SR&ED changes for 2026

The tax changes apply to tax years that begin on or after December 16, 2024, and they are now in the Income Tax Act. For a company with a calendar year end, 2025 was the first full year under the new rules, so most companies see them for the first time on claims filed in 2026.

• December 16, 2024: the Fall Economic Statement proposed raising the limit to $4.5M, moving the phase-out to $15M and $75M, extending the 35% credit to Canadian public corporations, and restoring capital spending. At the time the program supported over 22,000 businesses.
• Budget 2025: confirmed those changes, raised the limit again to $6M for the same tax years, and announced a reform of how the CRA runs the program.
• April 1, 2026: the CRA's process changes took effect.

A Canadian-controlled private corporation earns the enhanced, refundable 35% credit on its eligible spending up to its expenditure limit. That limit is now $6M a year. Spending above it earns 15%.

The limit is reduced for larger companies, based on last year's taxable capital employed in Canada for the whole associated group. The reduction now starts at $15M and the limit reaches zero at $75M, so many more growing companies keep the full rate.

Since 2014, equipment and other capital bought for SR&ED did not count. The new rules restore it, for both the deduction and the tax credit, for property acquired on or after December 16, 2024.

That brings back things like test equipment, specialised machinery, and computer hardware such as servers or GPUs used for SR&ED work. For a CCPC, 40% of the credit on capital spending is refundable, and the rest lowers tax owing.

Before, only Canadian-controlled private corporations could earn the enhanced 35% credit. Now eligible Canadian public corporations can too, on the same $6M limit. Because public companies do not use the taxable capital test the same way, their limit shrinks based on their average revenue over the last three years, using the same $15M to $75M range.

Budget 2025 said the SR&ED process had become a barrier for many businesses. From April 1, 2026, the CRA:

• Offers an optional pre-claim approval, giving a technical approval of a project before you start the work or spend money on it.
• Cuts processing time in half, from 180 days to 90, for claims that went through pre-claim approval and need a review of the costs.
• Uses more artificial intelligence to spot low-risk claims and avoid unnecessary audits.
• Removes steps and reduces the information requested during reviews.

The CRA is also consulting on improvements to Form T661 itself. Check that you use the current version when you file your claim.

• Growing CCPCs that spent more than $3M a year on eligible work: the next $3M now earns 35% instead of 15%.
• Companies with $10M to $75M of taxable capital, which used to lose some or all of the enhanced rate.
• Teams that buy equipment for experiments, from lab instruments to computing hardware.
• Eligible Canadian public corporations, which could only earn 15% before.
• Companies that wanted certainty, through the new pre-claim approval.

1. Check which tax year the rules start for you: the first one that began on or after December 16, 2024.
2. Recheck your numbers: associated companies, taxable capital and spending decide how much of the new limit you can use.
3. Track capital purchases used for SR&ED from that date, which may have been left out of past claims.
4. Consider pre-claim approval for big or uncertain projects.
5. Keep records as you go, so a lighter review stays light.