Calculate qualified expenditures
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, 2024
What 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:
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
Contact us
Call us if you have any questions about the SR&ED program or calculating your qualified expenditures.