The CREATE Act and Canada’s Film Tax Credit War: What US Federal Incentives Mean for Ontario Production in 2026
I have worked in Toronto’s film and video production industry long enough to know that when the US sneezes, Canada catches a cold. And right now, the US looks like it is gearing up for a very serious sneeze.
There is a piece of legislation making its way through the US Congress called the CREATE Act. If you work in film, television, or video production in Canada, you need to understand what this bill does. Because it could change where the next big production decides to set up shop. And that affects all of us, whether you are shooting a million dollar TV series or a corporate brand documentary.
Here is what is happening.
What is the CREATE Act?
The US does not have a national film tax credit the way Canada does. What they have is something called Section 181 of the Internal Revenue Code. It allows qualifying US productions to deduct production costs in the year they are incurred, rather than spreading that deduction out over time. Think of it like getting your tax benefit immediately instead of waiting years for it.
For years, Section 181 has been a modest incentive. It capped at $15 million for most productions and was set to expire at the end of 2025.
The CREATE Act, which stands for Creative Relief and Expensing for Audio and Television Enterprises Act, changes all that. A bipartisan group of four US Congress members introduced the bill with serious backing, including high profile support from actor Jon Voight, one of President Donald Trump’s special ambassadors to Hollywood.
If passed, the CREATE Act would do three big things.
First, it would extend Section 181 through December 31, 2030, giving producers a five year window of certainty. That matters because uncertainty kills investment.
Second, it would double the deduction caps. Most productions would go from 15millionto30 million. Productions in certain distressed areas would go from 20millionto40 million.
Third, it would introduce annual inflation indexing starting in 2027, meaning the caps grow automatically with the cost of living.
In plain terms, the US is finally getting serious about competing for production dollars.
How Canadian Provinces Are Responding
The response has already started. And it is not subtle.
British Columbia moved first. Premier David Eby announced that the province’s Production Services Tax Credit, which goes to international productions, would increase from 28% to 36%. The domestic Film Incentive BC credit also increased from 35% to 36% for productions starting principal photography on or after January 1, 2025.
Eby was direct about why. He said British Columbia must do more to compete with other jurisdictions. Translation: the fight for production dollars is heating up, and we are not sitting still.
Ontario has not raised its rates yet, but the pressure is building. FilmOntario, the province’s leading industry association, made a formal budget submission in early 2026 requesting that the base rate of the Ontario Film and Television Tax Credit be increased to 40% and the Ontario Production Services Tax Credit to 25%. As they put it, Ontario needs to meet the demands of an increasingly competitive business environment for film and television production.
Currently, Ontario offers a refundable tax credit of 35% of eligible Ontario labour expenditures, with an enhanced rate of 40% on the first $240,000 for first time producers.
The federal government is also paying attention. The 2025 federal budget included significant new funding for the audiovisual sector: 127.5million for the CanadaMediaFund, 150 million for Telefilm Canada, and $26.1 million for the National Film Board, all over three years. That signals that Ottawa understands the value of the screen based industries and is willing to invest.
Why This Actually Matters for Production in Toronto
I want to be clear about something. This is not just about Hollywood blockbusters. If major studios reconsider Canada, the ripple effects hit everyone.
Foreign production in Canada was valued at $4.73 billion last year, supporting more than 90,000 jobs. That includes not just the big sets but the lighting rental houses, the craft services companies, the post production studios, and the freelance camera operators, sound technicians, and editors who make a living in this industry. When a major production leaves, the entire ecosystem feels it.
We already have evidence of how quickly things can shift. The CBS drama Tracker moved its fourth season from Canada to Los Angeles after securing a $48 million California tax credit. That is a real world example of production moving across the border because of incentives.
The CREATE Act is designed to make that kind of move easier for more productions. And if Ontario does not keep its incentives competitive, we could see more of that.
The Complication: Not All Provinces Are Moving In the Same Direction
Here is where things get complicated for Canada.
While BC is raising its rates, Alberta is heading in the opposite direction. The province cut 35 million from its Film and Television Tax Credit, bringing the anticipated budget down to 60 million. The Alberta government insists it is an accounting measure rather than a true cap, and that no productions will be turned away. But the message it sends to producers is not great.
Alberta was the home of The Last of Us season one, one of the biggest productions to shoot in Canada in years. If Alberta becomes less aggressive in its incentives, those productions could look harder at other provinces, including Ontario, or at the US if the CREATE Act passes.
And there is another wildcard. The US has talked about imposing a 100% tariff on foreign made films. The Canadian Media Producers Association has warned that such a tariff would send Canada’s screen industry into chaos. That is likely an extreme scenario, but it shows how quickly the trade environment can shift.
What This Means for People Like Us
If you run a video production company in Toronto, you are competing for the same pool of commercial, corporate, and nonprofit clients that larger productions compete for crew and talent. When major studios reconsider Canada, the ripple effects hit everyone.
Here is what I am watching.
First, watch what Ontario does in the next budget. FilmOntario’s request for a rate increase is reasonable and necessary. If the province does not act, it could lose ground to BC and to the US.
Second, pay attention to the CREATE Act. The bill is still in committee, but it has bipartisan support and serious momentum. If it passes, the US will have a more competitive federal incentive than it has ever had before.
Third, keep an eye on the trade relationship. The tariff threat may be unlikely, but it signals a willingness to use trade policy as a tool. That adds another layer of uncertainty.
And finally, remember that this is not just about the big guys. If you shoot corporate videos, brand documentaries, or commercial work, your clients are also watching costs. If production costs rise in Toronto because incentives become less competitive, or if crew availability tightens because people leave for US productions, you will feel it.
A Few Honest Thoughts
I do not know if the CREATE Act will pass. I do not know if Ontario will raise its tax credits. I do not know if the tariff threats are real or just posturing.
But I know this. The conversation has changed. The US is finally acting like it wants to compete. Canadian provinces are scrambling to respond. And the days of assuming that productions will just keep coming to Canada because they always have are over.
If you work in this industry, you need to pay attention. Not because you can control any of it. But because understanding the landscape helps you make better decisions. Where you invest. Who you partner with. How you price your services.
At Skyrex, we are watching closely. We built our business on documentary storytelling and authentic human connection. That does not change no matter what happens with tax credits. But we want to be smart about where the market is headed.
I hope this breakdown helps you do the same.
