# 100% tax write off for new product ending soon



## MacDoc

I had thought the federal stimulus program that ran last year up to Feb 2010 had ended.

Unbeknownst to me and to many accountants as well......the program was extended.

*NEW ( not used ) equipment bought this year up to Dec 31st 2010 for business use qualifies for a complete tax write off for 2010 income.*

The program extends to the end of Jan 2011 for purchases after Dec 31st 2010 and will qualify for a 100% write off in 2011 tax year.

So about 5 weeks left for shiny toys for this tax year..

One happy client bumped an 8 core Westmere to a 12 core figuring he was getting the difference back on his tax return as soon as he filed...

and some moved off say a used MacPro purchase and opted for new instead and many have decided the new laptop they have been coveting could EASILY be justified now 

I don't have a directly link to the tax info for your accountants but can email you a PDF that my accountantant sent me that gives the relevant official info.


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## ColBalt

*Been awhile since I've posted...*

I'm seriously looking into this too. 
The refund is based on Capital Cost Allowance, Class 52: *LINK*

The thing is you have to be a business. I do some freelanceing but technicly not a business. I'm thinking of registering one soon. 

My question to anyone who may know; Can I purchase equipment for a business before it's registered?


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## rgray

ColBalt said:


> I'm seriously looking into this too.
> The refund is based on Capital Cost Allowance, Class 52: *LINK*
> 
> The thing is you have to be a business. I do some freelanceing but technicly not a business. I'm thinking of registering one soon.
> 
> My question to anyone who may know; Can I purchase equipment for a business before it's registered?


If you do freelance then you ARE a business. There is no need to be registered. I have run my business unregistered for over 20 years. I do all my business bookkeeping properly and have never been bothered.


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## John Clay

rgray said:


> If you do freelance then you ARE a business. There is no need to be registered. I have run my business unregistered for over 20 years. I do all my business bookkeeping properly and have never been bothered.


Same here.

Trying to think of stuff to get during the Black Friday sales, but nothing I want is actually on sale...


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## Macfury

Nice to see MacDoc giving a "thumbs up" to the Conservatives.


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## macmac

rgray said:


> If you do freelance then you ARE a business. There is no need to be registered. I have run my business unregistered for over 20 years. I do all my business bookkeeping properly and have never been bothered.


Hold on...am I understanding this correct. I can buy a MacPro + Cinema Display before Dec 31st of this year for my mortgage business and I will get 100% tax refund? Or does your business need to justify the high value? I mean I could get buy without a cinema display, but its gravy if I can get it.

What I am asking is....is this for real and does the type of business matter?

Is there a website we can confirm this from?

Thanks


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## rgray

macmac said:


> Hold on...am I understanding this correct. I can buy a MacPro + Cinema Display before Dec 31st of this year for my mortgage business and I will get 100% tax refund? Or does your business need to justify the high value? I mean I could get buy without a cinema display, but its gravy if I can get it.
> 
> What I am asking is....is this for real and does the type of business matter?
> 
> Is there a website we can confirm this from?
> 
> Thanks


Not literally "100% refund", but you can expense 100% of the cost by all the usual rules.


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## macmac

rgray said:


> Not literally "100% refund", but you can expense 100% of the cost by all the usual rules.


I should have clarified my language. I know I wouldn't get a cheque in the mail stating 'here is your refund'. BUT if my accountant follows all the rules, when my income tax comes back the ENTIRE cost of my purchase will come back to me, included with other expenses I have had?

Im just finding this to good to be true. Or am I just expensing the taxes on the product? I tried calling my accountant but I keep getting her voicemail.


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## macmac

*tax info*

Macdoc,

is this information your accountant gave you?

This is what I found on the Canada Revenue Agency website: Scroll down to the bottom to CLASS 52


Classes of depreciable properties


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## rgray

macmac said:


> I should have clarified my language. I know I wouldn't get a cheque in the mail stating 'here is your refund'. BUT if my accountant follows all the rules, when my income tax comes back the ENTIRE cost of my purchase will come back to me, included with other expenses I have had?
> 
> Im just finding this to good to be true. Or am I just expensing the taxes on the product? I tried calling my accountant but I keep getting her voicemail.


