How do I fill out Form T661 for an SR&ED claim, part by part, on the 2026 version?
Form T661 (version 26, updated May 15, 2026) has 10 parts: a Part 2 for each project, with descriptions capped at 350, 700 and 350 words, then Part 3 for expenditures, where line 160 or 162 locks in the proxy or traditional method. File it with Schedule 31 within 18 months of year end.
What does each part of the 2026 T661 ask?
The current form is version 26 of the T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim, and the CRA last updated it on May 15, 2026 canada.ca. It has 10 parts. Your client's money is worked out in Parts 3 to 6; the review starts with Part 2.
| Part | What it asks | Key lines |
|---|---|---|
| 1, general information | Name, tax year, business number, number of projects, financial and technical contacts | 010, 050, 100 to 125 |
| 2, project information | One per project: identification, the three descriptions, who did the work, evidence on hand | 200 to 282 |
| 3, SR&ED expenditures | Method choice, then salary, materials, contracts, leases, overhead, capital | 160, 162, 300 to 400 |
| 4, qualified expenditures for the credit | Adds the PPA, removes assistance and items that earn no credit | 500 to 570 |
| 5, prescribed proxy amount | Salary base and the PPA, proxy method only | 810 to 860 |
| 6, project costs | Costs by project (6A), capital property (6B), shared use equipment (6C) | 750 to 796 |
| 7, additional information | Statistics Canada data: funding sources, type of work, SR&ED headcount | 600 to 638 |
| 8, claim checklist | Items to confirm before filing | None |
| 9, claim preparer information | Each preparer, business number, billing arrangement and fee | 935 to 975 |
| 10, certification | Who certifies the form, and the date | 165, 170, 175 |
The line ranges come from the CRA guide to the form, T4088 canada.ca. The CRA says that guide is being revised, so it posts interim instructions for the lines version 26 added
canada.ca. Line 050 must match the number of projects you list in Part 6A, line 750.
Part 2 gives each project 350, 700 and 350 words
Section B of Part 2 is the technical narrative. Line 242 asks for the scientific or technological uncertainties (350 words at most), line 244 for the work done in the tax year to overcome them (700 words), and line 246 for the advancements achieved or attempted (350 words) canada.ca. Whether the work qualifies at all is a separate question, covered on the SR&ED eligibility page.
| New line in version 26 | What to enter |
|---|---|
| 207 | Field of research code from Statistics Canada's CRDC 2020, first five digits only |
| 212 and 214 | Tick 212 if the project got pre claim approval, and give the case number on 214 |
| 262 | The 10 most expensive depreciable properties acquired after December 15, 2024 used in the project |
| 263 | Each property's operating time on the project as a percentage of its operating time for the whole year |
The new lines and their instructions sit on the CRA's interim page canada.ca. The CRDC code can differ from your client's business field: it's the field where the advancement was attempted.
Lines 270 to 282 are a checklist of the evidence your client holds, such as records of hypotheses, test results and time records. Tick what exists and keep it; the guide says not to send those documents with the claim canada.ca.
You may file Part 2 for only the 20 largest projects by dollar value, but the cost of every project still goes in Part 6. If the CRA asks for a missing Part 2 and doesn't get it, that project's expenditures are disallowed canada.ca.
Which Part 3 lines carry the money?
Part 3 builds the allowable expenditures. Version 26 split the total: line 380 is now current spending and line 400 adds capital from line 390 canada.ca.
| Line | What goes on it | The catch |
|---|---|---|
| 300 | Salary of employees who are not specified employees, for SR&ED in Canada | Prorate by time on SR&ED |
| 305 | Same, for specified employees | No bonuses or profit based pay; capped at 5 times the YMPE |
| 307 and 309 | Salary for SR&ED done outside Canada | Together, no more than 10% of Canadian SR&ED salary |
| 310 and 315 | Salary unpaid 180 days after year end goes on 315 | Claimed on 310 in the year it is paid |
| 320 and 325 | Materials consumed and transformed | Cleaning supplies, solvents and test tubes are overhead, not materials |
| 340 | Contracts with arm's length performers in Canada | Part 4 strips 20% for the credit |
| 345 | Contracts with performers not at arm's length | Deductible, but no credit |
| 350 | Lease costs after December 15, 2024, equipment used 90% or more for SR&ED | Proxy method: no general office equipment or furniture |
| 355 | Proxy only: half the lease costs for equipment used 50% to under 90% | Traditional method enters 0 |
| 360 | Overhead and other expenditures | Traditional method only; proxy enters 0 |
| 370 | Third party payments | Attach Form T1263 for each |
| 380 | Total current expenditures: lines 306 to 370, not line 315 | New in version 26 |
| 390 | Capital: depreciable property available for use after December 15, 2024, used 90% or more for SR&ED | No land, buildings or leasehold interests; keep it off Schedule 8 |
| 400 | Lines 380 plus 390 | Total allowable expenditures |
The salary, contract and overhead rules come from the guide canada.ca, and the lease and capital lines from the interim instructions
canada.ca. A specified employee is one who doesn't deal at arm's length with the employer or is a specified shareholder, so an owner manager almost always lands on line 305. With the 2026 YMPE at $74,600
canada.ca, the line 305 cap is $373,000 for a full year as a specified employee.
