Canadian corporations can now claim deductions for the full cost of a much wider range of capital assets in the tax year in which they are purchased or come into use. The Canadian government is calling this new option for 100 per cent capital cost allowance (CCA) the productivity mega deduction, and making it permanently available for qualifying investments as of Sept. 15, 2026.
“This is one of the most significant changes to Canada’s business tax system in half a century, and a game changer for investment in this country,” maintains François-Philippe Champagne, Canada’s Minister of Finance and National Revenue.
Nearly two-thirds of CCA asset classes, which were previously subject to more incremental depreciation schedules for tax purposes, are eligible for the new measure, but most types of buildings are excluded. Nor do patents, franchises, concessions and licences for either limited or unlimited periods; natural gas pipelines and associated equipment; or some designated passenger vehicles qualify for immediate expensing.
However, some of this ineligible group — notably including buildings or building additions used for processing or manufacturing — qualify for the temporary 100 per cent CCA announced in the 2025 federal budget, which applies on assets acquired or coming into use between Nov. 4, 2025 and Dec. 31, 2029. The remainder still qualify for the temporary accelerated investment incentive.
Full CCA in the first tax year will apply on:
- computer/data-processing hardware, IT infrastructure and software;
- office/commercial furniture and appliances with a minimum value of $500;
- tools valued at less than $500;
- clean energy and energy conservation equipment;
- zero-emissions vehicles and EV charging equipment;
- greenhouses;
- roads, parking lots, sidewalks, airplane runways and paved-surface storage areas;
- excavating, earth-moving, compacting and paving equipment;
- outdoor advertising signs;
- manufacturing and processing machinery; and
- carbon capture equipment and infrastructure.
Prime Minister Mark Carney announced the measure in sync with this week’s Canada Investment Summit, which convened prominent global institutional investors in Toronto. The productivity mega deduction is part of the Canadian government’s strategy to draw $1 trillion in investment in major infrastructure projects over the next five years.
Federal number-crunchers project the bolstered tax incentive should equate to an average payout of $8.5 billion in “annual investment support” over a 10-year period and stimulate 1.4 to 3 times that amount in increased economic activity over the same horizon. The mega deduction is also calculated to cut Canada’s marginal effective tax rate (METR) — measuring business taxes payable in balance with available tax incentives — in half, pushing it down to 6.4 per cent.
“With the lowest marginal effective tax rate in the G7 by an order of magnitude, we are sending a clear message to the world: Canada is building big. Build with us,” Carney says.
