The Mega Deduction in Ontario

Ontario corporations pay a combined 11.2% on small business income (federal 9% + provincial 2.2%) and 26.5% at the general rate (15% + 11.5%). Every dollar deducted in year one under the Mega Deduction reduces tax by that percentage.

Ontario's small business rate falls from 3.2% to 2.2% effective July 1, 2026. A corporation whose fiscal year straddles that date allocates income by the number of days at each rate, so its effective rate for the year sits between the two.

Tax reduction on a $100,000 purchase, by asset class

Does Ontario follow the federal Mega Deduction?

Follows the federal rule Ontario calculates corporate income tax on the same taxable income as the federal return. If the federal measure is enacted as drafted, Ontario corporations would get the same 100% first-year deduction for provincial purposes. A province can legislate an exception, and we found no Ontario announcement of one.

Who collects Ontario corporate tax?

The Canada Revenue Agency administers Ontario corporate income tax. Ontario's Taxation Act defines corporate income and taxable income by reference to the federal Act.

Has Ontario said anything about this measure?

No Ontario statement naming the Mega Deduction was found. Ontario's March 2026 budget separately promised matching 100% write-offs for specified productivity assets and an enhanced first-year deduction for most other assets, to take effect once the federal legislation passes. That budget came before the Mega Deduction and is not a statement about it.

Sole proprietors and partners

Ontario personal income tax is calculated on federal taxable income, so the same result applies to sole proprietors and partners. The federal draft limits a non-corporate taxpayer to the income from the business or property source the asset is used in, so the deduction cannot create or deepen a loss.

Sources: Ontario corporate income tax · 2026 Ontario Budget: business investment. The federal measure: Department of Finance announcement · Draft legislative proposals. The Mega Deduction is draft legislation announced 15 September 2026; none of this applies until it is enacted.

What sales tax does to your deductible cost in Ontario

Ontario charges HST 13% on most equipment purchases. A business registered for GST/HST recovers that tax through input tax credits, so it is not part of the capital cost and not part of what you deduct. Enter the price before tax in the calculator.

If you are not registered for GST/HST, the tax you cannot recover does form part of the capital cost. Most businesses buying equipment at this level are registered.

All asset types in Ontario

• Computer equipment
• Software
• Manufacturing and processing equipment
• General equipment, tools and furniture
• Commercial vehicles (vans, pickups, work trucks)
• Heavy trucks and tractors
• Zero-emission vehicles
• Patents, licences and acquired IP
• Clean energy and energy conservation equipment
• Data network infrastructure
• Farm machinery
• Construction and contractor equipment
• Medical and dental equipment
• Restaurant and hospitality equipment
• Media production equipment
• Aircraft
• Buildings and additions
• Goodwill, franchises and licences (Class 14.1)
• Passenger vehicles (Class 10.1)
• Qualified liquefaction equipment