded benefit plans
• Various technical amendments affecting tax credits, assessments, and pension rules

What This Means for You

These measures may create planning opportunities, particularly for:

• Small business owners
• Corporations investing in capital assets
• Individuals receiving non-eligible dividends
• Home buyers and real estate investors

We recommend reviewing your situation early to understand how these changes may apply.

To read the Ontario Ministry of Finance Highlights of the 2026 Budget: A Plan to Protect Ontario, please click here: https://budget.ontario.ca/2026/highlights.html

If you have questions or would like to discuss planning opportunities arising from the 2026 Ontario Budget, please contact your Lipton advisor.