Machinery and equipment: CCA, timing and financing for manufacturers

A new press brake, laser or robotic welding cell can cost as much as a house. How and when you write it off for tax, and how you pay for it, can swing your tax bill and your bank covenants by hundreds of thousands of dollars.

This article is part of our guide to the financial side of running a manufacturing business.

How equipment is written off

You don't deduct a machine's price in one go as an ordinary expense. You claim capital cost allowance (CCA): a percentage of the remaining balance each year, set by the machine's class.

Manufacturing and processing (M&P) machinery

For machinery and equipment used mainly to manufacture or process goods for sale:

Other equipment, such as office furniture, computers and vehicles, falls into other classes with their own rates. Keep production machinery clearly identified in your asset records, because the M&P treatment depends on how it's actually used.

Right now: a 100% first-year write-off

Under rules enacted in March 2026, M&P machinery acquired after 2024 can be written off completely in the first year. That's the case if it's available for use before 2030. The rate then steps down:

Example: a new press brake

A 30-person sheet-metal shop in Nisku installs a $380,000 CNC press brake in 2026, used entirely in production. It can deduct the full $380,000 in its 2026 tax year.

Plan where the deduction lands

A deduction is worth more in a year your income is taxed at a higher rate. That makes timing the real decision.

Example: a soft year, then a strong one

The shop is a Canadian-controlled private corporation (CCPC). In Alberta, its first $500,000 of active business income each year is taxed at 11%; income above that is taxed at 23%.

• 2026 is a soft year: taxable income of $250,000 before CCA. Claiming the full $380,000 brings income to nil and creates a $130,000 loss.
• 2027 looks strong: a large contract should push income to about $800,000.

The loss isn't wasted. A business loss can be carried back up to three years or forward up to 20 years. Carried back, the $130,000 would recover tax paid at 11% in an earlier year. Carried forward to 2027, it comes off income taxed at 23%, saving roughly twice as much tax.

CCA itself is also optional. You can claim any amount up to the maximum and leave the rest in the class for later years, though once the 100% year has passed, the remainder comes back at the normal 30% rate. Which combination is best depends on your forecast. That's why we plan CCA and loss claims with owners before the return is filed, not after.

Selling or trading in equipment: recapture

When you sell a machine, the sale price comes off the balance of its class. If the class balance goes below zero, the excess is recapture, added to your income.

A 100% write-off makes this much more likely: the machine's balance is zero from year one.

Example: replacing the old laser

The shop fully wrote off a laser in 2025 (then in Class 53). In 2027 it sells it for $95,000 to buy a newer model.

• If the laser is the only asset in Class 53, the $95,000 is recapture, taxable income in 2027.
• The new laser goes into Class 43 (acquired after 2025), a different class, so it doesn't soak up the recapture the way a same-class purchase would.

Plan the sale and the purchase together. The tax cost of selling the old machine should be part of the replacement decision.

Buildings and what's still only proposed

Two federal measures were announced but weren't law as of October 2026:

• M&P buildings: Budget 2025 proposed a 100% first-year write-off for buildings acquired from November 4, 2025, and used at least 90% for manufacturing or processing. It's in Bill C-31, which was still before Parliament.
• The "Productivity Mega Deduction": announced in September 2026, it proposes permanent 100% first-year expensing for most equipment acquired on or after September 15, 2026, beyond M&P machinery.

Proposals can change before they pass. If you're planning a building purchase or a large equipment buy around these dates, talk to us before you sign, and keep the purchase documents showing exact acquisition and in-service dates.

Paying for it: cash, loan or lease

The tax write-off is the same whether you pay cash or borrow. The financing choice matters for cash flow and for your bank:

• Don't buy long-lived equipment on your operating line. It drains working capital and can push your current ratio below its covenant overnight. See reporting for owners and lenders.
• Term loans or equipment financing match the payments to the machine's life.
• Leases: payments are generally deductible as made, with no CCA. Some "leases" are really financed purchases, and the tax treatment follows the substance. Bring us the agreement before you sign.

Whatever you choose, the machine has to earn its keep. Build its cost (lease or payments, power, maintenance) into your machine-hour overhead rate so your quotes recover it. See job costing.

Records to keep

• Purchase agreements and invoices, with acquisition and available-for-use dates
• Installation and commissioning dates (often the in-service date)
• A note of how each machine is used (production vs other), for the M&P classes
• Sale or trade-in documents showing the price separately

The bottom line

Generous write-offs are available right now, but the timing of what you claim, buy and sell is where the real savings are. Talk to us before your next major equipment purchase.