Canada does not offer a federal solar tax credit to residential homeowners in 2026. The Canada Greener Homes Grant closed in March 2024. The Canada Greener Homes Loan stopped accepting applications in October 2025. But for businesses, the federal incentive stack is substantial. A commercial solar installation can combine a 30% refundable Clean Technology Investment Tax Credit, 100% first-year expensing through enhanced CCA, and immediate deduction of pre-development costs through CRCE. This guide explains each federal incentive, how they interact, and the exact claiming process for solar contractors and commercial property owners.
Class 43.2 Expired for 2026 Acquisitions
CCA Class 43.2, which previously allowed a 50% declining balance rate for clean energy equipment, expired for property acquired after December 31, 2024. Solar equipment purchased in 2026 must be classified under Class 43.1. The good news: the reinstated enhanced first-year allowance for Class 43.1 provides 100% immediate expensing for property available for use before 2030 — which is more favourable than the old Class 43.2 rate for first-year deductions.
The Clean Technology Investment Tax Credit (CT ITC)
What Is the CT ITC?
The Clean Technology Investment Tax Credit is a refundable federal tax credit designed to accelerate business investment in clean technology. For solar PV systems, it provides a 30% credit on the capital cost of eligible equipment.
| Feature | Detail |
|---|---|
| Credit rate | 30% of capital cost (full rate with labour compliance) |
| Eligible equipment | Solar PV panels, inverters, mounting/racking, electrical wiring, switchgear, battery storage when installed with solar |
| Equipment condition | Must be new — used or refurbished equipment does not qualify |
| Eligible entities | Taxable Canadian corporations, CCPCs, certain mutual fund trusts |
| Refundability | 40% refundable for corporations — paid even with no tax liability |
| Availability period | Property acquired after March 28, 2023; available for use before 2035 |
| Phase-out | 30% through 2033; 15% in 2034; expires December 31, 2034 |
Labour Requirements
To receive the full 30% rate, projects must comply with prevailing wage and apprenticeship requirements. If these requirements are not met, the credit rate is reduced. The prevailing wage requirement means workers must be paid at least the prevailing wage for their trade in the project’s geographic area. The apprenticeship requirement means a minimum percentage of total labour hours must be performed by registered apprentices.
| Compliance Level | Credit Rate |
|---|---|
| Full compliance — prevailing wage + apprenticeship | 30% |
| Partial or non-compliance | Reduced rate (exact reduction depends on deficiency) |
What Qualifies as Eligible Solar Property?
Eligible property includes:
- Solar photovoltaic panels and modules
- Inverters and power conditioning equipment
- Mounting and racking systems
- Electrical wiring, conduit, and switchgear
- Monitoring and control systems integral to the solar installation
- Stationary electricity storage systems installed as part of the solar project
- Electric vehicle charging equipment when installed alongside solar
Labour costs are not eligible for the ITC — only the capital cost of equipment qualifies. Installation labour, engineering fees, and permitting costs are excluded from the ITC calculation.
Example: CT ITC on a Commercial Solar Project
| Project Component | Capital Cost | CT ITC (30%) |
|---|---|---|
| Solar panels (500 kW system) | $250,000 | $75,000 |
| Inverters | $45,000 | $13,500 |
| Mounting and racking | $35,000 | $10,500 |
| Electrical equipment | $20,000 | $6,000 |
| Battery storage (integrated) | $50,000 | $15,000 |
| Total eligible equipment | $400,000 | $120,000 |
This $120,000 credit is refundable at 40% ($48,000 paid in cash even with no tax liability) and the remaining 60% ($72,000) offsets tax payable.
Capital Cost Allowance (CCA) for Solar Equipment
CCA Class 43.1 — The 2026 Rule
Solar equipment acquired in 2026 must be classified under CCA Class 43.1, not Class 43.2. Here is how the classes compare:
| Class 43.2 | Class 43.1 (2026) | |
|---|---|---|
| CCA rate | 50% declining balance | 30% declining balance |
| Availability | Property acquired before 2025 only | Property acquired in 2025 and later |
| Enhanced first-year allowance | N/A (expired) | 100% for property available for use before 2030 |
Enhanced First-Year Allowance for Class 43.1
The government introduced a reinstated enhanced first-year allowance for Class 43.1 property:
| Year Property Available for Use | Enhanced First-Year Allowance |
|---|---|
| 2025 – 2029 | 100% immediate expensing |
| 2030 – 2031 | 75% |
| 2032 – 2033 | 55% |
| After 2033 | Standard 30% declining balance with half-year rule |
For solar equipment placed in service in 2026, this means 100% of the capital cost can be deducted in the first year — a more favourable outcome than the old Class 43.2 regime for first-year deductions.
