Accelerated Investment Incentive provides an enhanced capital cost allowance (CCA) on equipment purchases. Full expensing in the first year for manufacturing and processing and clean energy equipment purchases was also introduced as part of the Accelerated Investment Incentive. 

The main advantage of this program is that, in the first year of acquisition, it helps companies to pay down more of the expense of their depreciable property. The program does this by improving on current capital cost rules. Some classes of purchases have a defined rate of capital expense deduction that businesses are permitted to use to pay their taxes on the purchase. This program improves the net addition to the class by up to one and a half times the year.

 

The Half Year Rule

The half-year rule has been suspended under the Accelerated Investment Incentive. This rule meant that previously just 50 percent of the expense of qualifying property in the first year it was acquired is authorized by the Canada Revenue. The particular Capital Cost Allowance rate is determined by the type of CCA to which the land belongs. Suspension of the rule means that qualifying assets will now be deductible to 100% of the CCA value in the first year. 

 

Capital Cost Allowance Classes

The Accelerated Investment Incentive also affects capital cost allowance classes that have CCA values calculated on a decreasing balance. However, when you have less value to rely on, the incentive does decrease the undepreciated capital expense required in future years.

The Accelerate Investment Incentive often affects capital cost allowance classes that are calculated for a straight-line depreciation. In fact, with this form of property, the incentive does not reduce the amount you will demand in subsequent years until you have claimed the maximum cost. For other resource-related assets and other properties depreciated on a unit-of-use basis, the same goes.

 

Full Expensing for Certain Sectors

Under the Accelerated Investment Incentive, businesses will deduct the entire cost of specific transactions immediately. Also, manufacturers and processors and clean energy investments have the full expensing ability. In the year of acquisition, any company making equipment and acquisitions in clean energy will even be entitled to deduct the entire cost of these investments.

 

To read more about Accelerated Investment Incentive please visit the website on:

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/claiming-capital-cost-allowance/accelerated-investment-incentive.html

 

At BPF Solutions, we are constantly monitoring the release of new tools and resources available to small and medium-sized businesses.  As well we work with our lending partners to understand other avenues available to help our clients manage their way through these trying times, aid your recovery and help you grow your business.  We are here to help you, so contact us today at 1.877.800.2731, 1.416.222.2909 or info@bpfsolutions.com,  so we can discuss your situation and how we can help.