Productivity Mega Deduction expands immediate tax write-offs for business investment
A major tax change now allows Canadian businesses to deduct the full cost of a broad range of investments in the first year, lowering the tax rate on new investment to the lowest in the G7.
Govgrant newsroomOctober 9, 2026 · 2 min read- What changed
- Eligible assets for immediate expensing expanded from roughly 15% to more than 65% of asset types
- Eligible investments
- Equipment, software, R&D, vehicles, aircraft, fibre-optic cable, greenhouses, mining property, oil and gas pipelines, patents, rail, bridges, roads
- Tax rate on investment
- Reduced from roughly 13% to 6.4%—lowest among major economies
- Who can apply
- Businesses of all sizes
- Key change
- Immediate expensing is now permanent
What was announced
The federal government introduced the Productivity Mega Deduction, described as one of the most significant changes to Canada's business tax system in half a century. The measure allows businesses to immediately deduct the full cost of eligible investments in the year the asset becomes available for use, rather than writing off the cost over multiple years.
The expansion substantially increases the types of assets eligible for immediate expensing. Previously, only about 15% of assets qualified; under the new rules, more than 65% of assets become eligible. The government also made immediate expensing permanent, providing businesses with long-term certainty for investment planning.
What assets qualify for immediate deduction
Eligible investments span a wide range of business assets across multiple sectors and industries.
- Fibre-optic cable and telecommunications infrastructure
- Greenhouses
- Mining property
- Oil and gas pipelines
- Software and computer equipment
- Research and development assets
- Aircraft and vehicles
- Patents and intellectual property
- Rail track, bridges, and roads
How this reduces the cost of investing
By allowing the full deduction of eligible investments in year one, the Productivity Mega Deduction lowers the marginal effective tax rate on new business investment from approximately 13% to 6.4%. According to the government, this represents the lowest rate among major economies—less than half the rate in the United States.
The lower tax cost of investment is intended to encourage businesses of all sizes to purchase equipment, modernize facilities, and expand operations across Canada.
Why this matters for your business
The immediate deduction reduces the after-tax cost of capital investment, making it more economical to purchase new equipment and adopt technology. Small and medium-sized enterprises, which the government identified as central to Canada's economy, can use the tax savings to fund additional growth initiatives, hire staff, or reinvest in productivity improvements.
The permanent nature of the change removes uncertainty about future changes to the tax rule, allowing businesses to make long-term investment decisions with confidence.
Frequently asked questions
Does this apply to all businesses?
The source states the Productivity Mega Deduction applies to businesses of all sizes. For details on any specific eligibility requirements or limitations, consult the official Productivity Mega Deduction program page.
When does this take effect?
The source does not provide an effective date for when the Productivity Mega Deduction takes effect. Check the official government page for implementation details.
How much can a business deduct?
The source states businesses can immediately deduct the full cost of eligible assets in the year the asset becomes available for use. The specific tax benefit depends on the investment amount and the business's tax situation.
See which grants fit your business.
Free to start. Ten minutes to your first matches.
