Software in Ontario
An Ontario corporation buying software licences and custom builds on or after September 15, 2026 can deduct 100% of the cost in the year the property is available for use. Combined tax rates in Ontario: 11.2% on small business income and 26.5% at the general rate.
Does Ontario follow the federal rule? Follows the federal rule Ontario calculates corporate tax on the federal tax base, so the federal deduction would flow through if it is enacted. Details and sources
Software in Ontario
Worked examples
| Purchase | Old year-one deduction | New year-one deduction | Tax reduction (small business) | Tax reduction (general rate) | NPV benefit (general) |
|---|---|---|---|---|---|
| $25,000 | $12,500 | $25,000 | $2,800 | $6,625 | $177 |
| $100,000 | $50,000 | $100,000 | $11,200 | $26,500 | $708 |
| $250,000 | $125,000 | $250,000 | $28,000 | $66,250 | $1,769 |
Ontario's small business rate falls from 3.2% to 2.2% effective July 1, 2026. A corporation whose fiscal year straddles that date allocates income by the number of days at each rate, so its effective rate for the year sits between the two. Custom development that you own outright is capital property; a subscription you rent is not. Structure the deal so you own the code if you want the write-off.
What sales tax does to your deductible cost in Ontario
Ontario charges HST 13% on most equipment purchases. A business registered for GST/HST recovers that tax through input tax credits, so it is not part of the capital cost and not part of what you deduct. Enter the price before tax in the calculator.
If you are not registered for GST/HST, the tax you cannot recover does form part of the capital cost. Most businesses buying equipment at this level are registered.
See also: all assets in Ontario · Software in other provinces
Free: the Year-End Purchase Checklist (PDF)
One page. What qualifies, what does not, the 'available for use' trap, and the seven questions to ask your accountant before you buy. No spam, unsubscribe any time.
The Mega Deduction Year-End Playbook
Everything you need to walk into your accountant's office with a plan instead of a question. Built for owner-managed Canadian businesses that expect a profitable 2026.
- Excel purchase planner with every province's rates and every CCA class pre-loaded. Model up to 12 purchases, see the year-one deduction, tax reduction and 10-year comparison for each.
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- 30-day action plan for purchases that must be delivered and installed before your fiscal year-end.
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