Normally, we tell dentists who are getting ready to sell their practice: don’t spend a lot of money on new equipment right before the sale.
There are good reasons for that advice. You might spend $100,000 or $200,000 upgrading dental chairs, buying a new digital pan/ceph, adding an intraoral scanner, replacing X-ray sensors, upgrading computers or modernizing your sterilization centre. Those upgrades may make your office look great, but a buyer may not value them dollar-for-dollar. The buyer may even prefer to choose their own equipment after closing.
There is also a timing problem. While the value of newer equipment may be reflected in a practice appraisal, the financial benefits of that investment may take months—or even longer—to show up in your financial statements. Did the new scanner increase production? Did the new technology make the practice more efficient? Did a new pan allow you to perform more procedures in-house? Did the investment actually increase EBITDA? If you’re selling shortly after buying the equipment, there may not be enough history to prove it.
And under the traditional tax rules, you generally couldn’t deduct the entire equipment purchase immediately. Instead, the cost would usually be written off over time through Capital Cost Allowance (“CCA“). So, historically, making a large equipment purchase immediately before selling often didn’t make much sense.
Then September 15, 2026 happened. On that date, the federal government announced its proposed Productivity Mega Deduction. Among other things, the proposal would allow businesses—including dental practices—to IMMEDIATELY deduct 100% of the cost of most qualifying equipment acquired on or after September 15, 2026, once it becomes available for use. That could dramatically change the math for dentists who are thinking about selling.
And for dentists planning to sell the shares of their dentistry professional corporation, the opportunity may be particularly interesting. Here’s why….
What’s Canada’s New Mega Deduction?
Normally, when a dentist purchases expensive equipment, the Canada Revenue Agency (“CRA“) doesn’t allow the entire cost to be deducted from income immediately. Instead, the cost is generally deducted over several years through CCA. For example, if your dentistry professional corporation purchases $100,000 of qualifying dental equipment, the traditional rules generally allow you to deduct only a portion of that cost each year.
Under Canada’s proposed Productivity Mega Deduction, most eligible equipment acquired on or after September 15, 2026, could instead be fully deducted in the year it becomes available for use. That means potentially receiving the entire tax deduction upfront rather than waiting years. The proposal is intended to make immediate expensing permanent, but as of the date of this article, it remains proposed legislation.
What Dental Equipment Could Qualify?
Many of the expensive items dentists regularly purchase may qualify, including:
- Dental chairs, delivery units and operatories
- Digital X-ray machines and panoramic imaging systems
- Cone-beam CT scanners
- Intraoral scanners and digital impression systems
- CAD/CAM equipment and milling machines
- Sterilization equipment
- Computers, servers and certain software
Both new equipment and qualifying used equipment may be eligible, although special restrictions apply to previously owned equipment and related-party transactions. Goodwill and most buildings are excluded. Timing is also important. The equipment generally needs to be available for use. Simply signing an order or paying a deposit before selling your practice isn’t necessarily enough.
How Much Tax Could You Save?
Consider an Ontario dentist planning to sell their practice in 2027. The dentist’s corporation purchases $200,000 of qualifying equipment before the sale. Assuming the corporation has sufficient taxable income and the income is subject to Ontario’s 11.2% combined small-business corporate tax rate, the numbers could look something like this:
| Amount | |
|---|---|
| Equipment purchased | $200,000 |
| Immediate tax deduction | $200,000 |
| Potential corporate tax savings | $22,400 |
| Effective after-tax cost | $177,600 |
This is a simplified example. Actual tax savings will depend on the corporation’s income, taxation year, applicable tax rate and other circumstances.
And if some of that income would otherwise be taxed at the higher general Ontario corporate tax rate, the value of the deduction could be substantially greater. Remember, though: this isn’t free equipment. Your corporation is still spending $200,000. The potential advantage is receiving the tax deduction immediately instead of spreading it over many years.
Why Selling Shares Makes This Especially Interesting
Here’s where it gets particularly interesting for a dentist planning a sale. Most dentist sellers would prefer to sell the shares of their dentistry professional corporation rather than having the corporation sell its individual assets. One important reason is the potential availability of the Lifetime Capital Gains Exemption (“LCGE”), which can shelter a significant portion of the shareholder’s capital gain if all of the requirements are satisfied.
But the Mega Deduction creates another interesting consideration. If your corporation sells depreciable dental equipment in an asset sale, some of the CCA previously claimed may come back into income as CCA recapture.
