Maximizing SR&ED in 2026: Complete Guide to Capital Costs and All 2026 SR&ED Rules

16 minute read

TLDR;

The SR&ED program changed in 2026, and companies that don’t understand these changes will leave money on the table. Capital expenses are now SR&ED eligible, limits have increased, and documentation rules have tightened. Maximizing SR&ED in 2026 comes down to knowing about these changes and taking the steps outlined in this guide.

Introduction: The Biggest SR&ED Change in a Decade: Many Startups Missing Out

If you filed SR&ED for your 2025 fiscal year and claimed zero capital costs, you may have left money on the table.

As of 2026, the Canada Revenue Agency (CRA) restored capital expenditure eligibility under SR&ED for the first time since 2014. This is the most significant change to the SR&ED program in over a decade, and it went into full effect for the 2025 tax year. The CRA updated its official SR&ED Policy on May 22, 2026, to reflect these changes. If your company has purchased equipment, computers, cameras, drones, lab gear, specialized hardware, or other depreciable assets since December 16, 2024, those costs are likely claimable as part of your SR&ED investment tax credit.

This SR&ED guide isn’t like the others out there. It’s written for founders, CTOs, CFOs, and CEOs who want straight answers: What’s changed about the SR&ED program, what it means in practice, and exactly what to do to maximize their 2026 SR&ED claim. No jargon. No confusing CRA jargon. Just real, actionable SR&ED guidance.

At GrowWise, we work with startups, scaleups and SMBs across Canada who want SR&ED to not suck. We’ve built an AI-driven, expert-guided approach to SR&ED, focusing on reducing the time and effort required from you and your team to submit a strong, maximized CRA-compliant SR&ED claim. If you want to skip the reading and directly find out if you are maximizing your SR&ED refunds in 2026, book a no-commitment, no-pressure 30-minute consultation call with us today.

Book a free consultation: https://growwise.ai/intro/

Quick Summary: What Actually Changed in 2026 SR&ED

Here’s the plain-English summary of what changed, when it took effect, and what it means for you:

Change #1: Capital costs are SR&ED eligible

This change is effective for capital equipment purchased after December 16, 2024. From 2014 to December 15, 2024, you could not claim capital equipment as an SR&ED expense. That rule has been reversed. Equipment, machinery, specialized hardware, computers, cameras, drones, and other depreciable assets purchased after December 15, 2024, can now be claimed as SR&ED capital expenditures. Not all assets qualify, but capital assets used specifically (90% or more over their useful life) for the SR&ED project are now SR&ED eligible. This means you can receive ~40% of those capital costs back through SR&ED. Calculate the impact on your SR&ED claim here: 2025 SR&ED calculator

Change #2: The refundable ITC expenditure limit doubled

This is effective for tax years starting on or after December 16, 2024. Canadian-Controlled Private Corporations (CCPCs) now benefit from a doubled annual expenditure limit to qualify for the enhanced 35% refundable ITC. The limit went from $3 million to $6 million, meaning the maximum refundable credit is now up to $2.1 million per year (up from $1.05 million). This is not a new rate. The 35% rate is unchanged. The doubling means significantly more of your eligible spending now qualifies at the higher refundable rate.

Change #3: Taxable capital phase-out thresholds widened

Growing companies used to lose access to the full 35% refundable SR&ED ITC once their taxable capital reached $10 million (and lost it entirely at $50 million). Those thresholds are now $15 million and $75 million. This means more mid-stage companies remain eligible for the full enhanced credit for longer. Additionally, CCPCs can now elect to use gross revenue instead of taxable capital for this phase-out calculation, which is a more favourable option for many tech companies.

Change #4: Eligible Canadian Public Corporations (ECPCs) can now access the enhanced refundable credit

Previously, the 35% refundable ITC was only available to CCPCs. Bill C-15 extends eligibility to eligible Canadian public corporations. If your company recently went public or is considering it, this is worth reviewing with your SR&ED consultant.