Combined Tax Benefit Example
Consider a $400,000 commercial solar project in Ontario:
| Benefit | Calculation | Value |
|---|---|---|
| Clean Technology ITC | 30% of $400,000 | $120,000 tax credit |
| Enhanced first-year CCA (Class 43.1) | 100% of $400,000 × 26.5% corporate tax rate | $106,000 tax savings |
| Total first-year benefit | $226,000 (56.5% of cost) |
This combined benefit substantially reduces the after-tax cost of commercial solar in Canada. The ITC and CCA can be claimed together — they are not mutually exclusive.
How to Claim CCA
- Add the solar equipment to Class 43.1 on Schedule 8 of your tax return
- Apply the enhanced first-year allowance if the property is available for use before 2030
- Maintain documentation: invoices, delivery receipts, installation contracts, and proof of available-for-use date
- Retain records for at least six years
Canadian Renewable and Conservation Expense (CRCE)
What Is CRCE?
The Canadian Renewable and Conservation Expense allows businesses to deduct 100% of eligible pre-development and start-up costs for clean energy projects in the year they are incurred, or carry them forward indefinitely for future deduction.
Eligible CRCE Expenses
| Expense Type | Eligible? |
|---|---|
| Feasibility studies | Yes |
| Engineering and design | Yes |
| Site assessments and environmental studies | Yes |
| Project planning and management | Yes |
| Pre-feasibility studies | Yes |
| Process engineering | Yes |
| Equipment purchase | No — claim CCA and ITC instead |
| Installation labour | No |
| Permitting fees | No |
How CRCE Differs from ITC and CCA
| Incentive | What It Covers | Benefit |
|---|---|---|
| CRCE | Early-stage development costs | 100% immediate deduction |
| CCA Class 43.1 | Equipment capital cost | 100% first-year expensing (2026) |
| Clean Technology ITC | Equipment capital cost | 30% refundable tax credit |
CRCE is particularly valuable for project developers who incur significant costs before equipment is purchased. A developer can deduct feasibility study costs through CRCE, then claim the ITC and CCA on the equipment once the project proceeds.
Claiming CRCE
CRCE is claimed on the business tax return. For corporations, it flows through the T2 return. The expenses must relate to a project involving Class 43.1 or 43.2 equipment. Keep detailed records with dates, descriptions, vendor names, and amounts. The NRCan CRCE Technical Guide provides detailed eligibility criteria.
GST and HST Treatment
Federal Tax Status
Solar installations are taxable supplies subject to GST or HST across Canada. There is no federal GST/HST exemption or zero-rating for solar installations.
| Province/Territory | GST/HST Rate | Notes |
|---|---|---|
| Alberta | 5% GST | No provincial sales tax |
| Saskatchewan | 5% GST | No provincial sales tax |
| Manitoba | 5% GST | No provincial sales tax |
| Quebec | 5% GST + 9.975% QST | QST also applies |
| Ontario | 13% HST | Combined federal and provincial |
| British Columbia | 12% GST + PST | Solar PV equipment is PST-exempt (saves 7%) |
| New Brunswick | 15% HST | Combined federal and provincial |
| Nova Scotia | 15% HST | Combined federal and provincial |
| PEI | 15% HST | Combined federal and provincial |
| Newfoundland & Labrador | 15% HST | Combined federal and provincial |
Input Tax Credits
Businesses registered for GST/HST can generally recover tax paid on solar installations through input tax credits (ITCs). This means the GST/HST is not a net cost to the business — it is recovered on the next GST/HST return. The ITC is claimed on the regular GST/HST return, not on the income tax return.
British Columbia PST Exemption
British Columbia offers a Provincial Sales Tax (PST) exemption on solar PV equipment. This saves the 7% provincial portion of the tax. The exemption applies to solar panels, inverters, wiring, and related equipment. Installation services may still be subject to PST. Confirm the specific PST status of each component with the contractor.
