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The biggest small business tax break is a rate, not a credit. A Canadian-controlled private corporation pays a net 9% federal tax on its first $500,000 of active business income, against 15% above that. On $100,000 of profit that’s $9,000 federally, not $15,000.
Which small business tax credits are worth knowing?
Three come up most, and they suit different businesses. The small business deduction helps almost any profitable corporation. Hire apprentices in a Red Seal trade and the apprenticeship job creation tax credit helps. SR&ED is for research and development work.
| Break | What it gives | Limit |
|---|---|---|
| Small business deduction | Federal rate of 9% instead of 15% | First $500,000 of active business income |
| Apprenticeship job creation tax credit | 10% of eligible wages, non-refundable | $2,000 a year per eligible apprentice |
| SR&ED credit at the higher rate, most CCPCs | 35% of qualified spending, refundable | Expenditure limit of $6 million (was $3 million) |
The SR&ED numbers changed recently. Bill C-15 received Royal Assent on 26 March 2026, and the higher limit applies to tax years beginning after 15 December 2024. The limit also phases out over taxable capital of $15 million to $75 million. If your year falls near those dates, check the CRA’s SR&ED news page before you claim.
What does the small business rate save you?
Put $100,000 of profit through the corporate tax calculator in Ontario, calendar 2026. Federal tax is $9,000 and Ontario adds $2,696, so you pay $11,696 and keep $88,304. At the general rate the same profit would cost $26,500.
So the saving on that profit is $14,804. For the average small company, nothing else on this page comes anywhere near that, since it applies every year to every dollar of profit up to the limit, with no application and no claim to document.
A warning on Ontario. Its small business rate falls from 3.2% to 2.2% on 1 July 2026, so the $2,696 uses our own day count for a calendar year. That’s a derived figure, not a published one.
How do you work out the apprenticeship credit?
Take the wages you paid an eligible apprentice, multiply by 10%, and stop at $2,000. The apprentice has to be in one of the first two years of a registered contract in a Red Seal trade. On $15,000 of wages the credit is $1,500. On $30,000 it would be $3,000, so the cap cuts it to $2,000.
Because it’s non-refundable, it only reduces tax you owe. A business with no tax to pay gets nothing this year. The CRA page we read describes how sole proprietors claim it, on Form T2038(IND). We couldn’t confirm the exact form path for a corporation, so ask whoever prepares your T2.
Should you claim SR&ED?
Only if your work is real research or development, and you can document it. Take $100,000 of qualified spending. At 35% the credit is $35,000, but that’s the figure for a CCPC that gets the higher rate in full. Associated corporations share one expenditure limit. Not every CCPC is eligible for the higher rate, either, so treat $35,000 as the best case.
Claims get reviewed, so write down what problem you tried to solve and what you spent. Software-only businesses and ordinary product tweaks are the usual gray zone. We can’t tell you where your project falls.
What do small business owners get wrong?
They confuse personal credits with business ones. The tax credits calculator covers personal amounts such as tuition and donations, and it uses federal credits only, so it won’t show a business credit. A sole proprietor’s business income goes through the self-employed tax calculator, which counts both halves of CPP and leaves out EI.
Provincial credits exist too. The CRA lists, for example, a British Columbia training tax credit. We haven’t checked provincial amounts, so look at your province’s page. Also read the payroll side. If you hire the apprentice, the payroll remittance calculator estimates what you send in each pay period.
The corporate calculator leaves out credits and the taxable capital phase-out. It has optional boxes for shared limits and investment income.
Where the numbers come from
Both the 9% rate and the $500,000 limit come from the Canada Revenue Agency’s corporation tax pages and T2 guide. The apprenticeship credit terms come from a CRA page on that credit. Look to CRA’s SR&ED pages, read on 30 September 2026, for the 35% rate and the 2026 changes. Rates and limits can change from budget to budget.
Frequently asked questions
What is the main tax break for a small corporation?
The small business deduction. A Canadian-controlled private corporation pays a net 9% federal rate on its first $500,000 of active business income, against 15% above that.
How much is the apprenticeship job creation tax credit?
It equals 10% of eligible wages, up to $2,000 a year per eligible apprentice. It's non-refundable, so it only reduces tax you owe.
What is the SR&ED credit rate for a small company?
Most CCPCs earn a refundable credit of 35% on qualified spending up to their expenditure limit, now $6 million for tax years beginning after 15 December 2024.
Can a sole proprietor claim these?
The apprenticeship credit can be claimed on a personal return with Form T2038(IND). The small business deduction is a corporate rule.
Are there provincial credits too?
Yes, some provinces have their own, such as a British Columbia training tax credit. We didn't confirm provincial amounts.
- Canadian tax credits and government benefits explained
The difference between tax credits and benefits in Canada, how they're worked out from your return, and the calculators for the ones people claim most
Information only. This page is general information, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns or offer tax services, and we have no connection with the CRA, Revenu Québec, any government or any company named on this page. Check the figures that matter with an official source or a qualified professional.