There are several other changes to the program, including the creation of a pre-claim approval process, that the CRA has yet to publish all of the details about. These changes are very positive and indicate that the government is continuing to focus on supporting innovation and R&D in Canada, especially for scaling and larger companies that will benefit most from these changes.

In my experience working with scaling companies and asset-heavy companies such as manufacturing or biotech companies in 2025-2026, the most commonly missed opportunity is not documenting the capital assets sufficiently, and therefore missing out on claiming those expenses as SR&ED eligible.

What Counts as Capital for SR&ED in 2026? (The Exact Answer)

This is the question everyone wants answered plainly. What expenses are actually considered capital assets and claimable under SR&ED? Here it is:

Assets (equipment, machinery, tools, etc.) used in testing, experimenting, prototyping, or generally required to carry out the SR&ED project can be eligible as capital assets within the SR&ED claim. This means ~40% of the expenses will be reimbursed through SR&ED (for CCPCs).

The 90% Rule: The Core Test for SR&ED Capital Claims

In order to claim the entire asset cost as SR&ED eligible, it must meet the “all or substantially all” (ASA) test, which the CRA defines as 90% or more. Specifically, either:

Option A: The equipment is used 90% or more of its operating time for SR&ED activities over its expected useful life, OR
Option B: 90% or more of the value of the property will be consumed in the prosecution of SR&ED.

Important: This is an intent-based test, not a retrospective use test. CRA looks at your intent at the time of purchase. That means your documentation at the time of acquisition matters enormously. The question CRA will ask is: “When you bought this, did you intend to use it primarily for R&D?”

The “Shared-Use Equipment” Path: When You Can’t Meet the 90% Threshold

What if you use equipment for both R&D and commercial work, and it doesn’t hit the 90% threshold? There is a second path: Shared-Use Equipment (SUE). Under the SUE rules, if a piece of equipment is primarily used (not ASA, but primarily) in SR&ED during its first two years of ownership, a portion of its cost can still qualify for the ITC.

First-term SUE applies in year one; second-term SUE applies in year two. The CRA updated its SR&ED Shared-Use Equipment Policy on May 22, 2026, alongside the Capital Expenditures Policy. General-purpose office equipment or furniture is explicitly excluded from SUE eligibility, but computers and specialized hardware are not.

Examples of SR&ED Capital Assets: Eligible and Ineligible

The core of SR&ED capital asset eligibility is that if you purchase a piece of equipment, and there is a 6-month SR&ED project involving the scaling of production using that equipment, but then once it is operational, the equipment is used for day-to-day manufacturing, nothing experimental. In this case, since the objective of the equipment is production, not experimentation, the equipment would not be SR&ED eligible.

Conversely, purchasing tools, lab equipment, measuring devices, or assets that are used exclusively for testing, prototyping, iterating and experimenting are SR&ED eligible.

For example, a client of ours purchased several drones that are used to test and understand the limits of their geospatial analysis technology. The drones are used exclusively to gather data, test and experiment with the core technology, so the expenses are SR&ED eligible. Another client of ours had to purchase several work benches, drills, tools, and other fairly standard equipment for the purpose of testing and analyzing their prototypes to improve the mechanical strength. All of that work relates back to the core SR&ED project, and therefore the expenses were eligible.

Examples of What Can be Claimed as SR&ED Capital

(if used 90%+ for SR&ED, recorded as a capital asset, purchased after Dec 15, 2024):

Servers and hardware
Cameras, drones, and recording equipment used in testing or development
Lab equipment and scientific instruments
Specialized machinery or fabrication equipment
Testing rigs, prototyping equipment, and custom-built tools
Industrial hardware or sensors used in R&D processes
Tools and equipment required to carry out testing
Laptops or phones used exclusively for data collection, analysis or testing (general-purpose tech is typically not eligible)

What Cannot be Claimed as SR&ED Capital:

Inventory items
Equipment purchased before December 16, 2024
Equipment used primarily outside Canada
Assets that will be directly used in production and sold as a final product (i.e. purchasing a drone that is modified and then sold)
Vehicles
Tools or equipment used mainly for day-to-day production
General-purpose office furniture (desks, chairs, filing cabinets, photocopiers, fax machines, telephones)*