Carbon Pricing and Solar Economics
Federal Carbon Pricing Framework
Canada’s carbon pricing system affects solar economics indirectly. The federal carbon price was set at $95 per tonne in 2026, revised down from the previously planned $110 per tonne. The price is scheduled to rise to $100 per tonne for 2027–2029, $115 per tonne in 2030, and reach $140 per tonne by 2040.
Impact on Solar Competitiveness
The carbon pricing framework affects solar economics through several mechanisms:
- Industrial carbon pricing (Output-Based Pricing System) covers electricity generation, making fossil fuel generation more expensive relative to renewables
- Clean Electricity Regulations work with carbon pricing to drive grid decarbonization
- Decarbonization Incentive Program and Future Electricity Fund direct carbon pricing revenue toward clean electricity investments
For commercial solar projects, the carbon price improves the relative economics of on-site generation versus grid electricity — particularly in provinces with carbon-intensive grids. However, the effect is modest compared to the direct impact of the CT ITC and accelerated CCA.
Provincial Variations
| Province | Carbon Pricing System | Notes |
|---|---|---|
| Alberta | TIER (Technology Innovation and Emissions Reduction) | Provincial system meets federal benchmark |
| British Columbia | BC Carbon Tax | Provincial carbon tax |
| Quebec | Cap-and-trade (linked to California) | Different mechanism from federal backstop |
| Ontario | Federal backstop (fuel charge + OBPS) | Federal system applies |
| Saskatchewan | Federal backstop | Provincial system under development |
Quebec’s cap-and-trade system operates independently of the federal carbon price. The carbon credit price in Quebec’s system is typically lower than the federal carbon price, which means the indirect benefit to solar economics is smaller in Quebec than in provinces under the federal backstop.
Model Federal Incentives into Your Solar Proposals
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Step-by-Step: Claiming Federal Solar Incentives
Confirm business entity eligibility
Verify your business is a taxable Canadian corporation, CCPC, or eligible trust. The Clean Technology ITC is not available to residential homeowners, sole proprietorships, or partnerships directly. Confirm the solar equipment will be acquired after March 28, 2023, and available for use before 2035. Review prevailing wage and apprenticeship requirements to ensure full 30% rate eligibility.
Classify equipment under CCA Class 43.1
For 2026 acquisitions, use Class 43.1 — not Class 43.2, which expired December 31, 2024. Document the acquisition date, available-for-use date, and capital cost. Because the property is available for use before 2030, it qualifies for 100% enhanced first-year expensing. Maintain invoices, delivery receipts, and installation contracts as supporting documentation.
Track and document CRCE expenses
Identify all pre-development costs: feasibility studies, engineering reports, site assessments, and project planning. These must relate to a Class 43.1 or 43.2 project. Keep detailed records with dates, descriptions, and amounts. Claim CRCE on your business tax return — 100% deductible in the year incurred or carried forward indefinitely.
File tax forms for ITC and CCA
For corporations, claim the CT ITC on Schedule 31 of the T2 return. Claim CCA on Schedule 8. The ITC and CCA can be claimed together. Calculate 30% of eligible capital cost for the ITC. Apply 100% enhanced first-year allowance for Class 43.1 property available for use before 2030. Retain all documentation for at least six years. Consider engaging a tax advisor familiar with Clean Economy ITC rules.
Account for GST or HST
Budget for GST or HST on the total project cost. If your business is GST/HST registered, recover the tax through input tax credits. In British Columbia, solar PV equipment is PST-exempt. Ensure contractor invoices show GST/HST separately. File input tax credits on your regular GST/HST return.
Stack federal and provincial incentives
The federal CT ITC can be combined with provincial incentives where available. In Quebec, stack the Hydro-Québec $1,000/kW grant with the ITC. In Ontario, combine Save ON Energy with the ITC. In BC, combine the BC Hydro rebate with the ITC. Review each provincial program’s stacking rules. Document all incentives and ensure the total does not exceed 100% of project costs.
