CRA has established a new rule for Capital Cost Allowance (CCA) called the Accelerated Investment Incentive. This new rule applies to property purchased after Nov. 20, 2018. CCA can be calculated on 1.5 times the value of the asset in the first year of purchase, thus creating a larger amortization expense for this first year. This rule also suspends the existing CCA half-year rule.
The difference in CCA is outlined in an example below:
A corporation purchased a vehicle in the corporation name for $30,000.00 in January 2018.
This vehicle is a regular truck – therefore it is considered a passenger vehicle or Class 10.1.
The amortization rate for Class 10.1 is 30%.
Previous CCA Rules:
The Half Year Rule would apply thus resulting in the $30,000 to be divided in half for the purposes of the CCA calculation.
First Year: $30,000*1/2*30% = $4,500 CCA claim for the vehicle for 2018.
If this vehicle was in fact purchased in December 2018 instead, the new CCA rules would apply.
New CCA Rules:
The Accelerated Investment Incentive would apply this resulting in the $30,000 to be multiplied by 1.5 for the purposes of the CCA calculation.
First Year: $30,000*1.5*30% = $13,500 CCA claim for the vehicle for 2018.
Therefore, it is a great time to invest in assets for your business and take advantage of the Accelerate Investment Incentive. Come see us at Jibe for more information and file your corporate tax return.