Line 26 - Investment tax credit

Line 26 - Investment tax credit

A trust can claim an investment tax credit (ITC) on eligible investments and qualified expenditures that are listed on Form T2038(IND), Investment Tax Credit (Individuals). For example, a trust can claim an ITC on certain buildings, machinery, or equipment to be used in certain areas of Canada in qualified activities such as farming, fishing, logging, or manufacturing.

To claim an ITC, you have to send us the completed Form T2038(IND) no later than 12 months after the due date of the return for the year the expenditure occurred.

Send us a completed copy of Form T2038(IND) if the trust:

• earned an ITC in the tax year

• is carrying forward a credit

• had an ITC recapture

• is claiming refundable ITC in the tax year (on line 56 of the T3 return)

Reduce the cost of eligible investments and qualified expenditures by the portion of the credit deducted or refunded. Reduce these costs in the year after the trust:

• claims the credit

• acquired the asset if it:

  • made the claim or refund in the year of acquisition

  • applied the claim to a previous year

For example, the capital cost of property is reduced in 2024 by any ITC that the trust earned in 2023, and that was claimed or refunded on the 2023 return or applied to a previous year.

You will have to report an ITC recapture for the trust if the trust meets the following conditions:

• acquired the property in this or any of the previous 11 tax years

• claimed the cost, or a portion of the cost, of the property as a qualified expenditure for scientific research and experimental development

• included the cost, or a portion of the cost, of the property in calculating the trust's ITC, or was the subject of an agreement to transfer qualified expenditures

• disposed of the property or converted it to commercial use after February 23, 1998

  Note
  An ITC recapture on a portion of the cost of property as described above applies only to dispositions that occur after December 20, 2002.

For 2016 and subsequent tax years, only a graduated rate estate and a communal organization that is treated as a trust can designate all or part of its deductible ITC amount to one or more of its beneficiaries, taking into consideration the terms of the trust. For these trusts, when calculating their ITC to be claimed in the year, do not include the amount designated on line 941 of Schedule 9. Reduce the cost of the qualified property acquisitions or expenditures by the amount of any ITC that you designated to the beneficiaries in the tax year.

For more information, see Form T2038(IND).

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