Ontario’s 2026 budget delivers a mix of tax relief and tax increases, alongside higher spending and a projected multi‑year deficit. For everyday Ontarians, the most notable moves are a cut to the small‑business corporate tax rate and enhanced HST rebates on new housing, offset in part by future higher personal tax on non‑eligible dividends.

Small‑business corporate tax rate cut

The budget proposes to reduce the provincial small‑business corporate income tax rate for Canadian‑controlled private corporations from 3.2% to 2.2% effective July 1, 2026. For qualifying businesses earning income within the small‑business limit, this can mean savings of up to roughly 5,000 dollars per year.

Service‑sector firms, trades, and family‑owned retailers structured as CCPCs are among the likely beneficiaries. The province hopes that freeing up cash in small businesses will support hiring, investment, and resilience during uncertain economic times.

Enhanced HST housing rebates

To support housing affordability and construction, Ontario Budget 2026 temporarily enhances the provincial HST New Housing Rebate and related rental property rebate. The 8% provincial portion of HST will be fully rebated on many qualifying new homes priced up to 1 million dollars, and the province is partnering with Ottawa to also rebate the 5% federal portion in some cases.

Combined, this can produce a maximum HST rebate of up to about 130,000 dollars on qualifying purchases, significantly reducing closing costs for buyers or developers of eligible projects. Details such as eligibility, timelines, and project type will be crucial, so buyers should seek professional advice before relying on these amounts.

Higher tax on non‑eligible dividends

To help pay for the corporate tax cut, Ontario will reduce the provincial dividend tax credit on non‑eligible dividends starting in 2027. This change will increase the top combined federal–Ontario personal income tax rate on non‑eligible dividends to just under 49%.

Owners of private corporations who pay themselves primarily through non‑eligible dividends will therefore see higher personal tax bills over time, partly offsetting the corporate‑level savings. Planning around salary versus dividends, timing of distributions, and use of holding companies may become even more important.

What Ontarians should do

Small‑business owners should talk to their accountants about how Ontario Budget 2026 tax changes affect their structure and whether deferring or accelerating income could improve after‑tax results. Prospective buyers of new homes or purpose‑built rentals should ask builders and lawyers whether specific projects and purchase dates qualify for the enhanced HST rebates.

Investors relying on non‑eligible dividends—often from private corporations—should model how the higher personal tax in 2027 and beyond alters their after‑tax income. For many families, the combined impact of these measures will depend on whether they are primarily business owners, wage earners, or investors.