Software and SaaS SR&ED Tax Credit Calculator
A small Ontario software company with a handful of developers is usually looking at a six-figure refundable credit it has never claimed. Work out the pool, the federal and Ontario credits, the cash refund, and how many days are left to file.
total cash back
—
—
—
—
Building the Expenditure Pool
| Component | Basis | Amount |
|---|
The Credits, Federal and Ontario
| Credit | Rate and Basis | Refundable | Amount |
|---|
The Deadline and What Has to Be Filed
| Item | Requirement |
|---|
Points That Decide This
What to Do Next
—
Disclaimer: Scientific research and experimental development must involve a systematic investigation carried out by experiment or analysis to resolve a scientific or technological uncertainty that could not be removed by standard practice. Routine software development, configuration of existing tools and work following established methods do not qualify. The prescribed proxy amount is 55% of the salaries and wages of employees directly engaged in the work, and it replaces overhead rather than being added to it. Arm’s length Canadian subcontractor payments are included at 80%. Government and non-government assistance reduces the pool. The federal investment tax credit is 35% and fully refundable for a Canadian-controlled private corporation on qualified expenditures within the expenditure limit, and 15% above it, of which 40% is refundable for a CCPC. The expenditure limit is $4.5 million for tax years beginning after 15 December 2024, reduced on a straight-line basis where the taxable capital of the associated group is between $15 million and $75 million, and $3 million with a $10 million to $50 million range under the prior rules. The Ontario Innovation Tax Credit is 8% and refundable, subject to its own $3 million limit and phase-outs. The Ontario Research and Development Tax Credit is 3.5% and non-refundable. Provincial credits are treated as assistance and reduce the federal pool, which is applied here. Form T661 must be filed no later than 18 months after the end of the tax year, and that deadline cannot be extended for any reason. This page is general information, not tax advice.
Software Qualifies, But Not All of It
The question is never whether the work was difficult or whether it took a long time. It is whether the team faced a technological uncertainty that could not be resolved by standard practice, and then went about resolving it systematically.
| Usually Qualifies | Usually Does Not |
|---|---|
| Novel algorithms where the approach was not known to work | Building features to a known specification |
| Performance work at a scale nobody had documented | Configuring or integrating existing tools |
| Machine learning architecture where the outcome was uncertain | Applying a documented model to your own data |
| Distributed systems problems with no established solution | Standard CRUD, dashboards and reporting |
| Failed experiments that produced knowledge | Debugging and routine quality assurance |
Failed work is claimable, and it is often the strongest part of a claim. An approach the team tried, documented and abandoned is direct evidence of uncertainty and systematic investigation. Companies routinely leave it out because they assume only shipped features count.
The Proxy Is Why the Numbers Get Large
The prescribed proxy amount adds fifty-five percent of eligible salaries to the pool without any overhead being tracked or supported. On $390,000 of eligible salary that is $214,500 of pool created by a single election.
It replaces overhead rather than sitting alongside it, so the choice is between the proxy and tracking actual overhead. For a software company with few costs beyond people, the proxy wins almost every time and the traditional method is rarely worth the record keeping it demands.
| Eligible Salaries | Proxy at 55% | Pool Before Contractors |
|---|---|---|
| $200,000 | $110,000 | $310,000 |
| $390,000 | $214,500 | $604,500 |
| $800,000 | $440,000 | $1,240,000 |
Three Credits Stack in Ontario
An Ontario CCPC is claiming against three programmes at once, and two of the three pay cash whether or not the corporation is profitable.
- The federal investment tax credit at thirty-five percent, fully refundable within the expenditure limit
- The Ontario Innovation Tax Credit at eight percent, refundable
- The Ontario Research and Development Tax Credit at three and a half percent, non-refundable and carried forward against future tax
The Ontario credits are treated as assistance and reduce the federal pool. They do not simply add on top. A calculation that stacks all three at full rates on the same gross pool overstates the answer, which is why claims prepared on a spreadsheet often come back smaller than expected.
The Expenditure Limit Is the Ceiling on the Good Rate
The thirty-five percent refundable rate applies only within the expenditure limit. Above it the federal rate drops to fifteen percent, of which a portion is refundable for a CCPC and the rest carries forward.
The limit is reduced where the taxable capital of the associated group is large. Under the enhanced rules the limit is $4.5 million, phasing out between $15 million and $75 million of taxable capital. Most small software companies sit well below the threshold and get the full band, but a group with a funded parent or significant assets can be ground down without realising it.
Eighteen Months, and Not a Day More
Form T661 must be filed no later than eighteen months after the end of the tax year. That deadline is absolute. It cannot be extended, taxpayer relief does not touch it, and a late claim is simply not a claim.
| Fiscal Year End | T2 Due | T661 Absolute Deadline |
|---|---|---|
| 31 December 2025 | 30 June 2026 | 30 June 2027 |
| 31 March 2026 | 30 September 2026 | 30 September 2027 |
| 30 June 2026 | 31 December 2026 | 31 December 2027 |
A company that has never filed can usually still claim the last two fiscal years, and nothing before that. Every month of delay is a month of the older year running out. If the corporation has been building for four years, two of those years are already gone.
Documentation Decides the Review, Not the Claim
Claims are accepted or reduced on the strength of contemporaneous evidence. What matters is what existed at the time, not a narrative written eighteen months later.
- Commit histories and branch names tied to the experimental work
- Design documents that state the uncertainty in advance
- Sprint records and issue trackers showing approaches tried and abandoned
- Time records allocating developers to projects rather than an estimated percentage
- Test results, including the ones that failed
- Meeting notes where the technical problem was discussed
Most of this already exists in a software company’s tools. The work is connecting it to the claim, not creating it. That is very different from a manufacturing claim where the records often have to be built from scratch.
What This Calculator Does Not Cover
- Whether your specific work qualifies, which is a technical assessment rather than a calculation
- Capital expenditures, which no longer qualify federally
- Non-arm’s length contractor payments, which follow different rules
- Work performed outside Canada, which is limited
- Provinces other than Ontario
- The interaction with IRAP, where funding reduces the pool dollar for dollar
The claim is worth preparing properly once and repeating every year. Our SR&ED service covers the technical narrative, the T661, the schedules and the review if one comes.
Frequently Asked Questions
Common questions on SR&ED for software companies.
Related Calculators and Guides
More tools for technology companies.
Two Years Are Claimable, and One of Them Is Expiring
Send us your payroll register, your year end and a short description of what the team was building. We will assess what qualifies, prepare the technical narrative and the T661, and file with the T2.