It is done under capital cost depreciation and it is depreciated at 100% (see link in post 2). Common sense says this is subject to the usual "proportion used for business" just like personal/business use of a car or an office in home.

Revenue Canada doesn't care what kind of computer you buy aside from the restrictions, link above, which are essentially 'new to you' and used to (potentially) generate income either in a business or from property. You just have to be able to demonstrate that you use it for business, push come to shove and the proctologists show up at you door.



> Class 52 (100%)
> 
> Include in Class 52 with a CCA rate of 100% (with no half year rule) general purpose electronic data processing equipment (commonly called computer hardware) and systems software for that equipment, including ancillary data processing equipment if acquired after January 27, 2009, and before February 2011. To qualify for this rate the asset must also:
> 
> be situated in Canada;
> not have been used, or acquired for use, for any purpose before it is acquired by the taxpayer;
> be acquired by the taxpayer:
> - for use in a business carried on by the taxpayer in Canada or for the purposes of earning income from property situated in Canada; or
> - for lease by the taxpayer to a lessee for use by the lessee in a business carried on by the lessee in Canada or for the purpose of earning income from property situated in Canada.


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## WCraig

macmac said:


> I should have clarified my language. I know I wouldn't get a cheque in the mail stating 'here is your refund'. BUT if my accountant follows all the rules, when my income tax comes back the ENTIRE cost of my purchase will come back to me, included with other expenses I have had?


No.

The cost of the qualifying equipment can be deducted from your INCOME. The amount of tax reduction depends on your income tax RATE. If you are a high earner, perhaps the combined federal and provincial income tax rate is 40% (too lazy now to look up current rates). So, if you spent $2,000 on a system, the tax reduction would be $2,000 X 40% or $800. 

You can't just imagine that you have a business, either. If you claim business losses repeatedly, Revenue Canada may challenge such deductions. You have to be able to prove you had "a reasonable expectation of profit". Best way to prove that is to actually HAVE profits although if you had a plausible business plan that didn't work out, you won't be penalized further.

Craig
(Why, yes, I'm an accountant. Why do you ask?)


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## MacDoc

Don't have the direct link - only the portion of the PDF my accountant sent me but I imagine it's all the same tome from Rev Canada.

The equipment does need to be new....

By the number of Mac Pros snapped up today :yikes: - clients taking it to heart. 
Good deals, 100% write off = busy Doc. still building one tonight at midnight. XX)
maybe number 7 today?
The MacPro escalator started again finally after effectively halting for a year...2.8s were just too good a machine.

ONE of them  is going to a client who isn't backing up properly on a daily basis and may be facing a nasty bill for retrieval.....sort of offsets the tax savings and sharp deals windfall.

See relevant rant on CONSISTENT backup.....especially with operating RAIDs as boot or media drives.


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## ehMax

Macfury said:


> Nice to see MacDoc giving a "thumbs up" to the Conservatives.


Macfury, everyones really tired of your off topic political comments and goading, and feeble attempts at being witty. Knock it off or take it elsewhere.


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## ColBalt

ehMax said:


> Macfury, everyones really tired of your off topic political comments and goading, and feeble attempts at being witty. *Knock it off or take it elsewhere.


LOL. Agreed. Macfury; in the nicest way possible, stfu.

WCraig: the option of "Capital Cost Allowance" sounds like it has nothing to do with your taxable earnings. Class 52 clearly states 100% (up to $5000) can be claimed for the purpous (sp?) of earning income and not about income earned. Is there some piece of info I/we're not aware of that would effect CCA, Class52?



rgray said:


> *If you do freelance then you ARE a business. There is no need to be registered.


I know and figure as much, but when I looked at the tax form related to CCA, there is a field for a business number. Have you, or anyone else ever clamed CCA as an unregistered business?


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## rgray

ColBalt said:


> Have you, or anyone else ever clamed CCA as an unregistered business?


Yes.


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## screature

ehMax said:


> Macfury, everyones really tired of your off topic political comments and goading, and feeble attempts at being witty. Knock it off or take it elsewhere.


Well if you are going to single out Macfury then there others here (I won't name names) to whom you should offer similar warnings to as well....


