Canada’s federal government introduced a new tax measure, called the Productivity Mega Deduction, effective September 15, 2026. The measure brings 100% immediate expensing for aircraft and a wide range of other depreciable property, allowing the full cost to be deducted in the year the asset becomes available for use rather than spread out over time. For aircraft buyers operating under Canadian tax law, this is a meaningful change to how quickly the cost of a new aircraft can be written off, and it’s worth understanding the actual mechanics before assuming how it applies to a specific purchase.

What Changed

Under the traditional approach, the cost of an aircraft is deducted gradually over a number of years through Canada’s Capital Cost Allowance system, spreading the tax benefit of a purchase out well beyond the year the aircraft actually enters service. The Productivity Mega Deduction replaces that gradual schedule, for eligible property, with a single 100% deduction taken in the year the asset becomes available for use.

The measure significantly widens what qualifies for immediate expensing, expanding eligibility from roughly 15% of depreciable asset classes to approximately 65%. The list of newly eligible categories is broad and includes aircraft and vehicles alongside fibre-optic cable, computer equipment, software, research and development costs, rail track, bridges, and mining and pipeline property. That’s a substantially larger share of the assets Canadian businesses invest in than any prior immediate expensing program has covered, which is part of why industry groups have been paying close attention to how the aircraft-specific provisions are ultimately finalized.

Unlike some past accelerated depreciation programs that were structured as temporary incentives with a sunset date, the government has described the Productivity Mega Deduction as a permanent measure rather than a temporary one.

What Qualifies

A few conditions determine whether a given aircraft purchase actually qualifies:

• The aircraft must become available for use in the tax year the deduction is claimed.
• Used aircraft can qualify, but only if neither the purchasing taxpayer nor a related party previously owned the aircraft, and it was not acquired through a tax-deferred rollover.
• Certain other asset classes are explicitly excluded from the measure, including buildings, franchises and licenses, goodwill, regulated natural gas pipelines, and specific categories of passenger vehicles. Aircraft are not among the excluded categories in the draft legislation released so far.

Why This Is Happening

Industry associations, including the Helicopter Association of Canada working alongside the Air Transport Association of Canada and the Aerospace Industries Association of Canada, had specifically lobbied the federal government for accelerated depreciation and immediate expensing on aircraft, citing the benefit to fleet renewal and new investment across the Canadian aviation sector. The federal government’s own estimate puts the incremental fiscal cost of the broader Productivity Mega Deduction at approximately $36 billion over five years starting in 2026-27, a cost it is framing against the economic activity the measure is intended to generate. The government has positioned the deduction as part of a broader push to increase private capital investment across the Canadian economy, with the name itself, the Productivity Mega Deduction, reflecting that stated goal.

Timing Considerations

The deduction is tied to when an aircraft “becomes available for use,” not necessarily when a purchase agreement is signed or a deposit is paid. That distinction matters for anyone timing a transaction around a specific tax year, particularly for purchases that close near a year-end, since the closing and delivery date, not the contract date, is what determines which tax year the deduction falls into under the mechanics described in the draft legislation.

What Is Still Unsettled

As of this writing, the Productivity Mega Deduction exists as draft legislation and has not yet received Royal Assent. The specific rules described above, including which asset classes qualify and the conditions on used property, remain subject to change before the measure is formally enacted into law.

This is a factual summary of the policy as proposed as of publication. It is not tax advice, and it does not account for how this measure interacts with any individual buyer’s specific ownership structure, residency status, or existing depreciation schedule on aircraft already in service. Holstein Aviation does not provide tax advice. Decisions about how this deduction applies to a specific purchase, and how to structure a transaction to take advantage of it, should be made with a qualified tax advisor or accountant who can evaluate your full situation.

Contact Holstein Aviation to talk through the aircraft side of your next transaction, and bring your tax advisor into the conversation early if timing this deduction is part of your plan.

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Sources:

• Osler, Hoskin & Harcourt LLP, “Canadian prime minister announces ‘Productivity Mega Deduction'”
• Corporate Jet Investor, “Canada goes 100% on bonus depreciation”
• Vertical Mag, “HAC celebrates advocacy win over tax deduction for new aircraft”
• Insights CPA, “Productivity Mega Deduction Canada 2026: What’s Excluded”