Accelerated Capital Cost Allowance
MARCH 15 | 2010 | 4:00 PM
According to the Canadian Government's ecoACTION initiative, ecoENERGY, "[t]he accelerated capital cost allowance under Class 43.1 and Class 43.2 of the Income Tax Regulations makes investments in energy efficiency and renewable power financially more attractive for industry. Because the cost of an asset can be depreciated and deducted more quickly for income tax purposes, income taxes payable early in the life of an asset are reduced and more funds are available to invest in the asset."
The Tax Regulations specify which kinds of equipment are eligible and what rates they can be depreciated at. Assets that qualify under Class 43.1 can be depreciated at 30% (on a declining basis) and Class 43.2 at 50% (on a declining basis). The costs associated with feasibility studies, land purchashing assessment, and engineering and design work may also be eligible for a 100% tax write-off as a Canadian Renewable and Conservation Expense (CRCE) . Qualifying technologies include:
- Electricity generation systems (certain cogeneration & specified-waste fuelled electrical generation systems, and small-scale hydroelectric installations not exceeding 50 megawatts of rated capacity)
- Wind energy electrical generation systems
- Enhanced combined cycle systems
- Expansion engines
- Photovoltaic electrical generation systems (three kilowatts capacity or larger)
- Geothermal electrical generation systems
- Geothermal energy systems (active solar systems, including groundsource heat pumps)
- Heat recovery systems
- Specified-waste fuelled heat production systems
Also, equipment purchased for processing or manufacturing may be eligible for a 50% depreciation on a straight line basis under Class 29 of the Tax Regulations (meaning your assets can be depreciated in two years).
If you are familiar with your tax codes and want to see how much of an advantage the ACCA has, try our ACCA calculator. This is for information purposes only and does not indicate actual tax savings. Consult a tax professional for an assessment of potential savings.
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