Common Mistakes When Claiming Federal Solar Incentives
| Mistake | Consequence | Correct Approach |
|---|---|---|
| Classifying equipment under Class 43.2 in 2026 | Incorrect CCA claim; potential CRA reassessment | Use Class 43.1 for all property acquired after December 31, 2024 |
| Claiming CT ITC as a residential homeowner | Claim will be denied — ITC is for businesses only | Only taxable Canadian corporations and eligible trusts can claim |
| Including labour costs in the ITC calculation | Overstated credit; CRA may deny the excess | Only equipment capital cost qualifies — exclude installation labour |
| Missing prevailing wage or apprenticeship requirements | Reduced ITC rate instead of full 30% | Document compliance with labour requirements from project start |
| Forgetting to claim CRCE for pre-development costs | Missed deduction opportunity | Track all eligible pre-development expenses and claim them separately |
| Not maintaining adequate documentation | CRA may deny the claim on audit | Keep invoices, contracts, delivery receipts, and proof of available-for-use date for six years |
| Claiming ITC on used or refurbished equipment | Ineligible; claim will be denied | Only new equipment qualifies for the CT ITC |
| Failing to account for GST/HST in project budgeting | Cash flow shortfall | Budget for GST/HST upfront; recover through input tax credits if registered |
Related Canada Compliance Guides
- Canada Solar Compliance Hub
- Quebec Solar Compliance Guide
- Ontario Solar Regulations
- British Columbia Solar Regulations
- Alberta Solar Guide
- CSA C22.1 Solar Requirements
For solar design tools that models federal tax incentives into project economics, use the generation and financial tool to show clients the true after-tax cost and payback of commercial solar installations across Canada.
Frequently Asked Questions
What is the Canada Clean Technology Investment Tax Credit for solar?
The Clean Technology Investment Tax Credit (CT ITC) is a 30% refundable tax credit on the capital cost of eligible clean technology property, including solar PV systems, wind energy systems, stationary electricity storage, and low-carbon heating equipment. It applies to property acquired after March 28, 2023, and available for use before 2035. For corporations, 40% of the credit is refundable — meaning it is paid out even if the company has no current tax liability. The credit rate drops to 15% in 2034 and expires December 31, 2034. To receive the full 30% rate, projects must meet prevailing wage and apprenticeship requirements.
Can residential homeowners claim the federal solar tax credit in Canada?
No. The Clean Technology ITC is available only to businesses — taxable Canadian corporations and mutual fund trusts that are real estate investment trusts. Canadian-Controlled Private Corporations (CCPCs) can claim the credit, making it accessible to small and medium solar contractors and commercial property owners. Residential homeowners are not eligible for the CT ITC. The Canada Greener Homes Grant, which previously offered up to $5,000 to residential homeowners, closed to new applicants on March 31, 2024. The Canada Greener Homes Loan closed on October 1, 2025. No federal residential solar incentive currently exists.
What CCA class applies to solar equipment in Canada in 2026?
Solar equipment acquired in 2026 falls under CCA Class 43.1 with a 30% declining balance rate. Class 43.2, which previously allowed a 50% declining balance rate, expired for property acquired after December 31, 2024. However, the government introduced a reinstated enhanced first-year allowance for Class 43.1 property acquired after 2024 and available for use before 2030. This means solar equipment placed in service in 2026 qualifies for 100% immediate expensing in the first year. The rate phases down to 75% for 2030–2031, 55% for 2032–2033, and returns to the standard 30% declining balance with half-year rule after 2033.
What is the Canadian Renewable and Conservation Expense (CRCE)?
The Canadian Renewable and Conservation Expense (CRCE) allows businesses to deduct 100% of eligible pre-development and start-up costs for clean energy projects in the year they are incurred, or carry them forward indefinitely. Eligible expenses include planning, engineering, feasibility studies, process engineering, and pre-feasibility studies. To qualify, the project must involve clean energy equipment that falls under CCA Class 43.1 or 43.2. CRCE is claimed on the business tax return and is separate from the Clean Technology ITC and CCA claims. It is particularly valuable for early-stage project development where significant costs are incurred before equipment is purchased.
Are solar installations subject to GST or HST in Canada?
Yes. Solar installations are taxable supplies subject to GST or HST across Canada. There is no federal GST/HST exemption or zero-rating for solar installations. GST at 5% applies in Alberta, Saskatchewan, Manitoba, Quebec, Yukon, Northwest Territories, and Nunavut. HST applies in Ontario at 13%, British Columbia at 12%, and Atlantic Canada at 15%. British Columbia offers a Provincial Sales Tax (PST) exemption on solar PV equipment, which saves the 7% provincial portion. Alberta has no provincial sales tax, so only the 5% GST applies. Businesses can generally recover GST/HST paid on solar installations through input tax credits.
