Proxy versus traditional: the overhead election
What the choice on Form T661 actually decides, the 55% proxy amount, when each method wins, and a worked comparison from the engine.
Every SR&ED claim has to say how it accounts for overhead — rent, utilities, admin support, the costs that sit around the R&D work without being the work. Form T661 gives two choices, you make one per tax year, and once the return is filed it cannot be changed for that year.
The traditional method
You claim the actual overhead that was directly related to the SR&ED work and would not have been incurred without it. Both tests, line by line, with support for each. It suits a company that already tracks overhead by project and has R&D that consumes a lot of it — a lab, a test facility, dedicated space.
The proxy method
You claim nothing for overhead. Instead a prescribed proxy amount — 55% of the salary base of the people doing the SR&ED — is added to the qualified expenditures and earns the credit. Nothing to track, nothing to defend under review beyond the salaries themselves. The proxy amount is eligible for the credit but is not deductible from income; it exists only for the ITC.
The salary base is the SR&ED share of salaries, excluding bonuses and taxable benefits, with the owner caps described on the federal rates page applied.
Which to choose
It is not purely a money question. The proxy is a simplification: it is the right election whenever you do not track overhead, or would rather not do the work of substantiating it. Traditional is only worth taking when the overhead you can actually defend exceeds 55% of the salary base by enough to matter — and for most software and engineering companies, where overhead per developer is small next to the salary, it does not.
The Alberta grant follows the same election: under proxy, the federal proxy is swapped for an Alberta proxy of 55% of Alberta SR&ED salaries; under traditional, there is no proxy on either side and the overhead sits inside the Alberta figure as an ordinary expenditure.
A worked comparison
An Alberta company with $100,000 of SR&ED salaries and $245,000 of materials, no prior-year history to speak of, and $30,000 of overhead it could attribute to the work if it chose the traditional method. Both computed by SREDDY's engine on the same facts:
| Proxy method | Traditional method | |
|---|---|---|
| Overhead claimed | $0 | $30,000 |
| Proxy amount | $55,000 | $0 |
| Alberta grant | $62,000 | $57,000 |
| Federal credit | $118,300 | $111,300 |
| Total | $180,300 | $168,300 |
Proxy comes out $12,000 ahead here, and it carries none of the burden of proving the overhead. The traditional side only overtakes it once the defensible overhead passes the proxy amount of $55,000.
What SREDDY does with this
SREDDY defaults to the proxy method, because the normal case is a company with no overhead tracking. If you have recorded overhead, it computes the claim both ways side by side, says which is larger and by how much, and reminds you that the election is irrevocable before it is locked. The choice stays yours.
Form T661 (2026) Part 3 Section A, line 160; Part 5 · Guide T4088, prescribed proxy amount · Income Tax Regulations s.2900(4)–(6) · Alberta TRA Guide to Claiming the IEG, lines 007 and 009
Rates and limits are read from SREDDY's parameter table at build time, last verified against the published sources on August 13, 2026. This page explains the rules; it is not tax, legal or accounting advice, and CRA and Alberta TRA decide every claim on its own facts.
- The Alberta Innovation Employment Grant, explainedWhat the IEG is, who gets it, how the 8% and 12% parts are worked out, and two examples from Alberta's own guide, calculated step by step.
- Federal SR&ED tax credit rates and limitsThe 35% and 15% investment tax credit rates, the expenditure limit and how taxable capital reduces it, what is refundable, and the proxy, contract and salary rules behind the qualified figure.
- SR&ED deadlines: federal and AlbertaWhen the T661 has to reach CRA, when Alberta's Schedule 29 has to reach TRA, why they differ, and the dates for common year ends.
- What qualifies as SR&EDThe three questions CRA asks of any project, what counts and what is excluded, how software work is judged, and the three write-ups the T661 requires.
- What SR&ED consultants costHow contingency pricing works, what the 15–25% range means at real claim sizes, what you are paying for, and when a flat fee makes more sense.
- SR&ED terms in plain languageThe words on the forms and in the rules, each explained in a sentence or two, with the number attached where there is one.