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## i-rui

Would an upgrade to CS5 be covered under this write off as well?

I still haven't upgraded....


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## screature

i-rui said:


> Would an upgrade to CS5 be covered under this write off as well?
> 
> I still haven't upgraded....


I am pretty sure is only for hardware... you should check the CRA site.


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## WCraig

ColBalt said:


> WCraig: the option of "Capital Cost Allowance" sounds like it has nothing to do with your taxable earnings. Class 52 clearly states 100% (up to $5000) can be claimed for the purpous (sp?) of earning income and not about income earned. Is there some piece of info I/we're not aware of that would effect CCA, Class52?


Sorry, I think you're confused about the basics of Capital Cost Allowance? CCA is the tax department's rules for the portion of the cost of long-lived assets (capital assets) that may be claimed against a business's income. For example, a guy buys a $100,000 bulldozer and works doing earth-moving. He is not permitted to claim the whole $100,000 against income in the first year. Rather, he (or his accountant) looks up the appropriate asset class for the machine and follows the rules for how much can be deducted to compute his income (or loss) for tax purposes from that business. Assuming this is an unincorporated business, this income is added to (or deducted from) his other incomes (employment, investment, etc) to come up with taxable income. 

Or were you asking about something else?

Craig


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## Macfury

ehMax said:


> Macfury, everyones really tired of your off topic political comments and goading, and feeble attempts at being witty. Knock it off or take it elsewhere.


You're only miffed because I ragged the "untouchable." This is, for better or worse, my personality. If I'm not welcome just say so.


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## ehMax

Macfury said:


> You're only miffed because *I ragged the "untouchable."* This is, for better or worse, my personality. If I'm not welcome just say so.


No, I'm miffed about comments *EXACTLY* like the one highlighted above. Nothing wrong with having a personality, but you're frequently posting off-topic comments with the sole intent of provocation. It's not funny or witty, its just annoying to many members trying to have meaningful conversations and dialogue. Not every topic has to turn into this caricature left wing vs right wing jerry springer one liners. 

This is not about anyone else or their opinion on your personality, its about you and your own behaviour and what you choose to type on your keyboard. 

There's an abundant of topics that can be discussed on ehMac. This is a thread in the Mac Pro section about getting tax write-offs the purchase of computers that's very informative. Nobody wants to turn it into a stupid political conversation and have it littered with off topic comments about political parties and one liners with the attempt to provoke other members. Has nothing to do with your personality.


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## macmac

WCraig said:


> CCA is the tax department's rules for the portion of the cost of long-lived assets (capital assets) that may be claimed against a business's income.
> Craig



Hi Craig,

So essentially not every business can be eligible for the class 52 100% tax write off of new equipment? But rather it would be more precise to say that under class 52, a business MAY be able to claim UP TO 100% depending on their income/earning rating? 

Have I interpreted class 52 correctly? I still intend to ask my accountant as my business is currently in the red.


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## MacDoc

Further to that if you are in the red this year the program extends into January so you may be better to buy in Jan with the idea that you will have taxable income in 2011 to take advantage of the write off.
In a situation like yours we would often advise clients to lease to keep the cash hit down while building the business income.
$100 a month gets about $3k worth of gear over 3 years.....$3 a day for your work tools is not bad.....just cut out the Timmies 
and you own it at the end.


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## i-rui

screature said:


> I am pretty sure is only for hardware... you should check the CRA site.


the earlier link states this :

"Include in Class 52 with a CCA rate of 100% (with no half year rule) general purpose electronic data processing equipment (commonly called computer hardware) and *systems software* for that equipment,"

so that MIGHT be applicable to a CS5 upgrade.... but i'm not sure. i was hoping for someone with accounting experience to clarify.


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## macmac

MacDoc said:


> Further to that if you are in the red this year the program extends into January so you may be better to buy in Jan with the idea that you will have taxable income in 2011 to take advantage of the write off.
> In a situation like yours we would often advise clients to lease to keep the cash hit down while building the business income.
> $100 a month gets about $3k worth of gear over 3 years.....$3 a day for your work tools is not bad.....just cut out the Timmies
> and you own it at the end.


