Written by Behdad Karimi Dermeni, CPA · Reviewed by Maryam Ajorloo, CPA
Small businesses make up 98.2% of Canada's employer businesses, according to the federal government's Key Small Business Statistics 2025. Between them they employ 5.8 million people. Which means the federal government has a fairly strong interest in keeping you in business, and it funds a long list of small business tax credits and grants in Canada to do it.
The catch is that the list changes constantly. Programs close, caps get cut, and half the articles you will find were accurate two years ago and have not been touched since. So this guide does two things: it names the federal credits and funding programs that are open right now, and it tells you plainly which well-known ones have shut down.
The short answer: Canadian small businesses can claim federal tax credits including the GST/HST input tax credit, the Scientific Research and Experimental Development (SR&ED) credit, and the Apprenticeship Job Creation Tax Credit, and can apply for federal funding through programs such as CanExport, NRC IRAP, and Innovative Solutions Canada. Credits lower the tax you owe. Grants are money coming in, usually matched, and usually taxable.
Most of these programs ask for the same thing before they will look at you: books that show what you actually spent and earned. If yours are scattered across a bank app and a folder of photos, that is the first thing worth fixing. ReInvestWealth connects your bank, categorizes your transactions with AI built by CPAs, and keeps the numbers ready when a program asks for them. Start free for 30 days.
Tax Credit, Deduction, or Grant? What the Difference Actually Means
Here is the rule that organizes everything below. A deduction lowers the income your tax is calculated on. A credit lowers the tax itself. A grant is money coming into the business, and it almost always arrives with conditions attached and a tax consequence on the other side.
That ordering matters. A $1,000 deduction saves you your tax rate times $1,000. A $1,000 credit saves you $1,000. Credits are the stronger instrument, which is why there are fewer of them and why the eligibility rules are tighter.
Credits also come in two flavours:
Refundable credits can produce a refund even if they exceed the tax you owe. You can end up receiving money.
Non-refundable credits reduce your tax bill to zero and stop there. No cheque for the excess.
Some credits can be carried forward or back to other tax years, which is useful in a year when you had the expense but not the profit. If you want the deduction side of the picture, our guide to small business write-offs in Canada covers what you can claim as an expense.
Federal Tax Credits Your Small Business Can Claim
These are federal credits administered mainly by the Canada Revenue Agency (CRA). Your province almost certainly has its own on top of these.
GST/HST Input Tax Credit. The one nearly every registered business uses and the one most often left on the table. It lets you recover the GST/HST you paid on business purchases, claimed on your regular sales tax return. If you are registered and not claiming these, you are donating money to the CRA. Details are on the CRA's input tax credit page.
Scientific Research and Experimental Development (SR&ED). The largest federal innovation incentive, and it was materially expanded. The basic investment tax credit rate is 15%. Canadian-controlled private corporations (CCPCs) can earn an enhanced, refundable 35% rate, and the annual expenditure limit for that enhanced rate rose from $3 million to $6 million. The limit now phases out over a taxable capital range of $15 million to $75 million rather than the old, much narrower band. Capital expenditures made after December 15, 2024 are eligible again, reversing a long-standing exclusion, and certain eligible Canadian public corporations can now access the 35% rate for tax years beginning after December 15, 2024. You do not need a laboratory to qualify. Systematic work to resolve a genuine technological uncertainty can count.
Apprenticeship Job Creation Tax Credit (AJCTC). A non-refundable credit worth 10% of eligible salaries and wages paid to an eligible apprentice, capped at $2,000 per apprentice per year. The apprentice has to be in the first two years of a registered apprenticeship contract in a prescribed trade, which in practice means the Red Seal trades.