*In most cases, companies use the “Proxy Method” to calculate their SR&ED. If the company has extensive overhead costs and maintains very detailed records of those expenses, it can sometimes make sense to use the “Traditional method” to calculate SR&ED. In the case of the Traditional method, general overhead costs such as office equipment, office rentals, etc., can be claimed. Not sure which method is right for you? GrowWise can help you decide -> Book a Free Assessment: https://growwise.ai/intro/

Depreciating Asset Rule: Recorded as a Capital Asset in Your Books

In order to claim an asset as SR&ED eligible, you must ensure that it is recorded as an asset in your books. To support the claim, these purchases should be capitalized in the company’s accounting records and recorded as capital assets on the balance sheet, rather than expensed through the income statement. The CRA will expect the accounting treatment to be consistent with the assets being treated as capital property for tax and financial reporting purposes.

If assets are recorded as expenses in the books but as depreciable assets for SR&ED, that is a red flag to the CRA, and you are increasing your risk of an audit.

How to Maximize Your SR&ED Claim in 2026: The Practical Playbook

This section is where most SR&ED guides fail you. They’ll say “keep good records” and “identify your eligible activities” and leave it there. That is not enough. Here’s what maximizing your SR&ED claim actually requires, with specifics:

Tactic #1: Ensure all eligible work is allocated to SR&ED projects

The single biggest driver of a larger SR&ED claim is documentation captured at the time the work happens. Not six months later. Not in a year-end interview where your engineers try to reconstruct what they did.

Option A: Set this up in your existing tools:

In Jira: Create a label called “SR&ED” or “R&D” and apply it to any ticket involving systematic investigation, testing against technical uncertainty, or development of new technology. Require engineers to tag tickets at creation, not during sprint retrospectives. Add a required field in your ticket template: “Does this work involve solving a technical problem with no known solution?” A yes answer is a strong signal the work is SR&ED eligible.

In Linear: Use labels and projects. Create an “R&D” project or cycle tag. When closing a ticket that involved significant technical iteration or novel problem-solving, add the tag. Require a one-line description in the PR or ticket: “What technical problem did this solve, and was the solution known in advance?”

In Notion / Confluence / GitHub: Document experiments and test results as they happen. Log what you tried, why you tried it, what happened, and what you learned. This is the contemporaneous documentation that CRA will ask for in a review.

In your time-tracking tool (Harvest, Toggl, etc.): Create an “SR&ED” or “R&D” project or if you have multiple SR&ED projects, create each specific project. Engineers should log time against it when working on eligible activities. This is direct evidence of SR&ED hours and is one of the most important inputs in your claim.

Option B: Use GrowWise SR&ED Tracking Technology

At GrowWise, we built our approach around solving this exact problem by making it easy to capture technical work as it happens, without disrupting how teams operate. Instead of relying on a stressful year-end reconciliation or trying to remember what happened 12 months ago, we’ve built the tech to facilitate year-round SR&ED tracking.

This happens in two ways.

First, we capture the technical context that does not naturally get written down. Through short (~10-minute), scheduled monthly check-in calls with our AI SR&ED consultant, your technical team members are prompted to share what they worked on, what challenges they encountered, what experiments were performed, and what did not work. This ensures that the story around the attempts and failures (which is easily captured in a quick conversation) gets documented, and these are the parts of the narrative that often get lost when looking at the Jira/Github documentation alone.

Second, we build on the systems your team already uses. Our platform ingests technical details directly from tools like Jira, GitHub, Excel, Slack, and other documentation tools. The small pieces of context your team is already adding, such as notes in tickets, commits, or project updates, are automatically pulled into a centralized SR&ED record.

Together, this creates a centralized, continuously updated record of SR&ED activity across your team. It ties technical work to specific projects, timelines, and team members, without requiring engineers to change how they work, ensuring you are maximizing SR&ED in 2026.