Thanks for the tip MacDoc. My business that is in the red is part time. The fact is..i have a full time job that pays well. I can buy the Mac Pro in a flash and not even flinch....but it is always good to save a dollar when possible. If my accountant can confirm on monday that she can make this work for me, I will buy a new system January 2nd or 3rd.

Thanks for the tip of buying in January.


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## Macfury

i-rui said:


> the earlier link states this :
> 
> "Include in Class 52 with a CCA rate of 100% (with no half year rule) general purpose electronic data processing equipment (commonly called computer hardware) and *systems software* for that equipment,"
> 
> so that MIGHT be applicable to a CS5 upgrade.... but i'm not sure. i was hoping for someone with accounting experience to clarify.


The write-off is intended for _Systems_ software--that is, whatever you require to support the operations of the computer you just purchased, in this case OSX. I have always considered a software upgrade as a full write-off in that year, much as I would consider a computer repair, a video card upgrade or adding a few GB of RAM.


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## eMacMan

Since Adobe and others upgrade software on an almost annual basis, I think you should be able to depreciate over a single year with or without the special rules.

Would be good if one of our accountants could address this.


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## MacDoc

I've never heard an issue with software being treated as a capital item. It's an operating expense....especially upgrades.


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## kps

Not sure I get it..immediate 100% write off vs depreciation? Is that what it's all about?

I haven't been self employed for over 10 years now and when I was, I was incorporated. That may make a big difference, but from what I remember, my accountant pretty much written office type expenses off at 100%, any large capital expenditures were depreciated over a set period of time. The time depended on the initial expenditure, business rules, expected revenues and the life expectancy of the unit.

This seems ok if you need the equipment and need to lower your taxable profits this year, but next year you'll have no depreciation to write off, you'll end up giving them more in taxes.


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## MacDoc

Umm you are putting out $5k and within a couple months getting back $2k more or less depending on tax bracket- you are never going to pay "more taxes".

You are picking up the entire three years of depreciation in a few months or even less if you file right away at year end.
That cash flow advantage is significant.


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## kps

MacDoc said:


> Umm you are putting out $5k and within a couple months getting back $2k more or less depending on tax bracket- you are never going to pay "more taxes".


Really? let me get this straight...you reduce your taxable income by 5k and save 2k on taxes? That 5k would need to take you down a few tax brackets then, no? 

Say next year you're back up in the same tax bracket and perhaps have an even better year, now you have no further deductions in terms of depreciation...ergo, you pay more to Rev Canada based on the higher revenues.

I see this as an advantage if you're incorporated (where your personal income and corporate income are separate) or had an exceptional year which you don't see replicated next year.



MacDoc said:


> You are picking up the entire three years of depreciation in a few months or even less if you file right away at year end.
> That cash flow advantage is significant.


The cashflow advantage is only realized in the fact that you get to keep a little more of your money at the end of this tax year. I would not call it _significant_.

Best to talk to a professional accountant about this deal, it may not be for everyone.


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## MacDoc

A little more??? 

Lets see .....

Normal write off.....$600 back in the first quarter, then wait 12 months then another $600 etc

This write off....*$2000 back the first quarter.....*

You'd need a huge jump in income to offset that.

I'm not sure you quite grasp the significance of this program for capital intense purchases.


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## WCraig

macmac said:


> So essentially not every business can be eligible for the class 52 100% tax write off of new equipment? But rather it would be more precise to say that under class 52, a business MAY be able to claim UP TO 100% depending on their income/earning rating?
> 
> Have I interpreted class 52 correctly? I still intend to ask my accountant as my business is currently in the red.


Your last statement is by far the most important one! Get advice from a professional that knows the specifics of YOUR situation. There are lots of seemingly little issues that can have a drastic impact on a decision.

I won't give tax advice on public forums. I hesitate, some times, to give general explanations of tax questions because it might be interpreted as advice. And taxation is not even a focus of my practice.

