Posts

Amortization (CCA) Rates Increased

The federal government has introduced accelerated rates of amortization on capital asset purchases, otherwise known as Capital Cost Allowance (CCA). These will allow businesses to write off their eligible asset purchases faster than in previous years.

The write off will be increased by one half of the original rate on ordinary asset purchases, if the asset purchased will be available for use prior to 2024.

In addition, businesses were previously allowed a write off of only one half of the applicable rate in the year of purchase. These new rules exclude the application of this “half year” rule on eligible purchases.

The half year rule will not apply on any of these asset purchases if the asset is available for use by the business prior to 2028.

If an asset purchase is considered to be a piece of manufacturing or processing equipment, the total write off on the asset will be up to 100% of the net cost of the asset in the year of purchase, if the equipment will be used prior to 2024.

If the equipment becomes available for use in 2024 or 2025, 75% of the purchase can be written off in the year of purchase, and if it is not available for use until 2026 or 2027, 55% can be written off in the first year.

Similar accelerated rates of amortization are available for purchases of clean energy equipment.

Zero emission vehicles will also qualify for special amortization status. These vehicles can be fully written off in the first year if they are available for use prior to 2024.

There is a cap of $55,000 on the amount of the write off if the vehicle is considered to be a passenger vehicle.

If the vehicle qualifies for federal incentives on the purchase of zero emission vehicles, it will not qualify for these special amortization rates. Rather, the vehicle would be written off the same as any other vehicle purchases.