This article is to inform you about an important update regarding the Capital Cost Allowance (CCA) immediate expensing benefits.
What’s Changing?
Canadian Controlled Private Corporations (CCPCs) have until December 31, 2023, to acquire property eligible for temporary immediate expensing measures. These measures allow eligible businesses to claim up to $1.5 million in tax depreciation on eligible property acquired and available for use before January 1, 2024. This is done through a CCA claim on each CCPC’s tax return. The $1.5 million CCA claim limit is per taxation year and is shared between an associated group of CCPCs, with the limit being prorated for shorter taxation years.
What Property is Eligible?
Eligible property encompasses depreciable assets subject to the CCA rules, with the exception of property classified within CCA classes 1 to 6, 14.1, 17, 47, 49, and 51. These excluded classes typically comprise assets known for their extended lifespans, including buildings, fences, and goodwill.
Immediate expensing would generally only be available on eligible property that:
- Was neither previously owned by the taxpayer or a non-arm’s length person
- Has not been transferred to the taxpayer on a tax-deferred rollover basis
Important Deadlines
No carry-forward of excess capacity is allowed so CCPCs looking to benefit from the final year of immediate expensing should ensure eligible property is acquired and available for use by December 31, 2023.
Please note: Sole proprietors and Canadian partnerships, where all members are individuals, have until December 31, 2024, to procure eligible property eligible for immediate expensing.
About Associated Corporations
The concept of associated CCPCs for immediate expensing has been expanded to include individuals and partnerships. This is done by deeming individuals and partnerships related to each other and CCPCs as “deemed corporations”. By deeming individuals and partnerships as corporations, the existing association rules can be applied for sharing of $1.5 million immediate expensing limit (per taxation year).
We’re Here to Help
We understand that these changes may be complex. If you need help or still have questions about the immediate expensing benefits in Canada, please reach out to us. We’re here to help with all your tax needs.
