Last month, Ontario’s Minister of Finance presented the 2026 Provincial Budget, continuing the province’s Tax Action Plan with a focus on housing affordability, small business competitiveness, and capital investment incentives.
Personal and Corporate Income Tax Changes
The 2026 Budget introduces new corporate income tax relief for small businesses. Effective July 1, 2026, the small business corporate income tax (CIT) rate will be reduced from 3.2% to 2.2%. This change is expected to benefit over 375,000 Ontario small businesses, reducing the corporate tax rate by more than 30% and delivering an additional $1.1 billion in CIT relief over the next three years.
Housing HST Relief for New Home Buyers
To support housing affordability, the Budget proposes the removal of the full 13% HST on new homes for eligible buyers. The relief applies as follows: eligible buyers of new homes valued up to $1 million would receive a maximum rebate of $130,000, and that rebate amount would be maintained for homes valued up to $1.5 million.
The federal government will cost-share this initiative with Ontario, covering its 5% HST portion, subject to the passage of federal legislation. Combined, this partnership is expected to deliver nearly $2.2 billion in total joint tax relief for Ontario housing.
Accelerated Capital Cost Allowance
The Budget also signals Ontario’s intention to lower the cost of capital investment by allowing businesses to accelerate income tax deductions for the cost of depreciable assets. These changes would apply to a broad range of assets and are proposed to take effect following the passage of corresponding federal legislation, aligning Ontario’s approach with recent federal announcements.
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