2026 Ontario Budget Summary

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Below are the tax highlights from this year’s Ontario budget announced on March 26, 2026:

1. Corporate Income Tax (CCPCs)

Ontario’s small business tax rate for Canadian Controlled Private Corporations (CCPC) will decrease from 3.2% to 2.2% effective July 1, 2026. Combined Federal + Ontario Tax Rates (active business income ≤ $500,000):

• 2025: 12.2%

• 2026: 11.7%

• 2027: 11.2%

No change to the 26.5% general corporate tax rate for CCPC’s active business income above $500,000 or for non-CCPCs. Also, no change to the 50.17% tax rate for CCPC’s investment income.

2. Personal Income Tax

Top Personal Tax Rate (Non-Eligible Dividends) will be:

• 2025: 47.74%

• 2026: 47.74%

• 2027: 48.89%

This change offsets the lower small business tax rate and results in a higher personal tax rate on non-eligible dividends (rising to 48.89% in 2027).

3. Enhanced Ontario HST New Housing Rebate and New Residential Rental Property Rebate (Temporary)

The budget proposes to temporarily enhance to a full rebate of the 8% Ontario portion of HST on new homes priced up to $1 million. The federal government will rebate the 5% GST portion, for a maximum combined rebate of $130,000.

Eligibility Thresholds

• Full rebate: Homes up to $1.5 million

• Phased out: $1.5M–$1.85M

• Above $1.85M: Standard rebate of $24,000 applies

Eligibility Conditions

• Applies to primary residences or rental properties

• Not limited to first-time buyers

Timing Requirements

• Purchase agreements entered with a builder: April 1, 2026 – March 31, 2027

• Owner-occupied primary homes: Construction must begin before January 1, 2029 and be substantially completed before January 1, 2032.

• Rental properties: Construction must begin before April 1, 2027 and be substantially completed before January 1, 2030.

Enhanced rebates are temporary; future details expected in Fall 2026 Ontario Fiscal Update.

4. First-Time Home Buyers’ HST Rebate

• Applies to purchase agreements signed March 19, 2025 – 2031

• Aligned with the federal program timeline

• Start date moved earlier (originally May 26, 2025)

Key Takeaway

• Small business corporate taxes are decreasing, but

• Personal taxes on dividends are increasing, while maintaining integration. This will negatively impact the dividend paid out of CCPC’s investment income as the non-eligible dividend tax rate will increase by 1% in 2027.

• Significant short-term housing incentives are being introduced to support affordability and rental supply.

If you need further understanding on how the budget changes might affect you, please contact us.

©2026 IMPACT CPA LLP, an Ontario limited liability partnership. All rights reserved.

The content of this pamphlet is prepared by IMPACT CPA LLP for information only and are not intended to provide professional advice as individual situations will differ. We would be please to discuss your specific situation and tailor a tax plan to meet your requirements.