If you have self employed business income now is a good time to buy a new computer for your business because there is a temporary 100% capital cost allowance (CCA) write-off available on computers bought after January 27, 2009, and before midnight, January 31, 2011. The 100% CCA rate allows businesses to fully deduct the cost of eligible computers, including systems software and related equipment in the year of acquisition. For example, a business owner with gross income of $60,000 purchasing a $1,000 computer would save about $297 in tax. If you make this purchase on or before December 31, 2010 this saving will be enjoyed on your 2010 tax return. If you make the purchase in 2011 the saving will be enjoyed on your 2011 tax return.
If you delay the $1,000 computer purchase until after January 31, 2011 then the tax savings for a self employed person with a gross business income of $60,000 will be about $80 in the first year rather than the $297 in the example above. Why? Because after January 31, 2011 the “half-year rule of acquisition” will apply; meaning only half of the purchase price ($500) will qualify for a write off in the first year and a CCA rate of 55% will apply rather than the temporary 100% rate for purchases before January 31, 2011.
Of course, if you remain in business for the next few years you will ultimately enjoy the same write off spread over time, but if you purchase before January 31, 2011 you will enjoy the write off all at once.
In order to be eligible, the computer equipment purchased must be new and situated in Canada, and it must be used in a business carried on in Canada or used to earn income from property situated in Canada. To clarify, this special write off is only for business owners and those with self employed business income. Regular individual salaried taxpayers or students are not eligible.
So if you have been considering a new computer purchase for your business now is the time.