The goal is not to introduce a new process or ask more of your team. It is to meet teams where they already operate and fill in the gaps where critical technical detail would otherwise be lost.

This combination of lightweight, ongoing capture and integration with existing tools is what our clients love about working with us. When we implement these systems throughout the year, the year-end SR&ED process becomes more of a review than a full reconstruction.

The GrowWise approach was built to reduce the year-end SR&ED stress, improve the strength and size of the claim, and create documentation that can withstand CRA scrutiny.

If you want to learn more about the GrowWise approach to year-round SR&ED tracking, book a call with us now: https://growwise.ai/intro/

Tactic #2: Record Capital Assets Properly in Your Books From Day One

This is the detail that trips up even experienced teams. To claim equipment as an SR&ED capital expense, it must be recorded as a capital asset in your accounting records, not expensed. Here’s what that means in practice:

Step 1 – Capitalize the asset in QuickBooks/Xero/your accounting system: When you purchase a drone, server, camera, or piece of equipment intended for R&D, it must be recorded as a fixed asset on your balance sheet, not as an operating expense on your P&L. This is how CRA knows it’s depreciable property.

Step 2 – Note SR&ED intent at time of purchase: When you add the asset to your books, add a note or memo in the accounting record stating: “Acquired for [X project] for use in SR&ED activities.” This is your contemporaneous evidence of intent. If CRA asks, this entry, combined with your project documentation, is what defends the claim.

We had a client in the manufacturing industry who bought $150,000 in test equipment, expensed it in their P&L, and couldn’t claim it as SR&ED capital because it wasn’t capitalized. We went back and amended their classification, which resulted in them receiving $64,000 in SR&ED tax credits for that asset. We work directly with our client’s accountants to ensure assets are properly classified to ensure CRA compliance.

Tactic #3: Keep a Logbook for Equipment Used in SR&ED

CRA’s official SR&ED Capital Expenditures Policy (updated May 22, 2026) explicitly states that the onus is on the claimant to maintain logbooks or other documentation that support the SR&ED use of equipment for the period. This is not optional. If you’re claiming a drone, a specialized camera system, or a test server as SR&ED capital, you need to be able to show when it was running and what it was being used for.

A practical equipment logbook should capture:

Date of each use
Project or activity the equipment was used for
Approximate time used (in hours or as a % of the day)
Who used it
Whether the use was for SR&ED or commercial activity

This doesn’t have to be fancy. A shared Google Sheet, a Notion table, or a simple spreadsheet will do. What matters is that it’s maintained consistently and close to real time. Idle time is NOT counted as operating time. Setup and switchover time generally is counted as SR&ED operating time, as long as it’s reasonable.

The Real Questions Founders Are Asking about Maximizing SR&ED in 2026 (Answered Directly)

These are the questions that come up most often in our conversations with founders, CTOs, and CFOs. Here are direct answers:

Can I claim a laptop or computer as an SR&ED capital expense?

Yes, potentially. The CRA explicitly states that computers, including hardware, software, and ancillary equipment, are NOT considered general purpose office equipment or furniture. A laptop purchased after December 15, 2024, that is used 90% or more for SR&ED work can be claimed. However, a developer’s general-purpose work laptop used for a mix of R&D, meetings, email, and admin will typically fail the 90% test. A dedicated server or testing machine used primarily in R&D is a much stronger claim. The more specialized and dedicated to R&D the device is, the stronger the case.

Can I claim a drone or camera used in R&D testing?

Yes, if they meet the 90% test and you can document it. Drones and cameras used primarily for R&D testing (for example, a drone used to test autonomous navigation software, or a high-speed camera used for computer vision model training) are depreciable equipment. They qualify as SR&ED capital expenditures if: (a) purchased after December 15, 2024, (b) recorded as capital assets in your books, (c) intended at the time of purchase to be used 90%+ for SR&ED, and (d) supported by a logbook showing SR&ED use. The same drone used partly for marketing videos would not be eligible. Keep the R&D use and the commercial use clearly separated.