Capital gets its own detail. Part 6B lists up to 20 of the most expensive properties with their full acquisition cost, using the same names as line 262, and a capital expenditure only counts once the property is available for use canada.ca. Used equipment goes on line 390 but comes back out of the credit on line 532
canada.ca.
Proxy or traditional: the choice locks the day the T661 goes in
Tick line 160 for the proxy method (complete Part 5, enter 0 on line 360) or line 162 for the traditional method (skip Part 5, enter 0 on line 502). The guide says the choice can't be changed for the year once the T661 is filed canada.ca. Subsection 37(10) requires the proxy election to be filed on the day the taxpayer first files the subsection 37(11) form for the year
laws-lois.justice.gc.ca.
Under the proxy method, overhead isn't claimed. The prescribed proxy amount stands in for it at 55% of the salary base, and it can't exceed an overall cap tied to the client's total expenses canada.ca. A specified employee's salary in that base is the lesser of 75% of their salary and 2.5 times the YMPE, prorated for days employed. For a 2026 year end that ceiling is $186,500.
The full comparison, including which overhead the traditional method lets you claim, is on the SR&ED proxy method page.
How much credit does a calendar 2026 proxy method claim produce?
Your client is a small CCPC, a qualifying corporation well under the expenditure limit, with a December 31, 2026 year end. Employees who are not specified employees earned $400,000 for SR&ED work, with no bonuses. The owner, a specified shareholder, earned $250,000 and spent 90% of the year on SR&ED. The client also used $50,000 of materials and paid an arm's length lab $100,000.
| Step | Line | Amount |
|---|---|---|
| Salary, not specified employees | 300 | $400,000 |
| Owner: 90% of $250,000 (under the $373,000 cap) | 305 | $225,000 |
| Materials consumed | 320 | $50,000 |
| Arm's length contract | 340 | $100,000 |
| Overhead (proxy method) | 360 | $0 |
| Total current, and total allowable | 380 and 400 | $775,000 |
| Owner in the salary base: 75% of $250,000 = $187,500, capped at 2.5 × $74,600 | Part 5 | $186,500 |
| Salary base: $400,000 plus $186,500 | Part 5 | $586,500 |
| PPA at 55%, assuming the overall cap doesn't bite | 502 | $322,575 |
| Less 20% of the contract | Part 4 | ($20,000) |
| Qualified expenditures: $775,000 plus $322,575 less $20,000 | Part 4 | $1,077,575 |
| Credit at 35%, carried to Schedule 31 | Schedule 31 | $377,151.25 |
The 35% rate applies within the $6 million expenditure limit, and a qualifying CCPC gets 100% of that credit on current spending back in cash canada.ca. The deductible SR&ED pool is $775,000, because the PPA counts for the credit but isn't deductible. The traditional method would have produced a bigger credit only if the overhead on line 360 topped $322,575. Rates and the phase out are on the SR&ED tax credit page.
What has to go in with the T661, and by when?
Form T661 supports the expenditures, and Schedule 31 (T2SCH31, Investment Tax Credit, Corporations) claims the credit canada.ca. The CRA updated the Schedule 31 page again on October 14, 2026, so download it fresh rather than reusing a saved copy
canada.ca. Associated corporations allocate the expenditure limit on Schedule 49, and an individual uses Form T2038(IND) instead of Schedule 31
canada.ca.
Both are due 12 months after the T2 filing due date, so 18 months after year end, under subsection 37(11) laws-lois.justice.gc.ca. A late T661 means no SR&ED treatment for the spending; a late Schedule 31 loses only the credit. Part 9 is outside the deadline, but missing or wrong preparer details can cost a $1,000 penalty, shared jointly by the claimant and the preparer
canada.ca. Dates for each year end are on the SR&ED filing deadline page.
For a partnership, the partnership files one T661 reporting all of its SR&ED expenditures, not one partner's share, and partners can't add those costs to their own pools canada.ca. If a reviewer calls after filing, the steps are on the SR&ED audit page.
Sources
Can my client switch from the proxy method to the traditional method after filing?
No. The guide says the method chosen on line 160 or 162 can't be changed for that tax year once the T661 is filed canada.ca. Run both calculations before the first filing, because the election is made on that day under subsection 37(10)
laws-lois.justice.gc.ca.
Does every project need its own Part 2?
Only the 20 largest by dollar value at filing, if you choose. Every project's cost still goes in Part 6, and a Part 2 the CRA asks for and doesn't receive gets that project disallowed canada.ca.
How is equipment used only partly for SR&ED claimed on the new form?
As shared use equipment on line 504. New equipment acquired after December 15, 2024 and used more than 50% for SR&ED in Canada earns a partial credit on 25% of its capital cost in a first term and 25% in a second, listed in Part 6C canada.ca.
Can I file the T661 before the T2?
Yes. The deadline counts from the T2 filing due date, not from when the return is filed, and the CRA won't process the claim until the return arrives canada.ca. Filing at least 90 days before the deadline leaves time for the CRA to flag gaps you can still fix.
General information for the tax year shown, not advice for a specific client. Confirm the facts before you file or remit.