Canada Carbon Rebate for Small Businesses. Read this one carefully, because it is winding down and there is money involved either way. It was a refundable credit that returned federal fuel charge proceeds to eligible CCPCs with 499 or fewer employees. With the federal fuel charge removed effective April 1, 2025, the payment for the 2024-25 fuel charge year is the final payment. More importantly, legislation passed on March 26, 2026 confirmed the rebate is non-taxable for all fuel charge years. If your corporation already filed and reported the rebate at line 295 of Schedule 1, the CRA is automatically adjusting the return to take it back out of taxable income. You do not have to do anything, but it is worth checking that the adjustment actually lands.
Investment Tax Credit (ITC). Available on certain capital property, such as buildings, machinery, and equipment used for qualifying activities in designated regions of Canada.
Federal Foreign Business Income Tax Credit. Prevents double taxation on business income earned abroad that has already been taxed in another country.
Industry-specific credits. If you work in film, television, or journalism, look at the Canadian Film or Video Production Tax Credit, the Film or Video Production Services Tax Credit, and the Canadian Journalism Labour Tax Credit.
The CRA maintains the full list of federal business tax credits and a separate page for provincial and territorial credits.
The Small Business Deduction Is Probably Worth More Than Any of Them
It is technically a deduction rather than a credit, so it gets skipped in articles like this one. It should not be. The small business deduction lets a CCPC pay a materially lower federal corporate tax rate on its first $500,000 of active business income each year.
That business limit is shared among associated corporations, and it is reduced for larger corporations based on taxable capital and passive investment income. Most owner-operated businesses are nowhere near those thresholds, which means the full $500,000 applies. We cover how it works in detail in our guide to the small business deduction in Canada.
Federal Grants and Funding Programs for Canadian Businesses
One thing to set expectations before the list. Federal business funding is very rarely free money. Almost every program below is cost-shared, meaning you fund a portion and the program reimburses the rest, and several are loans rather than grants. That is not a reason to skip them. It is a reason to budget for your side of the split before you apply.
CanExport SMEs. Funding to help Canadian businesses enter new international markets, covering things like market research, trade shows, and adapting marketing for a new country. Two changes worth knowing: the maximum per project was cut from $99,999 to $50,000, and funding for projects targeting the United States is fully allocated, so those applications are not being accepted. The 2026-27 intake runs to August 31, 2026. Check current terms in the CanExport SMEs applicant's guide.
NRC Industrial Research Assistance Program (IRAP). Advisory services plus funding for technology innovation. To qualify you generally need to be incorporated, operating in Canada, have 500 or fewer employees, and be aiming to grow through innovation. Every firm that engages gets advisory support from an industrial technology advisor, though not every firm gets funded. Details at the NRC IRAP program page.
Innovative Solutions Canada. Federal departments post real problems and fund small businesses to solve them. Under the Challenge Stream, Phase 1 offers up to $150,000 over six months to prove feasibility, and Phase 2 up to $1 million over two years to build the innovation, with higher ceilings in some calls. The Testing Stream funds prototype testing in real settings. See Innovative Solutions Canada.
Canada Small Business Financing Program (CSBFP). Not a grant, but the most broadly useful federal program on this page for a business that needs capital. The government shares the lender's risk, which makes banks and credit unions willing to lend when they otherwise would not. Up to $1.15 million total, made up of $1 million in term loans and $150,000 in lines of credit, for equipment, leasehold improvements, property, intangible assets, and working capital. You apply through your own financial institution, not through a government portal.
Futurpreneur. Futurpreneur does not give grants. For entrepreneurs aged 18 to 39 it offers an equity-free loan of up to $75,000 (up to $25,000 from Futurpreneur plus up to $50,000 from BDC), packaged with up to two years of one-to-one mentorship. The mentorship is arguably the more valuable half.
Creative Export Canada. Funding for creative industries, including music, design, and publishing, to take their work to international markets.
Employment and Social Development Canada. Runs a rotating set of funding programs for hiring, training, and workforce development. Worth checking annually, since intakes open and close on their own schedules.
