Principal Issues: Whether a lap top computer that otherwise qualifies as Class 50 property is eligible for the accelerated CCA rate of 100% announced in the January 27, 2009 Federal Budget.
Position: Yes.
Reasons: January 27, 2009 Federal Budget. P.C. 2009-660/SOR 2009 - 126 April 30, 2009 [2008 and 2009 Budget Measures] adds Class 52 for computers and related system software eligible for the 100% rate announced in the budget.
May 26, 2009
XXXXXXXXXX
Dear XXXXXXXXXX :
The office of the Honourable James M. Flaherty, Minister of Finance, forwarded to me a copy of your email, which I received on March 19, 2009, concerning the tax deductibility of the cost of a laptop you intend to purchase to use in your business of providing graphic artist services.
Generally, a taxpayer that acquires a depreciable property for the purpose of earning income from a business is required to include the property in one of the classes specified by the tax legislation, depending on the type of property acquired. The taxpayer can then claim a portion of the cost of the depreciable property as a deduction when computing his or her business income. This portion of the cost is referred to as capital cost allowance (CCA) and is computed by using the percentage that applies to the class in which the property is included.
General-purpose computers, including related system software, are included in class 50 of Schedule II of the Income Tax Regulations. Based on the information you provided in your email, your laptop would be included in class 50.
I am pleased to confirm that the federal budget of January 27, 2009, increased the CCA rate from 55% to 100% for computers included in class 50 that are acquired after January 27, 2009, and before February 2011. This 100% rate will not be subject to the half-year rule, which generally allows only half the CCA write-off otherwise available in the year the asset is first available for use. The 100% CCA rate applies to computer equipment situated in Canada that is acquired for use in a business carried on in Canada or to earn income from property situated in Canada. In addition, the computer must be new in the sense that it was not previously used or acquired to be used for any other purpose.
Therefore, as a result of the 2009 federal budget measure, businesses will be able to deduct the full cost of an eligible computer in the first year that CCA deductions are available. The amount that can be used as a CCA deduction does not depend on the amount of gross business income.
I appreciate the opportunity to address your concerns.
Sincerely,
Jean-Pierre Blackburn, P.C., M.P.
Tim Fitzgerald, CGA
2009-031588