The Ontario government released its 2026 Budget on March 26, 2026. Below, we outline the key tax highlights.
1. HST Relief on New Homes
Ontario is providing relief for home buyers by removing the full 13% Harmonized Sales Tax (HST) for eligible buyers of new homes valued up to $1 million. This measure offers a maximum rebate of $130,000 per eligible buyer and maintains this amount for new homes valued up to $1.5 million.
For homes valued between $1 million and $1.5 million, the rebate is maintained, and for newly built homes above $1.85 million, a flat rebate of $24,000 applies (as under prior rules).
The relief applies to qualifying new homes purchased between April 1, 2026, and March 31, 2027.
2. Small Business Corporate Income Tax Rate Cut
Ontario is proposing to reduce the provincial small business corporate income tax rate from 3.2% to 2.2%, effective July 1, 2026.
This change will lower the overall effective tax rate on the first $500,000 of active business income earned by a Canadian-controlled private corporation (CCPC) in Ontario to 11.2%.
3. Personal tax on non-eligible dividends
In order to align with the Ontario small business corporate income tax rate cut, the non-eligible dividend tax credit rate will be reduced from 2.9863% to 1.9863%, effective January 1, 2027.
As a result, the top combined Federal/Ontario personal tax rate on non-eligible dividends will increase from 47.74% in 2026 to 48.89% in 2027.
4. Accelerated Tax Depreciation for Capital Assets
Ontario will align with Federal proposals to accelerate the income tax deduction for depreciable assets, effective January 1, 2025. This includes:
- Immediate write-off for manufacturing and processing (M&P) equipment and buildings
- Enhanced first-year deduction of up to three times the regular amount for most other depreciable assets
If you have questions about how the 2026 Ontario Budget may impact you or your business, please contact our office for personalized advice. This summary is for informational purposes only and does not constitute tax advice.