Ontario 2026 budget highlights: small business tax cut, AI funding, LCBO revenue declining

Queen’s Park, in Toronto, Nov. 6, 2025.THE CANADIAN PRESS/Eduardo Lima

The Ontario government tabled a budget Thursday that focused on developing a resilient economy amid geopolitical uncertainty.

The province is expecting to end this fiscal year with a $12.3-billion deficit, down from the $14.6 billion projected in last year’s budget. It is projecting a deficit of $13.8 billion in 2026-27 – a big jump from the previously forecast $7.8 billion.

The province’s net debt is now projected at $485 billion in 2026-27.

Here are the highlights:

TAX CUT FOR SMALL BUSINESSES

The budget proposes cutting the small business corporate income tax by 30 per cent, dropping the current tax rate of 3.2 per cent to 2.2 per cent, effective July 1.

The government says this will benefit more than 375,000 small businesses across the province and save eligible businesses up to $5,000 per year.

The government also intends to lower the cost of capital investments by allowing immediate 100 per cent writeoffs on a range of expenditures, including research and development and manufacturing machinery and buildings.

The province says those measures will provide more than $3.5 billion in tax relief to businesses over four years.

• READ MORE: Ontario reveals 2026 budget. Here’s how it could affect your pocketbook

HEALTH CARE FUNDING

The budget allocates over $1.1 billion in new funding for hospitals, which the government says will help deliver high-quality care and system efficiency. That’s more than a billion dollars less than what the Ontario Hospital Association has said the province’s overburdened hospital sector needs.

The province also plans to spend $1.1 billion over three years to expand home and community health-care services provided by nurses, personal support workers and therapists.

The government also proposes $186 million in new funding for the Ontario Autism Program, bringing its total budget to $965 million. The budget says the new investment will enable more children to access clinical services for autism care.

HOUSING STARTS DOWN

The budget notes that the housing starts projection for 2026 is 64,800 units, down by about 10,000 units from what was forecast in the 2025 budget.

The government has said its plan to temporarily expand HST rebates on the purchase of new homes, announced ahead of the budget, will spark an additional 8,000 housing starts.

Ontario has been steadily lowering projections for new home construction levels, with the finance minister conceding last year that the government’s goal of building 1.5 million homes in 10 years has become a “soft” target.

• READ MORE: Here is how Ontario’s 2026 budget will impact Toronto

RESEARCH AND INNOVATION FUNDS

The budget proposes a host of new investments for developing artificial intelligence and quantum technologies, along with research into life sciences and the agri-food sector.

For example, it allocates $107 million over three years to accelerate the development of critical technologies, including AI, quantum technologies, robotics and defence manufacturing.

It also earmarks $24 million over three years for a fund that supports enterprises in the life sciences sector, including medical isotopes.

PROTECTION OF CERTAIN PENSION BENEFITS

The budget proposes to boost the Pension Benefits Guarantee Fund, which protects members and beneficiaries of certain single-employer defined benefit pension plans in case of an employer’s bankruptcy.

The fund currently guarantees the first $1,500 of a person’s monthly pension benefits in case of a bankruptcy or a pension plan shortfall. The government is proposing to double that guarantee limit to $3,000 per month, saying it would be the largest increase since the fund was created in 1980.

LCBO REVENUE DECLINING

The budget says the Liquor Control Board of Ontario’s net income is expected to be about $1.9 billion, down from about $2.3 billion projected in last year’s fiscal update.

Officials say the downward trend primarily reflects lower alcohol markups, increased support programs for local producers and changes in consumer preferences.

A recent report from Statistics Canada found that people across the country are buying less booze, leading to a marked decline in alcohol earnings for provincial and federal governments.

This report by The Canadian Press was first published March 26, 2026.

Kathryn Mannie, The Canadian Press