Tax Brief: Reduce Current Year Taxes via Certain Eligible Property

After Canadian business owners called upon the Canadian government to provide additional incentives to remain competitive with USA competition, new rules were passed, enabling Canadian corporations with the ability to increase the first year amortization for certain eligible property subject to the Capital Cost Allowance (“CCA”) rules.

Issue at hand:

Until the original rules, amortization capital assets subject to CCA were limited in their first-year to the half-year rule. As the tax incentives in the USA grew, Canadian business owners recognized the need for additional/similar incentives. One of their biggest calls from the government was the immediate expensing of large capital expenditures.

New legislation passed:

Under the new measures, on eligible property acquired after November 20, 2018 and in-use before 2028, amortization of certain capital assets were amended as follows:

  • Accelerated Investment Incentive (“AII”): elimination of the half-year rule and eligible for an accelerated first year CCA rate of up to 1.5 times the net addition.

  • Full expensing for manufacturers and processors: full expensing of CCA class 53 items

  • Full expensing for clean energy investments: full expensing of CCA class 43.1 and 43.2 items

Planning considerations:

The incentive is subject to a phase-out, after 2023. Therefore, when considering making capital asset purchases for your business, it is advised to keep in mind the timing of such purposes and the benefits allowed under the current incentives.

Have any questions? Contact Blumenfeld Woznica & Co. so that we can ensure that you are in compliance with all tax matters and maximize your business and wealth planning.

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