Ottawa's proposed 100% aircraft write-off: what it means and what to ask first

On September 15, Prime Minister Carney announced what the federal government is calling the Productivity Mega Deduction. [1] The name is a bit much. What’s behind it matters to anyone in Canada thinking about buying business aircraft.

The short version: a business would be able to deduct the full cost of most newly acquired capital assets in the year they go into service, instead of over many years. It would apply to assets acquired on or after September 15, 2026.[2] There are exclusions, buildings being the main one, but aircraft are named specifically. And unlike earlier accelerated depreciation measures, this one is meant to be permanent.[1][2]

I say “would” because it is still a proposal. Draft legislation is out, and the government has been clear that it intends to pass it, but it is not the law today. Though, with a majority government in power, there is little chance of this not happening. [3] Finance Canada’s backgrounder is the source of the document if you want to read it yourself. [2]

Under the regular rules, an aircraft goes into Class 9 and is written down at 25% a year on a declining balance.[4] Set aside the first-year wrinkles, and you still have roughly a third of the purchase price undeducted after four years. On a multi-million-dollar aircraft, that is a long time to wait for the tax system to catch up with the cheque you wrote.

Under the proposal, the full amount comes off in year one. The aircraft doesn't get any cheaper, but the cash flow of owning it changes considerably.

Two other things make the timing interesting. The federal luxury tax on aircraft was removed in November 2025,[5] so a Canadian buyer is already looking at a very different tax picture than a year ago. And Canadian buyers have spent years watching their American counterparts write off aircraft in year one under bonus depreciation, which the U.S. introduced on a temporary basis, and made permanent in 2025.[6] Anyone who has watched the U.S. market in the fourth quarter knows how much of a motivator that is. Ottawa's own estimate is that this measure takes Canada's marginal effective tax rate on new business investment down to 6.4%, against 16.9% in the U.S.[2]

The permanence matters more than it might seem. Temporary incentives push people to buy against a deadline, and rushed aircraft purchases are rarely good ones. If this passes as proposed, a buyer can take the time to find the right aircraft and do a proper pre-purchase inspection without one eye on an expiry date.

The usual caveat: I am not a tax advisor. What I can offer is the list of questions I'd want answered by one who knows aviation before I take the deduction to the bank.

Is the aircraft pre-owned? Used aircraft can qualify, which matters in Canada because so much of our market is pre-owned. There are conditions, though. Neither you nor anyone not at arm's length from you can have owned the aircraft before, and it can't have come to you through a tax-deferred rollover.[2] If the aircraft has ever sat in a related company or a family member's name, sort that out before you sign anything.

What do your dates look like? The aircraft has to be acquired on or after September 15, and the deduction is claimed in the year it becomes available for use.[2] If you have an aircraft on order from before that date with delivery still ahead, ask specifically how "acquired" will be defined.

Do you have the income to use it? A deduction is only worth something against taxable income. A company that ends up in a loss position can generally carry that loss to other years, so the benefit isn't wasted, but it arrives more slowly.[6] If you own the aircraft personally, or through a partnership of individuals, the proposal says the deduction can't be used to create or increase a loss at all.[2] Owner-pilots should pay attention to that.

What happens when you sell? This is the one people forget. Writing off the full cost takes the aircraft's tax value to zero, and when you sell, the proceeds (up to what you originally paid) come back into income as recapture.[6] Aircraft tend to hold their value better than most equipment, which is good news right up until you sell one with a tax cost of zero. So what you are often getting is timing: the tax moves out to the year you sell. That is still worth having. Just go in knowing it.

A couple of smaller points. Claiming the deduction is optional, and you can take less than the full amount in a given year if that suits your tax position better.[6] And none of this changes the basic requirement that the aircraft be used to earn business income. An aircraft that is mostly personal is a different conversation.

Finally, keep your paperwork together. In an aircraft transaction, the documents that show when you acquired the aircraft, when it entered service and who owned it before you already exist: the purchase agreement, bill of sale, title search, delivery receipt, etc. With this much tax at stake, assume someone will eventually ask to see them.

We'll be watching the legislation as it moves, and I'll write again when there is something concrete to report. If you're weighing an acquisition and want to talk through how the timing might work, reply to this email. Always happy to trade notes.

One last thing. This is the first issue of this newsletter, so thank you for being here at the start. The plan is simple: when something happens that matters to people who own business aircraft in Canada, or are thinking about buying one, I'll explain what I think it means in practice. If there's a topic you'd like covered, just let me know.

Stan

Sources