Funding guide
Understand how R&D tax support differs from grants, what records founders should keep and why eligibility must be verified for each claim.
First establish that the work and costs qualify. Then calculate each credit on its own eligible expenditure base. Adding headline percentages together overstates the result when assistance reduces another credit's base.
| Program | Rate and refundability | Main qualifying condition | Claim preparation |
|---|---|---|---|
| Federal SR&ED | Basic 15%; qualifying corporations can earn 35% within their expenditure limit. Refundability depends on claimant and expenditure type | Eligible experimental work and qualified Canadian expenditures; ordinary product development is not automatically SR&ED | T661 and, for corporations, Schedule 31; technical records and cost reconciliation |
| Ontario Innovation Tax Credit | 8% refundable | Qualifying Ontario SR&ED corporation; expenditure limit and associated-group tests apply | Schedule 566 plus required federal claim forms |
| Ontario R&D Tax Credit | 3.5% non-refundable; unused amounts can generally carry back 3 years or forward 20 | Eligible Ontario SR&ED expenditures and corporate tax status | Schedule 508; reconcile eligible costs and Ontario tax payable |
| Ontario Business-Research Institute Tax Credit | 20% refundable on qualified contract expenditures | Eligible contract with an eligible research institute | Schedules 568 and 569; keep the signed eligible contract |
Current federal change: CRA's October 7, 2026 policy sets a maximum enhanced-rate expenditure limit of $6 million for tax years beginning after December 15, 2024. It also extends the enhanced rate to eligible Canadian public corporations and reinstates qualifying capital expenditures acquired after December 15, 2024. Older articles using a universal $3 million limit or excluding all capital costs need to be read with these effective dates.
Worked claim example: assume an Ontario corporation has already established an $80,000 OITC qualified-expenditure base after all required adjustments and is within its expenditure limit. At 8%, the illustrative OITC is $6,400. Separately, if its reconciled ORDTC base is $72,000, 3.5% gives $2,520 of non-refundable credit. With only $1,000 in applicable Ontario tax payable and no other interactions, only $1,000 would reduce current tax; the unused $1,520 follows the carryover rules. The two bases here are assumptions, not a calculation of how one credit changes another.
For the federal leg, an independently reconciled $70,000 qualified base at an applicable 35% rate produces $24,500 of earned ITC before refundability and other adjustments. Do not sum these illustrative amounts into a promised refund: a preparer must reconcile assistance, contracts, corporate status, expenditure limits and tax-year rules together.
Build one evidence file per project: technical uncertainty, attempted approaches, test dates, results, staff time, invoices and assistance received. Routine fixes, market research and a feature list alone do not establish qualifying experimental development.
15% basic ITC; qualifying corporations can earn 35% within their expenditure limit. Eligibility, refundability and assistance adjustments must be assessed for the claim year.
20% refundable credit on qualified expenditures under an eligible contract with an eligible research institute. Ordinary R&D contracting does not automatically qualify.
8% refundable credit for qualifying Ontario SR&ED corporations, subject to eligible expenditure and expenditure-limit rules.
3.5% non-refundable credit on eligible Ontario SR&ED expenditures; unused credit can generally carry back three years or forward twenty.
A tax credit is generally connected to eligible work, expenses and a filing process. It may affect cash timing, documentation and accounting differently from an upfront grant or investment.
For technical work, maintain contemporaneous records of the uncertainty, work performed, experiments, results and people or costs involved. Good records support an informed eligibility review; they do not guarantee a claim will qualify.
Programs, rates, definitions and filing requirements can change. Use the official federal or provincial source and qualified tax advice where the claim is material to the company's cash plan.
CRA’s SR&ED eligibility guidance requires work in Canada that advances scientific knowledge or achieves technological advancement and uses systematic investigation through experiment or analysis. A product can be new to your company without every development task meeting those requirements.
The existing qualifying-activities article can help organize the technical story. Identify what could not be established using available knowledge, the investigation undertaken and what you learned. Keep routine delivery, sales and general business activity separate from the technical work being assessed.
Official program or investor information: CRA: what SR&ED work is eligible
The preserved filing, claims and audit articles emphasize documenting both the investigation and the expenditures. Maintain records while the work happens: experiment notes, code or design changes, test results, staff activity and supporting cost documents. The technical account and financial account should describe the same work and period.
Give an adviser enough evidence to distinguish eligible research from routine development and to reconcile the claim to the company’s records. A large project budget is not a substitute for a supported explanation of the work performed.
Ontario’s innovation tax credit and business research institute tax credit have different qualification rules. The business research institute credit concerns qualifying research arrangements with eligible research institutes; it is not interchangeable with a general in-house development claim.
Use the Ontario articles to understand the categories, then match the company, expenditure, research arrangement and taxation year to the current provincial requirements. Keep federal and provincial calculations separate so that assistance and overlapping credits are handled correctly.
Official program or investor information: Ontario innovation tax credit · Ontario business research institute tax credit