Business Benefits Finder. The federal government's own search tool, filterable by industry, location, and business stage. Start here rather than with a blog post, ours included, because it reflects current program status. Find it at innovation.ised-isde.canada.ca.
Applying takes real time, so treat it as an investment rather than a lottery ticket. Fund the applications you actually fit, research the program so your proposal speaks to its stated goals, and follow the guidelines exactly. Grant reviewers are looking for reasons to shorten the pile.
Keeping clean records is what makes the application itself bearable, because most of what a funder asks for is something your books should already know. ReInvestWealth generates income statements and balance sheets from your categorized transactions, so pulling together financials for an application is a download rather than a weekend.
Programs That Have Closed (Check Before You Apply)
Grant lists rot faster than almost any other content, and these three still show up on pages that have not been updated. If you have been sent to any of them, stop.
Grow Your Business Online (Canada Digital Adoption Program). The $2,400 micro-grant that everyone remembers. The Grow Your Business Online stream closed on September 30, 2024, and the Canada Digital Adoption Program ended entirely on March 31, 2025. There is no successor with the same terms.
Sustainable Jobs Training Fund. The application period closed on May 15, 2024. Other Employment and Social Development Canada programs are still running, but this specific fund is not accepting applications.
Canada Carbon Rebate for Small Businesses. As above, the 2024-25 fuel charge year is the final payment. Nothing to apply for going forward, though the non-taxability change is still worth acting on if you already reported it as income.
How to Claim a Tax Credit or Apply for a Grant
The two processes are genuinely different, and mixing them up costs people money. Credits are claimed on a return you were filing anyway. Grants require an application, usually before you spend the money.
Work out which one you are dealing with. If it reduces tax on a return, it is a credit and there is no application form. If someone gives you money, it is a grant, a contribution, or a loan, and there is an application with a deadline.
Check eligibility against the program's own page, not a summary. Employee counts, corporation type, province, and intake dates all move. A CCPC requirement quietly excludes sole proprietors from a lot of this list.
Apply before you spend, for grants. Most cost-shared programs will not reimburse costs you incurred before approval. This is the single most common way businesses disqualify themselves.
Budget your matching share. If a program covers 50%, you need the other 50% in cash. Confirm the split before you commit to the project.
Claim credits on the right form. SR&ED and most investment tax credits go on Form T2SCH31 with the T2 for a corporation, or Form T2038(IND) for an unincorporated business. GST/HST input tax credits go on your sales tax return.
Keep the documentation. For SR&ED in particular, contemporaneous records of the work are what survives a review. Reconstructing them a year later is much harder than keeping them as you go.
Are Grants and Tax Credits Taxable in Canada?
This is the part most grant lists skip, and it is where the money quietly goes back out the door. The general answer is yes, government assistance is taxable, but *how* it is taxed depends on what you did with it. The CRA's grants, subsidies and rebates guidance sets out three treatments:
If the grant reimburses an expense, reduce that expense. A hiring grant reduces your wage expense rather than showing up as separate income. Your net income lands in the same place, but the presentation matters.
If it helped you buy depreciable property, reduce the asset's capital cost. That lowers the base your capital cost allowance (CCA) is calculated on, so the tax cost spreads over the life of the asset instead of hitting in year one.
If neither applies, report it as other income. That is line 8230 in Part 3C of Form T2125 for an unincorporated business, or income on the T2 for a corporation.
The Canada Carbon Rebate for Small Businesses is the notable exception. Legislation passed on March 26, 2026 made it non-taxable for all fuel charge years, which is why the CRA is going back and adjusting returns that reported it at line 295.
Refundable tax credits are generally included in income in the year received or applied. Your accountant will handle the mechanics at year end, and this is exactly the kind of question worth bringing to them rather than guessing.
Get Your Books Ready Before You Apply
Almost every program above eventually asks for the same three things: what you earn, what you spend, and proof of both. Businesses lose out less often because they were ineligible than because assembling the paperwork took longer than the intake window.
