On 26 March 2026, the Ontario Minister of Finance Peter Bethlenfalvy presented the 2026 Budget: A Plan to Protect Ontario. This post focuses on four tax changes in the 2026 Ontario Budget affecting individuals and businesses. Following the budget release, the Ontario Government released Bill 97, which includes many of their budget measures. The full budget document is available on this link.

Ontario’s Economic Outlook

  • Ontario’s real GDP is projected to grow by 1.0 per cent in 2026 and growth is expected to pick up in subsequent years with projected increases of 1.7 per cent in 2027, 1.8 per cent in 2028 and 2.0 per cent in 2029. The Ontario Ministry of Finance’s real GDP projections are set slightly below the average of private‐sector forecasts for prudent planning purposes.
  • The 2026 Ontario budget anticipates a deficit of $12.3 billion for 2025-26 and projects deficits of $13.8 billion for 2026-27 and $6.1 billion for 2027-28.
  • Ontario employment increased by 80,900 net jobs in 2025, with nearly all gains in the private sector.
  • Ontario’s unemployment rate rose to an average of 7.7 per cent in 2025, up from 7.0 per cent in 2024.
  • Ontario’s Consumer Price Index inflation has moderated significantly from the peak of 7.9 per cent in June 2022. In Ontario, food inflation rose 3.2 per cent in 2025 compared to 2.6 per cent in 2024. Excluding food and energy, inflation rose by 2.4 per cent in 2025.

Cut to Ontario Small Business Corporate Income Tax (CIT) Rate

The Ontario Budget proposes to cut the small business tax rate on eligible income earned by a Canadian controlled private corporation (CCPC) from 3.2% to 2% effective July 1, 2026. This change will result in a combined (Federal + Ontario) tax rate of 11.2% on the first $500,000 of taxable income that is eligible for the small business deduction. This will result in a corporate tax savings of up to $5,000 annually.

Personal tax increase on non-eligible dividends received in 2027 and later

Due to the cut to Ontario’s small business corporate tax rate, Ontario’s non‑eligible dividend tax credit rate will decrease from 2.9863% to 1.9863%, effective January 1, 2027. This will increase the top combined (Federal + Ontario) non-eligible dividend tax rate from 47.74% in 2026 to 48.89% in 2027.  These rates apply to individuals with taxable income above $258,482 in 2026 (to be indexed in 2027).

HST Rebate for New Home Purchases

The Ontario Budget proposes the temporary removal of the 13 per cent Harmonized Sales Tax (HST) on qualifying new homes valued at up to $1 million (with specific construction timelines), for one year, from April 1, 2026 to March 31, 2027. This relief will be in the form of a rebate. The maximum rebate of $130,000 will be available for homes valued at up to $1.5 million, then will be gradually reduced for homes valued between $1.5 million and $1.85 million.

Accelerated Tax Depreciation for Capital Assets

The Ontario Budget proposes that Ontario will mirror previously announced federal measures with respect to accelerated depreciation. These measures include an immediate expensing of manufacturing & processing (“M&P”) equipment and buildings, and an enhanced first year deduction of up to three times the regular amount for most other depreciable assets.

Disclaimer: This budget highlight summary, intended to inform readers in general terms only, is based on documents issued by the government of Ontario. The legislation, when or if enacted, may vary from the summary described herein. It is not intended to provide tax or business advice. Please consult your Stern Cohen advisor if you have questions about your unique situation. While we have tried to ensure the accuracy of the information in this article, we accept no liability for errors or omissions.