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A super-deduction is a tax deduction that permits businesses to deduct more than 100 percent of their eligible expenses from their taxable income. As such, the super-deduction is effectively a subsidy for certain costs. This policy sometimes applies to capital costs or research and development (R&D) spending.

Super-Deductions and Economic Growth

A super-deduction and other capital allowances are a form of cost recovery, or the ability of businesses to recover (deduct) the costs of their investments. It plays an important role in defining a business’ tax base and can impact investment decisions.

The Effect of Capital Allowances on Taxes Paid capital cost recovery across OECD countries, 2021. Learn more about capital allowance and capital recovery.

For example, the United Kingdom has a temporary super-deduction of 130 percent of investment costs made within a year. If a U.K. business buys a $10,000 machine in 2021, it can then deduct $13,000 from its revenues in 2021.

Over a dozen countries currently allow for super-deductions for innovation-related spending, ranging from 100 to 300 percent of partial or all R&D expenses and investments.

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