Staff post by Sarah Penner, CPA
Did you know that certain capital expenditures can be completely written off under CRA’s immediate expensing incentive?
What purchases qualify?
All capital cost allowance (CCA) classes qualify with the exception of classes 1 through 6, 14.1, 17, 47, 49, and 51 (these exceptions are generally long-lived assets such as buildings, other structures, parking lots, and intangible assets like goodwill or trademarks). This means that purchases of vehicles and trailers (Class 10) and other equipment (Class 8) can be fully deducted in the year of purchase.
When is this available?
Canadian Controlled Private Corporations: For purchases made after April 18, 2021, and available for use before 2024
Canadian resident individuals and partnerships: For purchases made after Jan 1, 2022 and available for use before 2025 (or available for use before 2024 for partnerships where not all partners are individuals)
Is there a limit?
Up to $1.5 million per year, shared between associated corporations, persons, or partnerships. This limit cannot be carried forward to another year if not used.
How does this help me?
Under the normal rules, the CCA claim was limited to a certain percentage per year which meant that a capital purchase was written off over several years. With the immediate expensing incentive, there are tax planning options available such as offsetting high-income years with capital purchases.
Do I have to use the incentive?
No – CCA is a discretionary deduction, so you can choose to deduct less than the fully allowed amount of CCA. You can still choose to spread out the deduction for your capital purchase over a number of years in order to normalize your net income.
If you have questions about how the immediate expensing incentive will work best with your business scenario, please contact our office.