Quick answer: A machine is not deducted when you buy it; it is depreciated through capital cost allowance at its class rate, with half the normal claim in the year of purchase. For a Mission forestry, excavation or trucking business, three decisions change the outcome: the asset’s class, whether it is available for use before the fiscal year-end, and whether a lease counts as rent or a purchase. They change when the deduction lands, not whether to buy.
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Which class, and why it is not obvious
Heavy equipment, trucks, trailers, tools and the shop they live in sit in different classes with different rates. Two machines bought the same week can depreciate at different speeds because one is a licensed road vehicle and the other is a tracked machine that never leaves the site. Attachments and tools below the small-item threshold can be treated differently again. The class is set when the asset is added to the schedule; changing it later means amending returns, so it is worth getting right once. Our equipment CCA classes guide goes through the common ones for BC trades.
Timing: the year end, and available for use
The claim starts in the year the asset is available for use, not the year it is ordered or paid for. A Mission operator with a December year end who takes delivery in late December earns that year’s half-year claim; the same machine delivered in January earns nothing for the year just closed. That makes the delivery date a legitimate planning point and the invoice date irrelevant. The half-year rule sets out the first-year mechanics.
Lease or buy, on the return
An operating lease is a rental: the payments are deducted as incurred and nothing is added to the CCA schedule. A purchase — including most financed purchases and leases that are purchases in substance — adds the asset to its class and deducts CCA instead. Neither is automatically cheaper; the difference is timing and cash, and the right answer for a machine you will keep for twelve years is not the right answer for one you will trade in three. This is the conversation to have before the dealer’s paperwork is signed, because the paperwork decides the treatment.
Selling or trading it in
Disposing of a machine for more than its undepreciated capital cost recaptures CCA previously claimed as income; disposing of the last asset in a class for less produces a terminal loss. Trade-ins are dispositions. Operators who upgrade regularly should expect recapture to show up, and it is far better forecast than discovered at filing time.
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Equipment accountant in Mission · Trades accountant in Mission · Accountant in Mission BC · CCA classes explained
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Sources: CRA — Basic information about capital cost allowance · CRA — T4012 T2 Guide. General information, not advice.
Frequently asked questions about equipment purchases in Mission
Can I deduct the whole machine in the year I buy it?+
Does it matter whether the truck is in my name or the corporation’s?+
My year end is December and the machine arrives on the 28th. Do I get the claim?+
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