Quick answer
Ontario accelerated depreciation rules for 2026 mirror the federal Budget 2025 measures announced on November 4, 2025. Most eligible assets acquired on or after January 1, 2025 and available for use before 2030 qualify for a first-year capital cost allowance (CCA) deduction up to three times the normal amount, with the half-year rule suspended. Eligible manufacturing and processing machinery, clean energy equipment, and zero-emission vehicles qualify for full 100 percent first-year expensing. Eligible manufacturing or processing buildings acquired on or after November 4, 2025 also qualify for immediate 100 percent expensing, subject to a 90 percent floor-space test. Enhanced rates phase down to 75 percent in 2030 and 2031, and 55 percent in 2032 and 2033, and are eliminated for property available for use after 2033.
Why 2026 is the year Ontario businesses stop deferring capital purchases
Picture a Hamilton manufacturer looking at a quote for new equipment. The invoice reads two hundred thousand dollars. The owner wonders whether to sign now or wait until next year.
That timing decision has changed meaningfully. The federal government reinstated generous first-year deductions through Budget 2025, and Ontario confirmed it would parallel those measures in its own 2026 Budget. Waiting past the end of 2029 can now mean leaving real money on the table.
This guide explains what changed, what qualifies, and how to claim it. For broader context, see our coverage of Canada Federal Budget 2025 expert insights.
Pick your path
You report business income on your personal T1 using Form T2125. Capital cost allowance (CCA), the CRA term for tax depreciation, is claimed in Area A. Focus on the asset-class table and the claiming steps.
Your corporation files a T2 return. CCA additions and deductions are tracked on Schedule 8. The full article applies, including the worked example and Ontario rate transition.
Professionals who have incorporated follow the T2 path but often carry mixed personal and business assets. Pay close attention to the arm’s-length and change-of-use rules.
If you are still deciding between sole-proprietor and incorporated status, our guide on self-employed or incorporated in Canada 2026 walks through the trade-offs in plain English.
A quick look at the first-year jump
To see why timing matters, compare the old half-year rule against the 2026 reaccelerated rule on a typical office-furniture purchase.
What actually changed: federal Budget 2025 and Ontario Budget 2026
The federal picture
Federal Budget 2025, tabled on November 4, 2025, reinstated and expanded the Accelerated Investment Incentive. Most depreciable property acquired on or after January 1, 2025 and available for use before 2030 qualifies for a first-year CCA deduction up to three times the normal amount, and the half-year rule is suspended.
Budget 2025 also introduced 100 percent immediate expensing for eligible manufacturing and processing buildings acquired on or after November 4, 2025, along with productivity-enhancing assets in Class 44 (patents), Class 46 (data network infrastructure), and Class 50 (computers and software). Bill C-15, the implementing legislation, received royal assent on March 26, 2026.
The Ontario overlay
Ontario tabled its 2026 Budget on March 26, 2026 and confirmed its intent to parallel the federal measures, pending final federal legislation on the remaining building provisions. According to the Ontario Ministry of Finance, the combined measures may provide over $3.5 billion in provincial tax relief to qualifying businesses across the four years from 2025-26 to 2028-29.
For a wider view, see our overview of Canada taxation 2026 and the important changes businesses must know.
Which assets qualify and at what rate
The CCA class system groups depreciable property by type and assigns each class a prescribed rate. Most Ontario small businesses interact with a short list of classes, summarised below.
| Asset type | CCA class | Normal rate | 2026 first-year rule | Phase-out milestone |
|---|---|---|---|---|
| Office furniture and equipment | Class 8 | 20% declining-balance | Up to 3x normal first-year deduction | Reduced 2030 onward |
| Passenger vehicles and most trucks | Class 10 | 30% declining-balance | Up to 3x normal first-year deduction | Reduced 2030 onward |
| Computers and systems software | Class 50 | 55% declining-balance | Full 100% expensing (productivity-enhancing) | Phases out through 2033 |
| Manufacturing and processing machinery | Class 53 (historic) / Class 43 | 50% declining-balance | Full 100% expensing | 75% in 2030-2031, 55% in 2032-2033 |
| Zero-emission vehicles | Class 54 or 55 | 30 or 40% declining-balance | Full 100% expensing | 75% in 2030-2031, 55% in 2032-2033 |
| Manufacturing or processing buildings | Class 1 (M&P sub-class) | 10% declining-balance | Full 100% expensing (if 90% floor-space test met) | 75% in 2030-2031, 55% in 2032-2033 |
For a companion reference on corporate tax arithmetic, see Canada’s corporate tax rates explained.
Step-by-step: how to claim accelerated depreciation on your return
- 1Confirm the asset is available for useAvailable for use is the CRA term for the date the asset is ready and being used for business. A delivery van must typically be plated, insured, and on the road.
- 2Identify the correct CCA classThe class determines both the normal rate and the 2026 first-year treatment. A laptop lands in Class 50; a delivery van in Class 10; M&P machinery in Class 53 or its post-2025 equivalent.
- 3Confirm the acquisition date falls inside the eligibility windowMost classes require acquisition on or after January 1, 2025. Manufacturing buildings require acquisition on or after November 4, 2025.