Craig


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## WCraig

kps said:


> Really? let me get this straight...you reduce your taxable income by 5k and save 2k on taxes? That 5k would need to take you down a few tax brackets then, no?
> ...
> 
> Best to talk to a professional accountant about this deal, it may not be for everyone.


kps could be correct, given a certain set of facts. In fact, CCA rules establish the MAXIMUM amount of an income deduction in a given year--you don't have to claim the maximum this year if you see it would be beneficial to apply it against earnings that would be taxed at a higher rate in the future. Or you can create (increase) a loss with your CCA claim and carry the loss back to apply it against previous years income. Or carry it forward, in some cases. The best choice will be influenced by several factors, including the past, present and expected future earnings of the business and the business owner. May the deity forbid that you have one or more business partners with their own, differing tax situations. ;-0

Get professional advice that relates to YOUR situation. 

Craig


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## MacDoc

But KPS is very incorrect about the cashflow aspect which is what I'm focusing on and what is significant for clients operating profitable businesses.

Getting 100% of the purchase at your tax rate back within a few months.....which is the situation for the vast majority - is very significant in terms of cash flow over the normal drawn out 3 year process.

The rest is fine tuning for a particular situation ...KPS left an incorrect impression vis-a-vis the cashflow.


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## (( p g ))

Yeesh. A lot of nitpicking in this thread. *IF* you are a business owner, and *IF* you are thinking of upgrading your IT hardware/software, then *THIS* would be the year to do it to gain the full CCA (the benefits of which would be gained in THIS tax year), versus next year where it presumably will revert to what it was before (approximately 50% in Year One and 50% in Year Two). 

Always consult your accountant, of course, but the intent of the original post was a good one: a helpful reminder.


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## okcomputer

This thread is awesome and confusing haha.

I am definitely going to talk to an accountant this year. I changed jobs, and my new job requires me to travel, and have a home office. So I will have to figure out what I can claim and how much and how I would do it - car payments, tires, insurance, part of mortgage payment, internet, phone, heat, insurance, etc.

-

The part that has to do with this thread though is that I am starting a photography business. I have been doing it for a few years, unofficially. Just for friends and family. But now I want to start charging and such.

I just bought a Canon 60D w/lens, and two months ago I picked up my MBP. Are these purchases still claimable even though I haven't registered the business? I will only take in $200 before the end of 2010 (I have a portrait session booked), and the weddings I have booked aren't until summer and fall... so can I even claim ANYTHING this year?


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## ColBalt

ugg. brain hurts. 
I think I have a better idea but still about as clear as mud. definitely will seek professional advice. 
Cheers WCraig and MacDoc for the valuable knowledge.


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## macmac

So I spoke to my accountant this evening. She said I am in the 40% tax bracket and because of that, I can claim 40% of the total cost(100%) of the equipment I purchase. After February any equipment would resort to the older way of taxation where you can claim less. 

Claiming 40% doesn't mean I would get 40% back, it would just put against my revenue/liabilities. So if I owe money, she can claim it against what I owe, if I am in the red, it can then assist in getting some of that money back.

Im sure I haven't explained it as articulately as she did to me, but I gave it my best shot. She kept telling me 'wording' in the taxation world is very delicate and one has to be precise. So as suggested in previous posts, consult your accountant.

In a nutshell she said, if you need a new computer, buy it now.
If you intend to buy a new computer next year, buy it now and save some extra money.


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## MacDoc

Um you have that very wrong....again.

You claim 100% of the purchase price not 40%  

You get back 40% of that as you are in the 40% bracket.....everyone here seems to understand that except you. 

Buy $5000
Claim $5000

Get back 40% = $2000 as has been stated all along...please do not confuse others and go back and have your accountant explain it to you slowly so you understand it exactly.
Clearly it did not take.


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## macmac

MacDoc said:


> Um you have that very wrong....again.
> 
> You claim 100% of the purchase price not 40%
> 
> You get back 40% of that as you are in the 40% bracket.....everyone here seems to understand that except you.
> 
> Buy $5000
> Claim $5000
> 
> Get back 40% = $2000 as has been stated all along...please do not confuse others and go back and have your accountant explain it to you slowly so you understand it exactly.
> Clearly it did not take.


Im not 'wrong again', in fact I understand it very well indeed, although I could have worded it more clearly. Like my accountant said, wording in the taxation world is very important. Essentially we have said the same thing, you just outlined it clearer than I did.


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