New tax write-off: what it means for small business
What happened
On September 15, 2026, Finance Canada proposed a new tax rule called the Productivity Mega Deduction. Today, when a business buys something that lasts, like a computer, a machine or software, it usually cannot deduct the whole cost at once. It deducts a slice each year. That yearly slice is called capital cost allowance (CCA).
Under the proposal, a business could deduct the full cost in the year the item is ready to use. Finance says this would cover about two-thirds of business investment, up from about 15% today. It would be permanent and would apply to most eligible property bought on or after September 15, 2026. It comes with draft legislation, but it is not law yet.
How it affects you
If you run a small business, or plan to start one, paying less tax sooner leaves more cash in the business early on. The total tax saved over time is the same. What changes is when you get the benefit.
Example (illustrative assumptions, not official figures): a small shop buys $20,000 of computers and software and pays 12% tax on its profit.
- Full deduction in year one: $20,000 × 12% = $2,400 less tax that year.
- If the cost were spread out and only $4,000 could be deducted in year one: $4,000 × 12% = $480 less tax that year.
- Difference in year-one cash: $2,400 − $480 = $1,920.
Notice that the purchase still costs real money. After the full $2,400 saving, the $20,000 purchase costs about $17,600 net. The deduction softens the price; it does not pay for it.
Finance also measures the tax on one extra dollar of new business investment (the "marginal effective tax rate"). It says that rate would fall from 13.0% to 6.4%, compared with 16.9% in the United States in 2026. The government expects more investment and, over ten years, up to 80,000 more jobs a year. Those are government estimates, not guarantees.
What you can do
- Before a big purchase, ask your accountant whether the item would qualify and how it changes your tax for the year.
- Keep invoices and note two dates: when you acquired the item and when it was ready to use.
- Check the CRA and Finance Canada pages for news on whether the rule becomes law.
- Do not buy something you do not need just for the deduction. In the example, you still spend $17,600 of your own money.
What to keep in mind
This is a proposal. The rules could change before they pass. Some things are left out, including buildings in CCA classes 1 and 3, franchises, licences and goodwill (classes 14 and 14.1), and certain vehicles. Used property qualifies only if neither you nor someone related to you owned it before.
Individuals, and partnerships with individual members, would face limits on using the deduction to create or increase a loss. This article is general information, not tax advice. For your own case, speak with an accountant or the CRA.
Data from Finance Canada releases of September 15 and October 1, 2026.
Sources
- Department of Finance Canada: Government of Canada introduces new Productivity Mega Deduction to boost Canada's advantage as the most competitive G7 country for new business investment
- Department of Finance Canada: The Government of Canada introduces new Productivity Mega Deduction to help businesses invest, grow and create jobs in Canada
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Information checked against the sources listed above on October 9, 2026. Educational information, not financial, tax or legal advice.
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