Write off 100% in year one. If it qualifies.

On September 15, 2026, the federal government announced the Productivity Mega Deduction. If it becomes law, a business will be able to deduct 100% of the cost of eligible property in the first year that property is ready to use, instead of writing it off slowly over many years. It is a genuinely significant change. It is also more conditional than the headlines suggest, and the conditions are where the money is won or lost.

What it actually does

Normally, when a business buys equipment, you do not deduct the whole cost the year you buy it. You deduct a portion each year over the useful life of the asset. The Mega Deduction collapses that into a single year for a much wider range of property than before.

It builds on the Productivity Super-Deduction from Budget 2025, which did the same thing for a narrower list. The expansion is the story: the share of business assets eligible for immediate write-off moves from roughly 15% to more than 65%. The government says this brings Canada's effective tax rate on new business investment down from about 13% to 6.4%.

What qualifies

The expanded list now includes software, computer equipment, machinery and equipment, research and development costs, patents and similar productivity-enhancing assets, data network infrastructure, fibre-optic cable, aircraft, mining property, oil and gas pipelines, rail track, bridges and roads. Clean energy and energy conservation equipment and zero-emission vehicles were already covered under the earlier measure and remain eligible.

For most small businesses the practical items are the first three: software, computers, and the equipment you actually use to do the work.

What doesn't

This is the part worth reading slowly, because several exclusions will surprise people.

• Buildings. Excluded from the Mega Deduction. Manufacturing and processing buildings may still qualify under the earlier Super-Deduction, so it is worth checking rather than assuming nothing applies.
• Most passenger vehicles. Passenger vehicles, rental vehicles, taxis, and certain vans and pickups used to earn income only qualify if the vehicle was assembled in Canada and has never been used for any purpose before you acquired it. Both conditions, not either. A great many vehicles people assume will qualify will not.
• Franchises, licences and goodwill. Excluded.
• Certain natural gas distribution pipelines, industrial mineral mines, and timber limits. Excluded.

Land has never been depreciable, so it was never in scope to begin with.

Three conditions that catch people

1. Available for use, not just paid for. The deduction lands in the year the asset becomes ready to use in your business, not the year you handed over the money. A deposit in December on equipment that arrives in March gives you a March-year deduction.
2. Buying used. Second-hand property only qualifies if you bought it from someone at arm's length and it was not transferred to you on a tax-deferred rollover basis. Buying equipment from a company you also control generally fails this.
3. It is proposed, not law. Draft legislation was released the same day it was announced, and the government has signalled clear intent to enact it. But as of today it has not been passed.

Your structure changes what you get

This is the part most coverage leaves out, and for a lot of readers it is the only part that matters.

If you are incorporated, the deduction is not limited by your income. A corporation can claim the full write-off on eligible property, and the normal rules for using business losses apply from there.

If you are a sole proprietor, or a partnership made up of individuals, the deduction is capped at the income from that business or property. It cannot create or increase a loss. Spend forty thousand dollars in a year where the business earned fifteen, and you do not get a forty thousand dollar deduction that year.

That single difference changes the whole decision. For an incorporated business, a large purchase before year-end is often straightforwardly good. For an unincorporated one, the same purchase in a weak year can be close to wasted, and waiting for a stronger year may be worth more than the deduction itself.

So what should you actually do

1. Check the asset against the list before you commit the money, not after.
2. Confirm it will genuinely be available for use this year, not merely ordered and paid for.
3. Know your structure and, if you are unincorporated, know roughly what the business will earn.
4. Keep the invoice with its date, evidence of when the asset went into service, and for used property, proof the seller was at arm's length.
5. Write down the position you took and why, given this is still a proposal.

A 100% first-year write-off is a real advantage and it is worth planning around. It is just not automatic, and the difference between a purchase that qualifies and one that doesn't often comes down to a detail nobody thought to check. Ten minutes before you buy is a lot cheaper than finding out at filing time.

Dilan Ropero

Senior Accountant at MyBookly Accounting. He works directly with Canadian businesses on tax strategy, compliance, and planning.