Immediate expensing in Canada

The terminology, in one place

Several names describe overlapping rules, which makes searching for them confusing. They are not interchangeable:

Term	What it refers to
Capital cost allowance (CCA)	The standard system. Property is grouped into classes, each with a declining-balance rate, and you deduct a portion each year.
Half-year rule	In the year of acquisition you can normally claim only half the usual CCA rate.
Accelerated Investment Incentive (AII)	Suspends the half-year rule and allows an enhanced first-year claim on most property.
Immediate expensing	A 100% first-year deduction. Introduced for Canadian-controlled private corporations, sole proprietors and certain partnerships with an annual limit.
Productivity Mega Deduction	The measure announced on 15 September 2026 that broadens 100% first-year expensing. Draft legislation, not yet enacted.

How it works

Under regular CCA, a $100,000 Class 8 purchase is deducted at 20% declining balance, halved in year one, so roughly $10,000 of the cost reduces income in the first year. Under immediate expensing the whole $100,000 reduces income in the first year instead. The total deduction across the life of the asset is the same; what changes is when you get it, and therefore the present value of the tax saved.

At a combined small business rate (9% to 12% depending on province) a $100,000 deduction is worth that percentage in cash this year. At the general corporate rate (23% to 30%) it is worth considerably more. Run your own figure in the calculator.

The 'available for use' test

The deduction attaches to the year the property becomes available for use, not the year you pay for it or sign the order. Machinery delivered in December but not installed and commissioned until February falls into the later fiscal year. This is the single most common planning error, and it is covered in detail in the guide.

Which classes qualify

Most depreciable property qualifies, including computers and software, machinery, manufacturing and processing equipment, tools, furniture, and commercial vehicles. The significant exclusions are buildings and additions (Classes 1 and 3), goodwill, franchises and licences (Classes 14 and 14.1), Class 51 pipelines, certain passenger vehicles (Classes 10 and 10.1), and Schedule V and VI property. Check any specific purchase against the eligible assets list.

Sales tax changes the amount you deduct

GST, HST and QST that you recover through input tax credits are not part of capital cost, so they are not deductible. Provincial sales tax that you cannot recover is part of capital cost. In British Columbia, Saskatchewan and Manitoba this raises the deductible amount: a $100,000 purchase in British Columbia carries $7,000 of non-recoverable PST, so the capital cost you deduct is $107,000. Each province page sets out its own treatment.

Recapture

Immediate expensing is a deferral, not forgiveness. If you later sell the property for more than its remaining undepreciated capital cost, the difference is recaptured into income. Deducting the full cost in year one drives the undepreciated balance to zero, so a later sale generally produces recapture on the whole proceeds up to the original cost.

Who can claim it

Corporations and unincorporated businesses are both in scope, but the restrictions differ. A sole proprietor cannot use the deduction to create or increase a business loss in the way a corporation can, which changes whether accelerating a purchase is worth it at all. Section 7 of the guide works through both cases.

Current status

The Productivity Mega Deduction was announced on 15 September 2026 and exists as draft legislation. It is not law until it receives Royal Assent, and the detail can change. Nothing here is tax advice; confirm any planned purchase with your own accountant. Updates are tracked on the news page.