A share sale is different. When you sell the shares of your dentistry professional corporation, the corporation itself continues to own the dental equipment. The shareholder changes. The owner of the equipment does not. As a result, the share sale itself generally does not trigger CCA recapture on the equipment.
Consider our $200,000 example. Your corporation purchases $200,000 of qualifying equipment and claims the proposed immediate deduction. Later, you sell the shares of the corporation. The equipment stays inside the corporation. The previous deduction isn’t automatically reversed simply because someone else purchased your shares. That creates the possibility of obtaining a significant corporate tax deduction before selling while potentially benefiting from the LCGE on the eventual share sale.
There is a catch, of course: the purchaser inherits the corporation and its existing tax attributes, including the reduced tax value of equipment that has already been written off. A sophisticated purchaser may take that into account when negotiating the deal.
Could New Equipment Increase Your Practice’s Selling Price?
Possibly—but don’t assume that spending $200,000 means your practice is suddenly worth $200,000 more.
Buyers consider more than historical billings. They look at the condition of the office, age of the equipment, future capital expenditures, profitability, efficiency and opportunities for growth. Imagine two otherwise similar dental practices generating $1.5 million annually. One has aging chairs, outdated X-ray equipment and a sterilization centre that will soon need replacing. The other has modern operatories, digital scanners and recently upgraded equipment. Which one would you rather buy?
The newer practice may be more attractive because the purchaser doesn’t have to immediately spend hundreds of thousands of dollars modernizing it. Better technology may also improve efficiency, allow additional procedures to be performed in-house and potentially improve profitability. If those improvements translate into sustainable EBITDA, they may ultimately support a higher practice valuation.
But the key is buying equipment that makes business sense, not buying equipment simply to generate a tax deduction.
Don’t Forget About the Capital Gains Exemption
There may be another planning benefit. To qualify for the LCGE, a dentistry professional corporation must satisfy several tests concerning the nature of its assets, including tests relating to assets used principally in an active business carried on primarily in Canada. A corporation holding too much excess cash or passive investments can create problems.
Purchasing equipment genuinely used in the dental practice may improve the corporation’s mix of active-business assets. But don’t assume that buying equipment immediately before selling will automatically fix an LCGE problem. There are additional requirements, including historical tests that look back over the preceding 24 months.
This is something that should be reviewed with your accountant and lawyer well before the sale.
Five Things Dentists Should Consider Before Buying
- Your sale timeline: If you’re selling in three months, talk to your advisors—and potentially your buyer—before making a major equipment purchase. If you’re selling in one to three years, there may be more time for the investment to generate measurable financial benefits.
- Your corporate profits: The immediate deduction is most valuable when your corporation has taxable income against which it can actually use the deduction.
- The equipment itself: Focus on technology that improves productivity, expands treatment capabilities, reduces future capital expenditures or makes the practice more attractive to purchasers.
- HST and financing: Dentists generally can’t recover HST paid on equipment used in providing HST-exempt dental services. Financing costs, interest rates and cash flow also need to be considered.
- Share sale versus asset sale: This distinction is critical. An asset sale may trigger CCA recapture. A share sale generally does not trigger recapture merely because ownership of the corporation changes.
The Bottom Line: Plan Before You Sell
Canada’s proposed Productivity Mega Deduction could change some of the traditional advice we give dentists preparing to sell.
Historically, spending heavily on equipment immediately before a sale could be difficult to justify. You might not have enough time to demonstrate the financial return, the purchaser might not value the equipment dollar-for-dollar, and the tax deduction could take years to realize.
The proposed Mega Deduction changes one important part of that equation.
A well-timed equipment purchase could potentially give your corporation a 100% upfront tax deduction, modernize the practice and make it more attractive to prospective purchasers.
And if you’re ultimately selling shares, the sale itself generally won’t trigger CCA recapture simply because the corporation has changed hands.
If you’re planning to sell your dental practice within the next one to three years, this is something worth discussing with your dental accountant and dental lawyer before making your next major equipment purchase.
The question isn’t simply, “Can I get a tax deduction?” The better question is: “Will this investment reduce my taxes, strengthen my practice and ultimately help me walk away with more money when I sell?”
Disclaimer: This article provides general information only and is based on proposed federal tax changes announced September 15, 2026. The proposed legislation may change before becoming law. Dentists should obtain professional tax and legal advice based on their particular circumstances before purchasing equipment or selling a dental practice.
