The 2025 Federal Budget continues the federal government’s efforts to support Canadian businesses investing in productivity and expansion. One of the most significant new measures is the introduction of temporary, immediate expensing for eligible manufacturing and processing buildings, effective November 4, 2025.
For manufacturers planning facility investments, this creates a valuable opportunity to accelerate deductions and reduce after-tax project costs.
What Is Immediate Expensing?
Under the proposed changes, businesses will be permitted to deduct 100% of the cost of an eligible manufacturing or processing building in the first year it is placed into use. This includes both new buildings and eligible additions or alterations.
To qualify, at least 90% of the building’s floor space must be used for manufacturing or processing purposes.
Instead of deducting the cost of the building gradually over many years, immediate expensing often allows businesses to realize tax savings much sooner.
Phase-Out Schedule: Timing Matters
The enhanced deduction applies only in the first year the building is first used for manufacturing or processing, and will gradually phase out:
- 100% deduction for property used before 2030
- 75% deduction in 2030 and 2031
- 55% deduction in 2032 and 2033
- 0% deduction after 2033
Part of Budget 2025’s Broader Investment Incentives
Immediate expensing for manufacturing buildings complements other accelerated capital investment measures in Budget 2025, titled the “Productivity Super-Deduction.”
Beginning January 1, 2025, businesses may claim up to three times the normal first-year CCA on many capital additions. Certain manufacturing machinery, clean energy equipment, and zero-emission vehicles may qualify for a full 100% first-year deduction. These incentives run through 2029, with a gradual phase-out from 2030 – 2034.
Why This Matters
This measure is more than a tax technicality; it represents a potential strategic planning tool. Manufacturers considering major facility projects may be able to significantly improve cash flow and project economics by placing assets into use before the phase-out begins. The window is open now, but the benefit declines quickly after 2030.
Next Steps
Immediate expensing for manufacturing and processing buildings could deliver substantial tax savings for Canadian manufacturers investing in growth.
Bateman MacKay LLP helps clients evaluate eligibility, understand the impact of accelerated deductions, and structure investments to maximize long-term value. If a facility expansion or building upgrade is on your horizon, now is the time to plan proactively.
For more information, please contact your Bateman MacKay Business Advisor. Topical accounting, tax, and business advisory articles pertinent to business owners can be accessed by subscribing to our blog and following us on LinkedIn.