Keep expenses categorized as they happen. A funder asking for last year's marketing spend should be a filter, not an archaeology project.
Keep receipts attached to transactions. For cost-shared programs you will be asked to prove what you actually paid before you get reimbursed. A receipt sitting in a photo roll is not proof anyone can follow.
Be able to produce financial statements on demand. An income statement and balance sheet are standard attachments on most applications above a few thousand dollars.
This is the routine work ReInvestWealth is built to take off your desk. Connect your bank and the AI Bookkeeper categorizes transactions for you, Smart Shoebox stores receipts and matches them to the right transaction, and your financial reports stay ready in the background. Your accountant then spends their time on the parts that need judgment, like whether your work actually qualifies for SR&ED.
Frequently Asked Questions
Does the CRA offer small business grants?
No. The Canada Revenue Agency administers tax credits and collects tax. It does not run grant programs. Federal grants and contributions come from departments and agencies such as Innovation, Science and Economic Development Canada, the National Research Council, and Employment and Social Development Canada. If a website claims the CRA is giving out business grants, treat it as a warning sign.
Can a sole proprietor claim these, or do I need to incorporate?
It depends on the program. GST/HST input tax credits and the Apprenticeship Job Creation Tax Credit are available to unincorporated businesses. The enhanced 35% SR&ED rate, the small business deduction, and the Canada Carbon Rebate for Small Businesses are restricted to Canadian-controlled private corporations. Many funding programs also require incorporation. If you are weighing the decision, our guide on when to incorporate is a better starting point than eligibility alone.
What is the $500,000 small business limit?
It is the amount of active business income a Canadian-controlled private corporation can claim the small business deduction on each year, which means a materially lower corporate tax rate on that income. The limit is shared among associated corporations and is reduced for corporations with substantial taxable capital or passive investment income.
Do I have to pay a government grant back?
A true grant is non-repayable, which is what separates it from a loan. But read the agreement, because two things can trigger repayment: failing to meet the conditions you agreed to, and spending the money on something outside the approved project. Repayable contributions and loan programs such as CSBFP and Futurpreneur are repaid on normal terms.
Can I claim more than one credit or grant at the same time?
Often yes, but not always on the same dollars. Many programs reduce what you can claim elsewhere for the same expense, and government assistance received generally reduces the SR&ED expenditures you can claim. Stacking rules are program-specific, so confirm them before you build a budget that assumes two sources cover the same cost.
Where do I find grants for my province?
Provincial and municipal programs are often easier to win than federal ones because the applicant pool is smaller. We cover small business grants in Alberta and small business grants in Ontario in detail, and if you are a woman-owned business, business grants for women in Canada covers programs specific to that group.
A note from our CPAs
This guide is general information for Canadian small business owners, not advice for your specific situation. Program terms, intake dates, and eligibility rules change often, and tax treatment depends on facts we cannot see from here. Confirm the details with the program's own page and with your accountant before you file a claim or commit to an application.
Programs will keep opening and closing. What does not change is that every one of them wants to see organized numbers, and that the businesses who get funded are usually the ones who could produce them quickly. ReInvestWealth keeps your bookkeeping caught up in the background so that when an intake opens, the paperwork is already done. Start free for 30 days.
Written by Behdad Karimi Dermeni, CPA
Co-founder of ReInvestWealth and a founding community builder at Stripe. Behdad built ReInvestWealth to give smart, busy entrepreneurs CPA-level accounting without the CPA-level price tag. Read more · Connect on LinkedIn
Reviewed by Maryam Ajorloo, CPA
Maryam Ajorloo is the co-founder of ReInvestWealth and a CPA who specializes in small business tax, sales tax, and everyday bookkeeping. She helps entrepreneurs keep clean, audit-ready books and make sense of write-offs, filing deadlines, and the numbers behind their business. Read more · Connect on LinkedIn