Can I claim used equipment or refurbished gear?

Partially. Used equipment can be included in your SR&ED expenditure pool as a deduction, but it does NOT qualify for the investment tax credit (ITC). Only new equipment that has never been previously used or acquired for any purpose qualifies for the ITC. Refurbished equipment is a gray area: if the refurbishments are so significant that the equipment can be said to be essentially new, it may qualify for ITC. The CRA looks at whether the refurbishment replaces a substantial proportion of major parts and brings the equipment to a “current state of the art.” Simply replacing worn parts does not count.

If I sell equipment I claimed as SR&ED, do I have to pay anything back?

Potentially, yes. If you claimed the ITC on SR&ED equipment and then sell it or convert it to commercial use, CRA’s ITC recapture rules may apply. The recapture is calculated based on the proceeds of disposition relative to the original cost and the undeducted balance in your SR&ED pool. This is not a reason to avoid claiming capital costs, but it is a reason to plan ahead. If you think you might sell certain equipment within a few years, discuss the recapture implications with your SR&ED consultant before claiming it.

We’re a software company. Does any of this apply to us?

Yes, and probably more than you think. For software companies, the capital rules are most relevant if you have dedicated testing servers, ML training hardware (GPUs), and specialized dev environments. Software development claims are typically more salary-based and contractor-based claims. Read our full guide: Is Software Development Eligible for SR&ED? Ultimate 2026 Guide

Your 2026 SR&ED Action Checklist: What to Do Right Now

Whether you’ve never filed SR&ED before or you’ve been claiming for years, here is a practical checklist of what to do right now to ensure you are maximizing SR&ED in 2026:

[1] Review all equipment purchases since December 16, 2024. Make a list of every piece of equipment your company has bought that is used for R&D. Include purchase date, cost, what it’s used for, and approximate % of time it’s used for SR&ED. If you purchased significant capital assets in previous years but didn’t claim them, it might make sense to go back and amend your claim to add those expenses. If you think this might apply to you, let’s talk: contact@growwise.ai

[2] Confirm each asset is recorded as a capital asset in your accounting system (not expensed). Flag any that were expensed and discuss with your accountant whether reclassification is possible.

[3] Add a memo or note in your accounting system for each capital asset indicating the SR&ED intent at the time of purchase.

[4] Set up a logbook for each major piece of R&D equipment. This can be a simple Google Sheet. Log date of use, project, hours, and purpose.

[5] Add SR&ED tagging to your Jira, Linear, or project management tool. Make it a workflow step, not an afterthought. Alternatively, you can reach out to us at GrowWise to get set up (for free) on our year-round SR&ED tracking platform.

[6] Start documenting experiments as they happen. Create a Notion page or Confluence document per R&D project that tracks technical uncertainty, hypotheses, tests, results, and conclusions.

[7] Book a call with a GrowWise SR&ED consultant. We’ll review your eligible work, estimate your claim, help you with year-round SR&ED tracking, and handle your claim filing. -> Book My Free Consultation: https://growwise.ai/intro/

GrowWise Take: Why This Moment Matters for Founders

It is great to see the federal government’s push to increase the SR&ED program. Despite there being more money available, they continue to make the process of applying for the funding more and more complicated. That is where we come in. We work with teams that are new to SR&ED, having difficulty understanding the program, all the way up to large organizations that have been claiming for years and want a simpler approach to tracking and claiming.

These SR&ED changes are very optimistic and mainly serve to further support the midmarket companies with significant capital and other expenses. Ignoring these changes will mean leaving tens, if not hundreds of thousands of dollars, on the table.

In the clients we work with at GrowWise, we have already seen these changes add over $1M in SR&ED refunds, especially the inclusion of capital expenses. It is fantastic to see these clients getting more non-dilutive funding to fuel their innovation and further expand their teams.

I find these changes genuinely exciting, and I love working with companies that were expecting a $200k SR&ED return, who are now seeing a $300-500k return thanks to these exciting upgrades to the SR&ED program.