Productivity Mega Deduction: Writing Off 100% of Your Investment in 2026?
On September 15, 2026, at the inaugural Canada Investment Summit in Toronto, Prime Minister Mark Carney announced a major tax measure: the Productivity Mega Deduction. The idea: let businesses immediately deduct 100% of the cost of a wide range of depreciable property acquired on or after September 15, 2026, instead of spreading the deduction over several years.
For a self-employed worker or small business in Quebec hesitating to invest in equipment, this is big news. But there is a major caveat: as of now, it is only a legislative proposal. It is not yet law, and nobody knows whether Quebec will harmonize with it.
What is immediate expensing, exactly?
When you buy an asset to earn income and that asset lasts several years — machinery, computer hardware, a work vehicle — Canadian tax rules don't let you deduct the full cost at once. You go through the capital cost allowance (CCA) system: each year, you deduct a percentage of the cost based on the asset's tax class, generally on a declining-balance basis.
In practice, $60,000 worth of equipment doesn't give you a $60,000 deduction in the year of purchase. You recover a fraction of it each year, for years.
Immediate expensing changes that: you deduct the entire cost in the year the asset becomes available for use. Same investment, same total deduction over time — but the tax saving arrives right away, when you need it to fund growth.
What the measure changes, in numbers
Here is how the proposed Mega Deduction compares with the Productivity Super-Deduction introduced in the 2025 federal budget:
| Element | Super-Deduction (Budget 2025) | Mega Deduction (proposed, Sept. 15, 2026) |
|---|---|---|
| Share of capital assets eligible | About 15% | More than 65% |
| Duration | Temporary | Permanent |
| Marginal effective tax rate on new investment | About 13% | 6.4%, the lowest among major economies |
| Estimated fiscal cost | — | $36 billion over 5 years, starting 2026–27 |
| Assets covered | Eligible machinery, equipment and technology | Expanded range: fibre-optic cable, software, patents, R&D, computer hardware, aircraft and vehicles, rail track, bridges, roads, mining property, oil and gas pipelines |
| Effective date | — | Property acquired on or after September 15, 2026 |
The government estimates Canada's marginal effective tax rate on new business investment would fall from about 13% to 6.4% — less than half the U.S. rate. The stated goal: make Canada the most tax-competitive G7 country for new business investment.
What's excluded: the list you need to know
The measure is broad, but not universal. Under the legislative proposals, the following property is excluded from immediate expensing:
- buildings and additions to buildings (CCA classes 1 and 3);
- franchises, licences and goodwill (classes 14 and 14.1);
- certain vehicles (classes 10 and 10.1);
- certain pipelines (class 51);
- property depreciated under Schedules V (industrial mineral mines) and VI (timber limits and cutting rights) of the Income Tax Regulations.
And even for eligible property, three conditions must be met: the asset must be acquired on or after September 15, 2026, it must never have been used before (no CCA previously claimed by anyone), and it must not come from a person you don't deal with at arm's length or from a tax-deferred rollover. In other words: used property bought from a related party doesn't qualify. Specific rules also aim to limit the creation or increase of losses for individuals and partnerships.
Good news for everything else: property that isn't eligible for immediate expensing will still qualify for an enhanced first-year deduction under the Accelerated Investment Incentive.
Worked example: $60,000 of new equipment
Take a self-employed worker who buys a new $60,000 machine on October 1, 2026, and puts it into service in November 2026.
With the Mega Deduction (if enacted as proposed): a $60,000 deduction in 2026, the year it becomes available for use.
Without the measure, under normal CCA — say a 20% declining-balance rate, with the half-year rule in the first year: $60,000 × 20% × 1/2 = $6,000 deductible in 2026, then 20% of the remaining balance each following year.
Translated into first-year tax savings, using a hypothetical combined marginal rate of 45% (for illustration only — your actual rate depends on your income, which you can estimate with [our income tax calculator](/en/quebec-income-tax-calculator)):
| 2026 deduction | Tax saving (at 45%) | |
|---|---|---|
| With the Mega Deduction | $60,000 | $27,000 |
| Normal CCA | $6,000 | $2,700 |
| Cash-flow difference | $24,300 |
Over the asset's life, the total amount deducted is identical. But getting $24,300 of tax savings this year instead of spread over a decade is money you can reinvest immediately. In finance, that's called the time value of money — and it's exactly the government's bet.
A practical reminder: the deduction applies to the asset's cost before taxes. GST and QST are added to the invoice but are recoverable if you're registered — you can check the math with [our GST and QST calculator](/en/gst-qst-calculator).
And Quebec — will it harmonize?
This is THE question for us, and the honest answer is: we don't know yet. Tax analysts stress that, as of writing, there is no indication whether Quebec's tax legislation will harmonize with the federal measure.
Why does it matter so much? Because in Quebec, you file two returns: one federal (CRA) and one provincial (Revenu Québec). If Quebec doesn't harmonize, immediate expensing would apply only to your federal return. You'd then have to track two different CCA balances for the same asset — a real accounting headache.
That said, it wouldn't be unprecedented: Quebec's March 18, 2026 budget already provided for harmonization with a targeted immediate-expensing measure — for greenhouses acquired since November 4, 2025. Quebec has shown it can follow Ottawa on targeted measures. But for the Mega Deduction, no provincial announcement has been made to date.
In the meantime, the distinction between a current expense and depreciable property remains critical for your returns. If that's not already clear, review [our guide to self-employed expenses](/en/blog/self-employed-expenses) before classifying your purchases.
What you can do right now
- Don't rush a purchase because of the measure. It isn't law yet. An investment must first make sense on its own.
- If you were already planning to buy new equipment, keep your invoices, acquisition date and in-service date carefully — those dates will determine your eligibility.
- Talk to your accountant before planning a major purchase: interaction with the Accelerated Investment Incentive, anti-loss rules for individuals, and scenarios with or without Quebec harmonization.
- Follow the file: passage of the bill in Ottawa, then Revenu Québec's position.
The federal release calls it "one of the most significant changes to Canada's business tax regime in half a century." That may prove true — but until the law is passed and Quebec has weighed in, caution remains the best tax strategy.
Frequently asked questions
Is the Productivity Mega Deduction already in force?
No. As of September 30, 2026, it is a legislative proposal published on September 15, 2026. It must be passed by Parliament to become law — plan your purchases accordingly and keep following the file.
What property is excluded from immediate expensing?
Buildings (CCA classes 1 and 3), franchises, licences and goodwill (14 and 14.1), certain vehicles (10 and 10.1), certain pipelines (51), and property under Schedules V and VI of the Income Tax Regulations. Such property still qualifies for the enhanced first-year deduction under the Accelerated Investment Incentive.
Does used property qualify?
Only if it has never been used and no CCA was claimed on it before your acquisition. Property bought from a person you don’t deal with at arm’s length, or received through a tax-deferred rollover, is excluded.
I’m buying equipment now — am I covered?
The measure targets property acquired on or after September 15, 2026, but only if it is enacted as proposed. A purchase made before that date is not covered.
Will Quebec harmonize?
We don’t know yet (September 30, 2026). Without harmonization, immediate expensing would apply only to your federal return, forcing you to track two separate CCA balances for the same asset.
I’m self-employed: what does it change for me?
If the measure is enacted, buying new equipment after September 15, 2026 could be 100% deductible in the year it becomes available for use on the federal side, instead of being spread over several years. Talk to your accountant before planning a major purchase.