Ontario Budget 2026: Energizing new housing, and tax breaks for business

While Canada’s HVACR industry was gathered at last week’s CMPX Show in Toronto, the Ontario government was making some news of its own a short distance away. On Thursday, the provincial Tories unveiled the 2026 Ontario Budget, dubbed A Plan to Protect Ontario.  

Using the same title as the 2025 provincial budget, Minister of Finance Peter Bethlenfalvy stated that the 2026 plan takes a pragmatic approach in the face of economic challenges and uncertainty as he outlined some of the new spending initiatives, as well as plans to continue several programs that were introduced last year. 

“To help the province navigate these times and come out stronger, we are investing in strategic priorities such as energy, critical minerals, key infrastructure and critical technologies that will make our economy stronger, while cutting red tape and creating the conditions for businesses to grow, supporting workers and strengthening Ontario’s economy,” he explained. 

While the HVACR sector was not specifically spotlighted in the 2026 outline, several of the measures introduced in the 2026 budget focus on construction, energy and small businesses, which will impact the sector. 

As promised by Premier Doug Ford, the 2026 budget plan does not include any new taxes. It does propose to cut the small business corporate income tax rate by 30 per cent, however. If the budget passes, that tax rate would drop from 3.2 per cent to 2.2 per cent, effective July 1, providing up to $5,000 in annual tax relief for eligible businesses. The government estimates this impact to be up to $3.5 billion over four years across the roughly 375,000 small businesses that would be eligible.  

The budget also introduces a major push to accelerate tax deductions on buildings and capital assets, giving businesses a tool to improve cash flow and reduce after-tax investment costs. This renewed alignment with federal accelerated write-off measures effectively allows companies to expense capital investments much faster than under traditional depreciation rules. 

Businesses may now be able to write off 100 per cent of the cost of certain buildings, including manufacturing and processing buildings and clean technology facilities, in the first year. Also included in the budget is accelerated depreciation of purpose-built rental housing, which will rise from four to 10 per cent annually. This is expected to improve project viability for developers.  

Beyond buildings, 100 per cent immediate write-offs will be available for machinery and equipment, productivity-enhancing assets, and R&D capital expenditures, while a tripling of first-year depreciation is being introduced for most other assets, allowing businesses to front-load deductions and reduce taxable income sooner.  

Perhaps capturing the greatest attention is the government’s plan to temporarily remove the provincial portion of the HST for all buyers of new homes under $1 million. The federal government has pledged to follow suit on their portion of the HST. Once the respective legislation passes at both levels of government, the revamped tax rebate will top out at $130,000 for homes costing between $1 million and $1.5 million and will be available to all buyers of new homes, rather than only first-time homebuyers.  

The proposed changes, which aim to reinvigorate the housing construction market while boosting housing affordability, would have a gradual reduction for homes above the $1.5 million threshold, and will only be available for owner-occupied primary residences or residential rental properties with purchase agreements signed by March 31 of next year, with construction starting by the end of 2028 and completed by the end of 2031. 

The province also updated its 10-year capital plan, increasing the allocation for the construction of new highways, transit and community-building infrastructure by five per cent. This includes $37 billion of new investment in the coming year, which will also impact construction across the residential and non-residential spectrum. 

Along with the construction announcements, the government also emphasized its ongoing investments in nuclear energy as a cornerstone of its broader economic strategy. The nuclear expansion plan is expected to create over 150,000 jobs and add $800 billion to Canada’s national economy.  

Budget 2026 projects a deficit of $13.8 billion for the next fiscal year, a rise from $12.3 billion the previous year, and has taken a reversal from last year’s optimism of returning to a balancing of the books by 2027-28. The revamped expectation is for deficits to continue until at least the 2028-29 fiscal year.

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