Ontario Budget 2026

ON Budget 2026 aims to encourage investment and increase affordability by reducing taxes for small businesses, expanding the HST rebate for new homes, and simplifying and reducing alcohol taxes.

The estimated deficit for the 2025-26 fiscal year is $12.3 billion, compared to a projected $14.6 billion deficit in the previous budget. Ontario anticipates balancing the budget by 2028-29.

Fiscal projections for the next three years are as follows:

Business tax measures

Corporate tax rates

ON Budget 2026 proposes to reduce the provincial corporate income tax rate on small business to 2.2% (from 3.2%), effective July 1, 2026. The reduced rate will be prorated for taxation years straddling July 1, 2026.

Combined federal and Ontario corporate tax rates

¹_{Prior to July 1, 2026, the combined rate for income entitled to the small business rate was 12.20%.}

Regional Opportunities Investment Tax Credit expiration

The Regional Opportunities Investment Tax Credit (ROITC) expires as of January 1, 2027. Expenditures on eligible property incurred on or before December 31, 2026 will continue to qualify for the credit. The ROITC is a 10% refundable tax credit applicable to qualifying investments made in designated regions of Ontario by a Canadian-controlled private corporation.

Insurance premium tax flexibility

Effective April 1, 2026, funded benefit plans may elect to be treated as unfunded benefit plans for Ontario insurance premium tax purposes. This will allow plan holders to defer the tax until benefits are paid out. The insurance premium tax currently applies to insurance policies and benefit plans based on how the plan is funded, with funded plans taxed upfront on contributions and unfunded plans taxed when benefits are paid out. 

Personal tax measures

Personal income tax rates

There are no proposed changes to personal income tax rates. The personal tax brackets and the respective marginal tax rates for 2026 are as follows:

The top combined federal and Ontario marginal tax rates for 2026 are as follows:

ON Budget 2026 proposes to decrease the dividend tax credit on non-eligible dividends to 1.9863% (from 2.9863%) effective January 1, 2027. This will increase the top combined marginal rate on non-eligible dividends to 48.89% (from 47.74%) for 2027.

Ontario Trillium Benefit lump-sum payment threshold

The budget proposes to increase the Ontario Trillium Benefit (OTB) lump-sum payment threshold to $500 (from $360). The OTB is paid either monthly or as a single lump sum, depending on certain factors. Effective for benefit year beginning July 1, 2026, individuals with a total OTB entitlement of $500 or less for the benefit year would receive the benefit as a lump-sum payment in the first month of the benefit year rather than in monthly instalments.

Sales and excise tax measures

HST rebates on new homes

Temporary expansion of New Housing Rebate and New Residential Rental Property Rebate

Ontario’s 2026 Budget proposes a temporary expansion of the existing Ontario Harmonized Sales Tax (HST) New Housing Rebate and New Residential Rental Property Rebate for eligible new homes, applicable from April 1, 2026, to March 31, 2027. The federal government has agreed to provide a rebate for the federal portion of the GST/HST, subject to the passage of federal legislation.

For new homes valued at up to $1 million, the maximum provincial rebate would be $80,000, with an additional federal rebate of up to $50,000, subject to the passage of federal legislation. This $80,000 maximum provincial rebate would be maintained for new homes valued up to $1.5 million and would be proportionally reduced for homes valued above $1.5 million. For homes valued at $1.85 million and above, only the pre‑existing provincial rebate would be available, up to a maximum of $24,000.

To be eligible for the enhanced HST rebates:

• Purchase agreement with the builder must be signed between April 1, 2026, and March 31, 2027
• New home must be acquired or rented for use as a primary place of residence
• Construction must begin on or before December 31, 2028, and the home must be substantially completed on or before December 31, 2031.

Individuals who also qualify for the first‑time home buyers rebate (see below) and purchase a home between April 1, 2026 and March 31, 2027 will be eligible for the same enhanced rebate amount. Additional details on transitional rules after March 31, 2027 are expected to be released in the 2026 Ontario Economic Outlook and Fiscal Review this fall.

Expansion of HST relief for first-time home buyers on new homes

The effective date of Ontario’s First‑Time Home Buyers’ Rebate will be aligned with the federal rebate so that it applies to purchase and sale agreements entered into on or before March 20, 2025. This is two months earlier than the original effective date of May 27, 2025 proposed in Ontario’s 2025 Fall Economic Statement. All other previously announced rebate parameters remain unchanged.

Alcohol taxes

The Ontario government proposes the following changes to consolidate and reduce alcohol taxes:

• Combining the basic, volumetric and environmental beer taxes into a single tax rate for manufacturers of $1.18/L for non-draft and $0.9/L for draft beer. The rate for microbrewers will be $0.46/L for non-draft and $0.36/L for draft beer. The Small Beer Manufacturers’ Tax Credit will be adjusted accordingly.
• Combining the basic, volumetric and environmental wine taxes into a single tax rate. The tax will be 0% on Ontario wines and wine coolers and 19.1% on non-Ontario wines and wine coolers if sold in on-site winery retail stores. The tax will be 12% for owner wines and wine coolers sold in off-site winery retail stores.
• Replacing the existing spirits and spirits coolers categories with three new categories based on alcohol by volume, and combining the basic, volumetric and environmental spirit taxes into a single rate, as follows:
  • 7.1% or below ABV: 20% tax
  • Between 7.1% and 18% ABV: 25% tax
  • More than 18% ABV: 30.75% tax

These changes will take effect on April 1, 2026. The tax filing and reporting requirement will be deferred from April to July 2026 and no interest or penalties will apply provided the April to July returns are filed by August 20, 2026.

Other notable measures

Several technical amendments to various statutes have been proposed, including:

• Calculation of the Ontario Computer Animation & Special Effects Tax Credit with respect to the minimum labour expenditure requirement
• Adoption of federal tax administration measures regarding proof of sending items by mail, personal service and electronic delivery
• Adoption of the federal provision to exclude certain periods of time when determining the timeframe within which a taxpayer may be assessed
• Exemption from the Non-Resident Speculation Tax for First Nation individuals registered under the Indian Act
• Amendments to the Pension Benefits Act relating to the conversion framework from single employer to jointly sponsored pension plans

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Visit our Budget 2026 hub to learn more about all federal and provincial budgets.   

^{Disclaimer 
The information contained herein is general in nature and is based on proposals that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice or an opinion provided by Doane Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, specific circumstances or needs and may require consideration of other factors not described herein.}