The January 2009 federal budget contained a number of initiatives that received a lot of press since the budget’s release. However, the budget did contain some important tax relief to stimulate business investment.
Computer Equipment Deductions
If you purchase new computer equipment for your business between January 27, 2009 and February 1, 2011, your business qualifies for a 100% capital cost allowance deduction. Prior to the announcement, any computer equipment that was acquired before the announcement was allowed an annual deduction of 55%.
This measure allows businesses to acquire or upgrade existing equipment during the eligibility period and accelerate the tax write off much sooner.
Depreciation of Manufacturing Equipment
The budget also provided for the extension of the temporary 50% straight-line accelerated depreciation for manufacturing or processing machinery and equipment acquired in 2010 and 2011. And like the accelerated CCA for computer equipment will allow businesses to accelerate the tax write-off of the equipment.
Small Business Measures
For small businesses, the federal budget also increased the small business deduction limit from $400,000 to $500,000 effective January 1, 2009. Below the limit, businesses are eligible for the reduced rate of tax (11%).
Impact to Business
The current capital cost allowance system allows a business to deduct only portion of the original cost annually. The deduction reduces the amount of income tax that is payable by the corporation. By allowing businesses to expense the capital costs sooner, reduces the business overall tax bill.