Accelerated investment incentive what is it and how does it work. To encourage Canadian business to invest the Canadian government has increased the depreciation that businesses can claim in the first year that they purchased the asset. The accelerated investment incentive replaces the half year rules which previously reduced the depreciation that businesses could claim in the first year that they purchased assets.
How does it work
The accelerated investment incentive can be claimed for all property eligible for the half year rule that is purchased after November 20, 2018. When factoring in the half year rule businesses claim depreciation on a cost base that is three times what is normally allowed in the first year. What this means is that they take 3 times the cost of half of the property in the first year.
To demonstrate ABC Inc. purchased new computers for $1,000 which are eligible to be depreciated at 55% under class 50. ABC Inc. would claim a 55% depreciation on a cost base of $1,500 ($1,000 x .5 x 3). The depreciation which would be claimed is $825 ($1,500 x 0.55).
The total depreciation that can be claimed over the life of the asset does not change however, businesses benefit by maximizing their depreciation claim in the first year of purchase.
Restrictions
Some of the restrictions that apply to the accelerated investment incentive
- The property cannot have been previously owned by you or a non-arms length person
- The property cannot be transferred on a tax deferred rollover basis
*Please note that is not the full list of restrictions that apply there are other restrictions that exist which are not mentioned
Disclaimer
The information provided on this page is intended to provide general information.
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