- 4Confirm arm’s-length and non-rollover conditionsThe enhanced first-year allowance does not apply to property acquired from a related party or on a tax-deferred rollover. Keep the purchase documentation.
- 5Record the addition on the right scheduleCorporations report the addition on Schedule 8 of the T2 return. Sole proprietors report it in Area A of Form T2125.
- 6Apply the enhanced rate and suspend the half-year ruleFor eligible property, the first-year deduction is up to three times the normal rate and you skip the half-year rule. Commercial tax software generally handles this once the property is flagged as AIIP.
For broader guidance on tax-saving moves that stack with accelerated depreciation, see how to reduce your tax bill with smart accounting strategies.
A worked example: a Hamilton manufacturer buying a $200,000 CNC machine
Consider a Hamilton metal-fabrication SME that orders a new CNC machine for $200,000 in July 2026 and commissions it in September. The company is a Canadian-controlled private corporation (CCPC) that qualifies for the Ontario small business deduction.
Under the reinstated immediate-expensing rule for manufacturing and processing machinery, the full $200,000 cost can typically be deducted in the first tax year. The combined federal and Ontario small business rate from July 1, 2026 is approximately 11.2 percent on qualifying income. At that rate, expensing the $200,000 in year one may reduce corporate tax by roughly $22,400 compared to deferring the deduction across multiple years.
The exact saving depends on taxable income, associated-corporation rules, and the Ontario rate transition. For help aligning these decisions with the rest of your year, see our fiscal year 2026 planning guide.
When do these rules start scaling back?
The enhanced first-year CCA rules are not permanent. They phase out between 2030 and 2033, reverting to normal treatment for property available for use after 2033.
For property that becomes available for use in 2030 or 2031, the enhanced rate drops to 75 percent of the first-year deduction. For 2032 or 2033, it drops further to 55 percent. After 2033, the half-year rule returns and the normal class rates apply.
A practical consequence: a project planned in 2029 but commissioned in January 2030 lands in the 75 percent tier, not the 100 percent tier. Acquisition date and available-for-use date are both relevant and can fall in different years. For broader planning through the end of the decade, see our Canadian tax in 2026 complete guide.
Common mistakes Ontario businesses make with accelerated CCA
The mechanics of the Accelerated Investment Incentive are straightforward, but the edge cases generate most of the CRA reassessments we see. A few patterns repeat.
- →Confusing the acquisition date with the available-for-use date. A machine bought in December 2029 but commissioned in January 2030 typically lands in the 75 percent tier rather than the 100 percent tier.
- →Claiming the enhanced first-year allowance on property acquired from a non-arm’s-length party. Equipment transferred from a spouse-owned company or on a rollover does not generally qualify.
- →Ignoring the 90 percent floor-space test for manufacturing or processing buildings. A mixed-use building where manufacturing occupies only part of the space may not qualify for 100 percent expensing.
- →Forgetting that Ontario alignment remains pending final federal legislation on some measures. Claiming federally does not automatically produce the same Ontario outcome.
- →Missing the change-of-use recapture risk. Converting an M&P building to retail or office use within a few years can trigger CRA recapture of the previously expensed amount.
- →Claiming CCA on leased equipment. True operating leases typically do not generate CCA at all; the business deducts lease payments instead.
- →Overlooking the interaction with the Ontario Made Manufacturing Investment Tax Credit. Accelerated CCA and the Ontario credit can stack, but a five-year recapture applies if the property is sold, relocated outside Ontario, or converted to non-manufacturing use.
Before filing, it can help to run through our CRA audit business checklist to confirm your documentation is complete.
Frequently asked questions
Short answers to the questions Ontario business owners ask most often.
Does Ontario follow the federal accelerated depreciation rules in 2026?
Can a sole proprietor in Ontario write off 100 percent of a new laptop in 2026?
What is the difference between immediate expensing and accelerated CCA?
Does the half-year rule still apply to assets bought in 2026?
What happens if I buy a used piece of equipment - does it still qualify?
When do these accelerated depreciation rules start phasing out?
If I sell an asset after claiming accelerated depreciation, what is recaptured?
Can I stack accelerated depreciation with the Ontario Made Manufacturing ITC?
For a broader set of planning tactics that pair well with these rules, see our guide to essential tax savings tips for small businesses in Canada.
Plan your 2026-2029 capital spending with ClearWealth
The action window is wide but finite. Property available for use through the end of 2029 generally qualifies for the full enhanced first-year deduction. If you would like a second set of eyes on your plan or want to browse related insights, our team is here to help.
Book a ConsultationSources & references
- Government of Ontario, 2026 Ontario Budget Highlights
- Government of Ontario, 2026 Ontario Budget, Chapter 1B: A Plan to Build a Competitive Economy
- Canada Revenue Agency, Accelerated Investment Incentive
- Canada Revenue Agency, Capital Cost Allowance (CCA) Classes
- Department of Finance Canada, Budget 2025
- Parliament of Canada, Bill C-15, Budget 2025 Implementation Act, No. 1 (royal assent March 26, 2026)
- KPMG Canada, 2025 Federal Budget Highlights (TaxNewsFlash No. 2025-41, November 4, 2025)
- PwC Canada, Bill C-15 tax measures analysis
