Introduction

Introduced as a pandemic-era stimulus measure and subsequently extended, federal immediate expensing allows eligible entities — including CCPCs — to deduct the full cost of certain depreciable property in the year of acquisition, rather than following the prescribed CCA schedule. For a corporation with significant taxable income and a capital equipment purchase, the immediate expensing deduction can be the largest single tax-reducing decision of the year.

Who Qualifies for Immediate Expensing

CCPCs: Canadian-controlled private corporations are the primary beneficiaries of the most generous immediate expensing rules. For CCPCs, the immediate expensing limit was $1.5 million of eligible property per year (shared among associated corporations) under the rules as structured in recent years.

Individuals and partnerships: Separate immediate expensing rules apply, with a $1.5 million limit per eligible person or partnership.

The rules have been subject to phase-out provisions that reduce the annual eligible amount for acquisitions after certain dates. Verifying the current eligible limit for the corporation's fiscal year with a CPA is essential — the rules have been modified since their introduction and should not be assumed to be identical to the original announcement.

What Property Qualifies

Eligible depreciable property includes most CCA-eligible assets used in Canadian business operations — but excludes:

Class 1 assets (buildings and structures)

Certain intangible assets under Class 14.1 that are already subject to enhanced write-off rules

Assets acquired from non-arm's-length parties

Assets not available for use in Canada

For incorporated professionals, eligible property typically includes:

•  Clinic and office equipment (Class 8)

•  Computers and software (Class 10, Class 12)

•  Vehicles used for business (Class 10, Class 10.1)

•  Medical and dental equipment (Class 8)

•  Construction equipment (Class 38, Class 10)

How the Deduction Works

Under normal CCA rules, property is added to a CCA class and depreciated at a fixed rate — typically 20% in year one (with the half-year rule reducing the first-year deduction to 10% of cost). A $100,000 piece of equipment generates $10,000 in CCA in year one.

Under immediate expensing, the full $100,000 can be deducted in the year of acquisition — subject to the annual limit and eligibility. This converts a 10% year-one deduction to a 100% year-one deduction.

For a CCPC with $300,000 in taxable income, a $100,000 immediate expensing deduction reduces taxable income to $200,000 — saving approximately $12,200 in corporate tax in the year of purchase.

When to Claim Immediate Expensing vs. Standard CCA

Claim immediate expensing when: The corporation has significant taxable income in the year of purchase. Deferring the deduction to future years provides no benefit if income is expected to be lower. The corporation has no CCA balance in the relevant class to protect (some practitioners prefer to maintain CCA class balances to absorb future recapture risk on disposition).

Defer to standard CCA when: The corporation has low taxable income in the year of purchase — a $100,000 deduction against $50,000 of income creates a loss that may not be efficiently utilised. Future years' income is expected to be higher, making the deduction more valuable then. The corporation is approaching the SBD limit and the deduction would push income below it anyway.

The Recapture Risk

Immediate expensing eliminates the CCA class balance for the expensed property. If the property is subsequently sold, the proceeds are fully included in the class (as a recapture) — creating taxable income in the year of sale equal to the proceeds, with no remaining CCA class balance to offset. This is not unique to immediate expensing — it applies to any fully depreciated asset — but it is worth understanding in planning contexts.

When to Speak With a CPA

Immediate expensing decisions should be made before year end, when the income picture is known and the CCA class strategy can be reviewed. A CPA can model the immediate expensing deduction against projected taxable income and recommend the optimal claim amount for the year.

Rotaru CPA advises incorporated clients on equipment timing, CCA strategy, and immediate expensing decisions as part of year-end planning. Book a consultation to review your capital equipment deduction strategy.