Guide
The SR&ED expenditure limit: $6 million and the taxable capital taper
Updated
The expenditure limit is the single number that decides whether your next dollar of R&D spending earns 35 cents or 15. It moved recently, and the taper moved with it.
What changed
- "The maximum annual expenditure limit for the enhanced 35% investment tax credit (ITC) has increased from $3 million to $6 million."
- "The expenditure limit for the enhanced 35% ITC will now phase out over a broader taxable capital range, from $15 million to $75 million." The previous range was $10 million to $50 million.
- "Eligible Canadian public corporations now have access to the enhanced ITC."
- "Eligible SR&ED capital expenditures made after December 15, 2024, can be claimed."
All four apply to tax years that begin after 15 December 2024, and the legislation carrying them received Royal Assent on 26 March 2026 (CRA news and updates). CRA also warns that its policies and forms are being reviewed to align with the new legislation, which is a good reason to read the rates page on the day you file rather than trusting a saved figure.
The formula
Subsection 127(10.2) of the Income Tax Act sets a CCPC's expenditure limit as $6 million x [($60 million minus A) / $60 million], where A is "nil, if" prior year taxable capital employed in Canada is "less than or equal to $15 million", and otherwise "the lesser of $60 million and the amount by which" that taxable capital "exceeds $15 million" (laws-lois.justice.gc.ca). For a corporation associated with others, taxable capital is the total across the group.
Note what is absent: taxable income. The current formula turns on taxable capital alone, so a profitable year does not by itself shrink the limit.
| Taxable capital, previous year | A in the formula | Expenditure limit | Maximum credit at 35% |
|---|---|---|---|
| $15,000,000 or less | nil | $6,000,000 | $2,100,000 |
| $30,000,000 | $15,000,000 | $4,500,000 | $1,575,000 |
| $45,000,000 | $30,000,000 | $3,000,000 | $1,050,000 |
| $60,000,000 | $45,000,000 | $1,500,000 | $525,000 |
| $75,000,000 or more | $60,000,000 | nil | $0 |
Groups, short years and the revenue election
- Associated CCPCs share one limit. Subsection 127(10.21) makes the limit nil for an associated corporation unless the group files an allocation agreement; CRA points to Schedule 49 for the allocation.
- Short tax years are prorated. Under 127(10.5)(b), a tax year of less than 51 weeks gets the limit multiplied by days in the year over 365.
- There is a revenue based alternative. Subsections 127(10.31) and (10.32) let a CCPC elect to have its limit determined the way an eligible Canadian public corporation's is, on a three year average of annual revenue instead of taxable capital. For an asset heavy but low revenue company that election can be worth modelling.
Our calculator models a stand-alone claimant with a full tax year, so a group or a short year needs the adjustments above before you rely on the figure.