Tax Insights: 2026 Ontario budget – Tax highlights

Issue 2026-14

In brief

On March 26, 2026, Ontario’s Minister of Finance, Peter Bethlenfalvy, presented the province’s budget. The budget:

• decreases the province’s Canadian‑controlled private corporation (CCPC) small business tax rate from 3.2% to 2.2% on July 1, 2026
• increases the province’s personal taxes on non-eligible dividends in 2027 
• enhances the Ontario Harmonized Sales Tax (HST) New Housing Rebate and New Residential Rental Property Rebate

This Tax Insights discusses these and other tax initiatives outlined in the budget.

In detail

Business tax measures

Corporate income tax rates

The budget proposes to decrease Ontario’s CCPC small business tax rate from 3.2% to 2.2% on July 1, 2026. This will result in tax savings of up to $5,000 annually for a CCPC.

The table below shows combined federal/Ontario corporate income tax rates and reflects the above noted budget measure that decreases the province’s small business tax rate.

Capital cost allowance (CCA) measures

The budget confirms that the province will mirror previously announced federal accelerated CCA measures, such as:

• providing immediate expensing (i.e. a 100% first‑year CCA deduction) for:
  • eligible M&P buildings acquired after November 3, 2025 and first used for M&P before 2030; the 100% rate is then phased out after 2029 and eliminated after 2033
  • eligible M&P and specified clean energy equipment and zero-emission vehicles acquired after 2024 and that become available for use before 2030; the 100% rate is phased out for property that becomes available for use after 2029 and eliminated after 2033
  • CCA class 44 (patents), 46 (data network infrastructure equipment) and 50 (general‑purpose electronic data‑processing equipment and systems software) property acquired after April 15, 2024 and that becomes available for use before 2027
• reinstating the Accelerated Investment Incentive, which provides an accelerated first‑year CCA deduction on qualifying depreciable property acquired after 2024 and that becomes available for use before 2030; the accelerated CCA is phased out for property that becomes available for use after 2029 and eliminated after 2033
• introducing an accelerated CCA of 10% for new eligible purpose-built rental projects that begin construction after April 15, 2024 and before 2031, and are available for use before 2036

Regional Opportunities Investment Tax Credit (ROITC)

The budget proposes to eliminate the ROITC effective January 1, 2027. Expenditures incurred before January 1, 2027 will remain eligible for the credit.

Insurance premium tax

The budget proposes to amend the Corporations Tax Act, effective April 1, 2026, to enable all funded benefit plans to elect to be treated as unfunded benefit plans so that plan holders would trigger an insurance premium tax liability only when the benefits are paid out of the plan, instead of when contributions are paid into the plan.

Personal tax measures

Personal income tax rates

The budget does not change Ontario’s personal income tax rates (except as discussed under “Personal taxes on non‑eligible dividends” below). The top combined federal/Ontario personal income tax rates are shown below. These rates apply to individuals with taxable income above $258,482 in 2026 (to be indexed for 2027; $253,414 in 2025).

Personal taxes on non-eligible dividends

To align with the decrease in Ontario’s small business tax rate (as noted above under “Corporate income tax rates”), Ontario’s non‑eligible dividend tax credit rate will decrease from 2.9863% to 1.9863%, effective January 1, 2027. This will increase the province’s top combined federal/Ontario non-eligible dividend tax rate from 47.74% in 2026 to 48.89% in 2027.  

Sales tax measures

Enhancing the Ontario HST New Housing Rebate and New Residential Rental Property Rebate

As previously announced, the budget proposes to temporarily enhance the existing Ontario HST New Housing Rebate and New Residential Rental Property Rebate by rebating the entire 8% provincial portion of the HST for eligible purchases of qualifying newly built homes valued at up to $1 million. The budget states that the federal government has agreed to partner with Ontario to also rebate the 5% federal portion of the HST, to create a maximum rebate of $130,000 for eligible Ontario homebuyers.

The maximum HST rebate will be available for homes valued at up to $1.5 million, then gradually reduced for homes valued between $1.5 million and $1.85 million. Newly built homes valued above $1.85 million will continue to qualify for the existing rebate of $24,000. The new home must be used as a primary place of residence, or as a residential rental property, to qualify for the enhanced rebates. The measure is not limited to first‑time home buyers, though.

These enhanced rebates are proposed to be available for agreements of purchase and sale entered into with a builder after March 31, 2026 and before April 1, 2027. For these purchasers, construction of the home must begin before January 1, 2029 and the home must be substantially completed before January 1, 2032. For long‑term residential rental properties, construction of the property must generally begin before April 1, 2027 and be substantially completed before January 1, 2030.

The budget states that the eligibility for the Ontario HST New Housing Rebate and New Residential Rental Property Rebate is “proposed to end after the end of the proposed enhancement period for those same rebates.” Details will be provided in the 2026 Ontario Economic Outlook and Fiscal Review in the fall of 2026.  

Ontario First-Time Home Buyers HST Rebate

The budget states that Ontario’s proposed First-Time Home Buyers’ HST Rebate will apply to agreements of purchase and sale entered into after March 19, 2025 and before 2031 (the same effective dates as the federal First Time Home Buyers’ GST Rebate). It was initially to apply to agreements of purchase and sale entered into after May 26, 2025, but the federal government revised the effective date to have it apply earlier. For more information, see our Tax Insights “GST relief for first-time home buyers on new homes valued at up to $1.5 million” (December 15, 2025 update).

Other tax measures

Alcohol taxes

Ontario is consolidating legacy beer, wine and spirits taxes into simplified single rates to reduce complexity, effective April 1, 2026. The timing aligns with the implementation of the new LCBO wholesale mark‑up pricing structure. Filing and reporting requirements for April to July 2026 will be deferred to August 20, 2026, with no interest or penalties during the transition.