2009 Federal Budget: Computers: 100% accelerated capital cost allowance

[RASHID007]

I am certainly not an accountant but doesn't this mean that anybody with a small business that is paying income taxes can basically take 100% of the cost of a new computer out of the tax they'd be paying?

Anybody understand this a little better and care to explain? If I have a business can I buy a Macbook Pro and write off 100% of the cost? So say it cost $2000 would that mean I'd pay $2000 less taxes or does it work out to a percentage of the $2000 I'd be saving from income taxes?

I apologize if this isn't the write forum but if I understand it correctly this is a pretty hot deal.

~Rashid


Computers: accelerated capital cost allowance

Computer equipment, including related systems software, included in Class 50 is currently eligible for a 55% declining balance CCA rate. The budget temporarily increases this rate to 100% for eligible computers and systems software acquired after January 27, 2009, and before February 2011. The half-year rule will not apply, so businesses will be entitled to a full deduction for the cost of these assets in the taxation year CCA is first available.

Eligible assets will include new computer equipment and software described in Class 50 that is:

* situated in Canada; and
* acquired for use, or leased for use, in a business carried on in Canada or for the purpose of earning income from Canadian property.

The computer tax shelter property rules will apply to assets eligible for this 100% CCA rate, to prevent investors from using these CCA deductions to shelter other sources of income.

[jackwest]

wtf too complicated me grumpy

[netforce85]

I would assume you deduct $2000 from your years earnings, and apply tax to the remainder.
Say you earn $40,000 this year, and you buy the $2000 macbook. Assuming you don't have any other tax write offs, you'd have to pay taxes on the remaining $38,000.

[agent86]

So, where's the hot deal?

This doesn't belong here. Try Personal Finance forum.

[AzN_RiverdaleCI]

So, where's the hot deal?

This doesn't belong here. Try Personal Finance forum.

+1 reported.

[quazy]

So, where's the hot deal?

This doesn't belong here. Try Personal Finance forum.

It might be pretty damn hot if you work in the private sector..

[RASHID007]

Hang on a second. This is a hot deal. Anybody on here that has a business can save huge on any computer.

So say you (your business) pays 30% income tax. If you buy a $2000 laptop it reduces your income reported by $2000 in that year so you just pAid $600 less tax and effectively got that laptop for $1400.

That sounds like the hottest deal on this forum to me.

[RASHID007]

And that savings is in addition to any other hot deal you already got on the computer.

[RASHID007]

There are a lot of small business owners on these forums that can benefit from this. Some businesses could pay 40% tax or more. Find me one post on here that's a better deal than 40% off a MacBook.

Moderator please move back to hot deals forum so everyone wanting a computer can benefit. People on her have cell phone stores and IT businesses and are professionals with corporations.

[Noobzilla]

An adjustment to the CCA rate just allows you to pay a bit less tax this year, a bit more tax next year.

And I doubt you could convince the CRA that you needed a $2000 computer to run your business. What's that quad sli geforce 280 for?

So lets say you spend a more reasonable $700 on a computer, and 80% of the time it's used for your business, 20% for personal use.

So, you can deduct $560.
If your marginal tax rate is 40%, you save $224.

Under the old system, you would've deducted the $560 across a number of years; 15% for year 1, 30% for year 2, etc.

[hammy]

And I doubt you could convince the CRA that you needed a $2000 computer to run your business. What's that quad sli geforce 280 for?

You either have a bad accountant or do your own taxes. My last computer cost $5000 to build all-in (4 years ago) and the tax man did not question it. My purchase was "future-proofed" since I expect to get 5 years or more use out of the computer.

So lets say you spend a more reasonable $700 on a computer, and 80% of the time it's used for your business, 20% for personal use.

That's not how it works at all. Your business buys the computer, and the computer becomes the business' asset. There's no business-use/personal-use split.

http://cache.hyves-static.net/images/smilies/default/smiley_hammer.gif

[fantom]

You either have a bad accountant or do your own taxes. My last computer cost $5000 to build all-in (4 years ago) and the tax man did not question it. My purchase was "future-proofed" since I expect to get 5 years or more use out of the computer.

That's not how it works at all. Your business buys the computer, and the computer becomes the business' asset. There's no business-use/personal-use split.


Exactly.

You tell 'em.

[Noobzilla]

You either have a bad accountant or do your own taxes. My last computer cost $5000 to build all-in (4 years ago) and the tax man did not question it. My purchase was "future-proofed" since I expect to get 5 years or more use out of the computer.



That's not how it works at all. Your business buys the computer, and the computer becomes the business' asset. There's no business-use/personal-use split.

http://cache.hyves-static.net/images/smilies/default/smiley_hammer.gif

Well, it's the law:
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/cptl/prsnl-eng.html

Just because you haven't been audited doesn't mean it's all correct.

[hammy]

Well, it's the law:
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/rprtng/cptl/prsnl-eng.html

Just because you haven't been audited doesn't mean it's all correct.

My business owns my desktop PC, and my laptop is for "personal use".

Clearly, you don't know how the system works.

:rolleyes:

[Noobzilla]

My business owns my desktop PC, and my laptop is for "personal use".

Clearly, you don't know how the system works.

:rolleyes:

Clearly, you don't even know how accrual accounting works. The fact that your business owns an asset does not mean you can automatically write it off as an expense.

[FulltimeIT]

sorry to bring this old thread back up, but how does CCA work exactly?
say if I buy a laptop I can get 100% CCA back how much discount are we talking here? How would this work
sorry I am seruiosly not an accountant so any answer would be nice

[a1lama]

Well if you have a business, you can claim it as a business expense (or a percentage).

www.cra-arc.gc.ca for more details. Theres numerous IT bulletins and guides to read up on.


My advice is if you are unsure, you probably shouldn't try it.

[FulltimeIT]

Thanks for the help, well I just want to know how it works,because my dad has a business and would it possible for me to get a good laptop off this

[grant]

Anybody understand this a little better and care to explain? If I have a business can I buy a Macbook Pro and write off 100% of the cost? So say it cost $2000 would that mean I'd pay $2000 less taxes or does it work out to a percentage of the $2000 I'd be saving from income taxes?

Old rules:
1) At year end you depreciate the computer 27.5% (55% divided by 2 because it's the first year of ownership). Debit $550 "computer" asset (now ACB = $1,450), Credit $550 "depreciation" expense.

New rules:
2) At year end you depreciate the computer 100%. Debit $2000 "computer" asset (now ACB = $0), Credit $2000 "depreciation" expense

So your "depreciation" expense is $1,450 higher than it would have been. This decreases your business' profit by $1,450.

less profit = less taxes payable.

[mr_raider]

It's probably a rule that's more fair, since computers get obsolete so fast, depreciating them over years is not very realistic.

Mind you the computer needs to be used for business. At least, keep a few token excel files on it!

[alanbrenton]

Well if you have a business, you can claim it as a business expense (or a percentage).

www.cra-arc.gc.ca for more details. Theres numerous IT bulletins and guides to read up on.


My advice is if you are unsure, you probably shouldn't try it.

What about for a profession like a realtor, can this be taken advantage of even if no small business has been set up? I believe for any income or expenses, my wife will be using the Statement of Business/Professional Income Form.

[kaycee8877]

Debit $2000 "computer" asset (now ACB = $0), Credit $2000 "depreciation" expense

not to nitpick but you have your debits/credits mixed up ;)

What about for a profession like a realtor

Your wife probably already has some assets built into her business on which she claims CCA, so these rules apply to her as well.

[grant]

not to nitpick but you have your debits/credits mixed up ;)
Not nitpicking at all! i get them mixed up approx. 50% of the time :D