How does the clean technology investment tax credit work, and what rate does my client get?
The clean technology investment tax credit refunds up to 30% of the capital cost of new clean technology property available for use from March 28, 2023 to December 31, 2033, and 15% in 2034. Without the labour election the rate drops 10 points, to 20%. Only taxable Canadian corporations and REITs that are mutual fund trusts can claim it.
What rate does the property earn, with and without the labour election?
The rate depends on when the property becomes available for use and on whether your client elects to meet the labour requirements canada.ca. The property also has to be acquired after March 27, 2023 and before January 1, 2035.
| Property available for use | Rate with the labour election | Rate without it |
|---|---|---|
| March 28, 2023 to December 31, 2033 | 30% | 20% |
| January 1 to December 31, 2034 | 15% | 5% |
| 2035 and later | nil | nil |
In the Act, the rate is the "specified percentage" in ITA 127.45(1): 30% for property acquired from March 28, 2023 to the end of 2033, 15% in 2034 and nil after, and 127.45(4) deems the property not acquired until it becomes available for use laws-lois.justice.gc.ca. Some firm summaries still quote a graduated phase out from 2032 that came from early proposals. The enacted schedule is the one above.
The labour requirements don't apply to off road zero emission vehicles or low carbon heat equipment, so those categories aren't exposed to the 10 point cut canada.ca.
Who can claim the credit, and what property qualifies?
Only a taxable Canadian corporation or a mutual fund trust that is a real estate investment trust can claim, including one that is a member of a partnership canada.ca. An individual, a sole proprietor or another kind of trust gets nothing. Your client can stack it with the Atlantic investment tax credit, but generally only one clean economy ITC applies to the same property.
The property must be new equipment situated in Canada and intended for use exclusively in Canada canada.ca. The eligible categories:
| Category | Notes |
|---|---|
| Solar, wind and water electricity generation | A test wind turbine is excluded |
| Concentrated solar energy equipment | |
| Fixed location electrical storage, pumped hydro storage | Not equipment that burns fossil fuel |
| Active solar heating, air source and ground source heat pumps | No labour requirements |
| Off road zero emission vehicles and their charging or hydrogen refuelling equipment | No labour requirements |
| Geothermal electricity or heat equipment | Not part of a system extracting fossil fuels for sale |
| Small nuclear energy property | |
| Waste biomass electricity or heat equipment | Acquired after November 20, 2023 |
Property leased out qualifies only when the lessee is a taxable Canadian corporation, a REIT that is a mutual fund trust, or a partnership whose members are all taxable Canadian corporations, and the lessor's principal business is selling, servicing or leasing such property, lending money or buying receivables canada.ca.
How much does a $500,000 solar array with a $100,000 grant earn?
Capital cost includes the purchase price, related legal, accounting and engineering fees, and site preparation, delivery, installation and testing. It's reduced by any government or private assistance received or reasonably expected by the end of the year the property becomes available for use canada.ca. Preliminary costs (permits, feasibility studies, front end design, land clearing, temporary access roads) never count.
| Step | With the labour election | Without it |
|---|---|---|
| Installed cost, available for use in 2026 | $500,000 | $500,000 |
| Less provincial grant | ($100,000) | ($100,000) |
| Capital cost for the credit | $400,000 | $400,000 |
| Rate | 30% | 20% |
| Refundable credit | $120,000 | $80,000 |
| Capital cost left for CCA | $280,000 | $320,000 |
Skipping the election costs this client $40,000 of credit. The CCA line follows from ITA 13(7.1)(e), which takes the amount deducted under 127.45(6) out of the capital cost of the property from the year after it's acquired, so the first year's CCA still runs on $400,000 laws-lois.justice.gc.ca. Solar equipment that is also class 43.1 or 43.2 can get accelerated CCA on top
canada.ca; the class rates are on the CCA classes table.
One more trap: an amount still unpaid 180 days after the tax year end drops out of capital cost until it's paid canada.ca.
What do the labour requirements demand, and what does a miss cost?
They apply to preparing or installing the property on or after November 28, 2023. Covered workers on the designated work site, including a contractor's workers, must get at least the prevailing wage under the eligible collective agreement, and Red Seal apprentices must work at least 10% of Red Seal hours during the year canada.ca. Your client elects and attests for each designated work site on Form T2SCH75.
| Failure | Consequence (latest published figures) |
|---|---|
| Worker paid under the prevailing wage | $22 per worker per day for 2025 ($21 for 2024), plus a top up with interest |
| Apprentice hours short | $54 per hour of shortfall for 2025 ($52 for 2024) |
| Top up not paid by the deadline | Penalty of 120% of the top up |
| Gross negligence or intentional failure | Reduced rate only, plus 50% of the difference between the two credits |
The CRA hasn't posted the 2026 indexed penalty amounts on that page as of October 2026. A top up paid to a worker is salary and wages, and it doesn't earn any tax credit itself canada.ca.
When does the CRA take the credit back?
Recapture can hit in any year for property acquired in that year or any of the preceding 10 calendar years, when the property is converted to a use that isn't clean technology, exported from Canada or disposed of canada.ca. The amount comes from a formula and can't exceed the credit claimed on that property. ITA 127.45(11) and (12) set the rule and formula, and 127.45(15) makes your client report the event
laws-lois.justice.gc.ca.
A taxable Canadian corporation can defer recapture on a transfer to a related taxable Canadian corporation that keeps the property in a clean technology use, reported by the transferor's filing due date. Partnerships and REITs can't use that deferral canada.ca. A disposition also feeds the usual CCA math, covered on the recapture and terminal loss page.
How do you claim it on the T2?
A corporation completes Form T2SCH75, enters the credit on line 155 of Schedule 31 and includes it in line 780 of the T2 canada.ca. A partnership files T5013SCH75 and reports each member's share on the T5013 slip (box 265 for the credit, box 266 for the labour addition to tax, box 267 for recapture). A REIT files Form T1098 with its T3.
The credit is deemed paid on account of tax on the balance due day, so it's refunded even when the corporation owes nothing laws-lois.justice.gc.ca. The form is due with the return, and the CRA may accept it late if filed by the later of December 31, 2026 and one year after the filing due date
canada.ca.
Natural Resources Canada gives the engineering and scientific guidance on whether equipment is clean technology property, while the CRA administers the claim canada.ca.
Sources
Can a sole proprietor claim the clean technology ITC on solar panels?
No. The credit is limited to taxable Canadian corporations and REITs that are mutual fund trusts, so a sole proprietor or an individual can't claim it canada.ca. An incorporated business that owns the property can.
Does a heat pump get 30% even if my client skips the labour election?
Yes, in practice. The CRA says the labour requirements don't apply to low carbon heat equipment, which includes air source and ground source heat pumps, so the 10 point reduction isn't triggered canada.ca. The property still has to be new and used exclusively in Canada.
Is the rate set by the acquisition date or the available for use date?
The available for use date, in practice. The CRA's table keys the rate to the date the property becomes available for use, and the property must also be acquired after March 27, 2023 and before 2035 canada.ca. The Act's definition in ITA 127.45(1) is worded by acquisition date, but 127.45(4) deems clean technology property not acquired before it becomes available for use, so equipment bought in late 2033 and commissioned in 2034 earns 15%
laws-lois.justice.gc.ca.
Can my client claim the clean technology ITC and the CCUS ITC on the same project?
On the same property, no: generally only one clean economy ITC applies per property. A project with different types of eligible property can carry more than one credit, each on its own property canada.ca.
General information for the tax year shown, not advice for a specific client. Confirm the facts before you file or remit.