Year End Planning: Consider the Productivity Mega Deduction

Geoff Currier and Evelyn Jacks

Year end tax planning is about reducing taxes on current year income. One of the best ways to do so is to consider the purchase of an income-producing asset and claiming a Capital Cost Allowance Deduction. The new Productivity Mega Deduction (PMD) is proposed to take effect on new asset purchases on or after September 15, 2026 and makes for a great year end conversation starter with your small business clients. It’s about immediately expensing these purchases – 100% - against other income and that can lead to a big tax saving. 

How it Works: The Finance Department says the PMD would provide immediate expensing on a wide variety of assets and expenses – about two thirds of investment in capital assets would be eligible. 

The immediate expensing rules would be permanent, which the government suggests will provide certainty for potential investors. It’s also a major piece of tax reform. 

Immediate expensing allows taxpayers to fully deduct the cost of an investment in the year that it becomes available for use. However, taxpayers may decide to use other existing provisions if the long term outcomes are better. For example, be mindful of future recaptured depreciation if assets when assets are sold, disposed or transferred.

Some Fine Print: “Depreciable property eligible for immediate expensing would include all capital property that is subject to the CCA rules acquired on or after September 15, 2026, except buildings (and additions to buildings) included in CCA classes 1 and 3; property included in CCA classes 14 and 14.1 (e.g., franchises, licenses and goodwill), and class 51 (e.g., regulated natural gas distribution pipelines); certain vehicles in classes 10 and 10.1; and property depreciated under Schedule V and VI of the Income Tax Regulations.”

There are some restrictions in particular for Class 10 and Class 10.1 vehicles acquired, covered in today’s CE Summit (Missed it? You can still register to take the online course including recorded presentations)  

Cost/Benefit Analysis: While the PMD is estimated to cost the government approximately $36 billion in tax revenue over a five-year period, the Finance Department believes that the long-term economic benefits will outweigh those losses to the treasury. Government projections suggest the creation of up to 80,000 jobs a year ten years from now.

Bottom Line: Are your clients considering new asset acquisitions before the end of the year? Let them know about the new Productivity Mega Deduction and do the math – what tax breaks will they win by making the purchase before the end of the fiscal year?

Additional Educational Resources: 

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