SR&ED Tax Credit in 2026: Who Qualifies and How Much You Can Claim

The Scientific Research and Experimental Development program is the single largest federal R&D incentive in Canada. In 2024 it returned $3.2 billion to roughly 17,000 businesses. The average claim was $187,000.

Most of your peers who qualify never file. Here is how the program works in 2026.

Who qualifies

Any Canadian-Controlled Private Corporation (CCPC) that attempts to resolve a technical uncertainty through systematic investigation. "Technical uncertainty" is the key phrase — it does not require a lab coat. Examples CRA has accepted:

• Custom software development where the outcome was unknown at the start
• Manufacturing process experiments to reduce defect rates
• New formulation testing in food, cosmetics, or chemicals
• Iterative prototype development where each cycle taught something new
• Algorithm tuning that required testing multiple approaches

Ordinary software development using known techniques does not qualify. The bar is whether a competent professional would have known the answer in advance.

What you can claim

For a CCPC, the federal credit is 35% refundable on the first $3M of qualifying expenditures. Above that threshold, it drops to 15% non-refundable.

Provincial credits stack on top: - Québec: +30% refundable on salaries - Ontario: +8% refundable (ORDTC) + 3.5% non-refundable (OITC) - British Columbia: +10% refundable - Alberta: 8% non-refundable (IRDTC)

A Québec CCPC combining federal + provincial can recover up to 65% of qualifying salary costs.

What counts as an eligible expense

• Salaries and wages of employees directly performing R&D
• Subcontractor costs (at 80% of invoiced amount)
• Materials consumed or transformed in R&D
• Overhead via the proxy method (55% of salary) or traditional method

The 18-month deadline

Claims must be filed within 18 months of your fiscal year-end. After that, the credit is lost forever. Many businesses discover the program too late to claim back years.

Why most eligible businesses never file

Three reasons dominate:

1. They assume they don't qualify. Software shops, manufacturers, and even service businesses with internal tool development regularly leave SR&ED unclaimed. 2. The technical narrative is intimidating. CRA requires a written description of the uncertainty, the hypothesis, and the systematic investigation. Most accountants don't write these; most engineers don't know they need to. 3. Cash-flow timing. The refund lands 3–6 months after filing. Businesses that need the cash sooner defer the claim and then forget.

How Fruxal handles this

Fruxal's recovery team includes SR&ED specialists who draft the technical narrative, assemble supporting documentation, and file on your behalf. Contingency pricing only — if the claim is denied, you pay nothing. If it's approved, Fruxal takes 12% of the refund.

Check if your business qualifies →