The Immediate Expensing Rules, set to end on December 31, 2023, allow businesses to deduct the full cost of qualifying assets in the year they are placed in service, rather than depreciating them over time.
Qualifying Assets
Not all assets are eligible for immediate expensing. The CRA has specific guidelines on what qualifies for this tax provision. Generally, tangible personal property used in business, such as machinery, equipment, vehicles, and computers, is eligible for immediate expensing. However, there are limitations on the total amount that can be expensed and certain exclusions apply.
The incentive is only available for assets purcahsed after April 18, 2021 and make available for us by December 31, 2023.
Take Advantage Before December 31, 2023
It’s important for businesses to be aware that the Immediate Expensing Rules are set to end on December 31, 2023. After this date, the maximum deduction limit will decrease, and businesses will no longer be able to fully expense qualifying assets in the year purcahsed.
Even if your business is not making a profit right now, you might still benefit from this incentive. You can use the increased loss from claiming the full cost of the capital property to offset your income in future years.
To give you an idea of how much you can save with this incentive, here is an example comparing the deduction you can claim under the new rules versus the old rules: