Expenditures that qualify for an ITC

To calculate your SR&ED ITC, you will need to identify the current and capital SR&ED expenditures and other amounts that qualify for an ITC.

Adjusting your qualified expenditures

Your qualified SR&ED expenditures start with your total allowable SR&ED expenditures that you adjust according to amounts you paid or received.

Amounts that increase your current or capital expenditures

Amounts that increase your qualified expenditures include:

• Payment of unpaid amounts from previous years
• The prescribed proxy amount (if you used the proxy method)
• Qualified expenditures that were transferred to you (refer to Transferring non-arm’s length expenditures)
• Expenditures on shared-use-equipment for property acquired after December 15, 2024What is shared-use-equipment?

  Shared-use-equipment (SUE) is depreciable property that is used primarily for SR&ED purposes but does not include general-purpose office equipment or furniture. To qualify as shared-use-equipment, the property must meet the criteria for first-term SUE and second-term SUE.

Amounts that reduce your current or capital expenditures

To calculate your qualified expenditures, deduct the following amounts from your current or capital expenditures:

• Provincial and territorial assistance (if not renounced in your province or territory on or before your filling-due date)
• Other types of government assistance
• Non-government assistance and contract payments
• Current expenditures, other than salary or wages, not paid with 180 days of the tax year-end
• Amounts paid to a contractor that is not a taxable supplier
• 20% of arm's lengh contract expenditures and third-party payments
• Prescribed expenditures not allowed by regulations, such as:
  • Interest and other financing costs
  • A due or fee for membership in a scientific or technical society or organization
  • Legal or accounting fees
  • Expenditures for the aquisitions of used equipment
  • Other deductions (expenditures incurred in the course of earning income that will not be subject to income tax)

• Non-arm’s length transactions, including:
  • Adjustments to amounts paid for goods and services to limit the amount to the cost incurred by the non-arm's length supplier.
  • Qualified expenditures you transferred
  • Assistance allocated to you (in this case, complete Form T1145, Agreement to Allocate Assistance for SR&ED Between Persons Not Dealing at Arm’s Length)
  • Expenditures for your non-arm’s length SR&ED contracts Transferring non-arm's length qualified expenditures

    Expenditures for non-arm's length contracts do not qualify for an SR&ED ITC. However, the performer may transfer all or part of their qualified SR&ED expenditures to you.

    To transfer expenditures, both the claimant and the performer must use:

    • Form T1146, Agreement to Transfer Qualified Expenditures Incurred in Respect of SR&ED Contracts Between Persons Not Dealing at Arm's Length

    In addition to Form T1146, the performer must also submit Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim, by their income tax due date.

To learn more about calculating expenditures for an ITC, review Part 4 of Guide T4088, SR&ED Expenditures Claim - Guide to T661.

Get support with your qualified expenditures

Review the policy for qualified expenditures

Total Qualified SR&ED Expenditures for ITC Purposes Policy

SR&ED Shared-Use-Equipment Policy

Review the guide to the SR&ED expenditures claim

Guide T4088, SR&ED Expenditures Claim - Guide to T661

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