Faster Deduction Available for Equipment Purchases
There was great news for businesses in the federal government’s Economic Statement which was announced on November 20th, 2018. The “Accelerated Investment Incentive”, means taxpayers will be entitled to claim a 100% deduction for manufacturing, processing and also clean energy equipment in the year it is put to use, instead of 25% in the first year and 50% per year thereafter on a declining balance basis.
The first year deduction on other asset purchases, such as buildings, vehicles, patents, and equipment, will be three times the amount currently deductible. This eliminates the half-year rule and allows a deduction equal to one and a half times the current CCA (Capital Cost Allowance) rate.
For example, if you were to purchase furniture, fixtures or equipment with a 20% CCA rate, the deduction in the first year will be 30% of the cost of the asset, rather than the 10% currently available.
If you were to purchase a vehicle with a 30% CCA rate, the deduction in the first year will be 45% rather than the 15% currently available.
These new rules will be available for equipment purchased after November 20, 2018, and in use before 2028. There will be a phase-out period from 2024 to 2027.
Important to note is you will only be able to claim the accelerated deduction in the year that the asset is in your possession and is in use.
Talk to your accountant and see if this may the year for you to buy that machine you’ve been wanting.
Visit the Government of Canada website to read more about this announcement!