Now may be the time to make that computer purchase you’ve been dithering on. ¬†Or buy that new business vehicle. ¬†Or that gravel truck.

Most tools and equipment costing $500 or more are called capital assets.  Because they usually have lasting value, they must be expensed over a number of years, through what is called depreciation (also known as amortization, or capital cost allowance.)

Different types of equipment have different rates of depreciation. ¬†Mobile equipment (a vehicle, for example) is usually depreciated at 30% per year. ¬†However, in the year of purchase, you can only claim one half of the usual rate of depreciation. ¬†So you can only claim 15% instead of 30% in the year you buy your new gravel truck. ¬†In most cases it doesn’t matter if you bought it at the start of the year or the end of the year, you can still only claim half the usual rate of depreciation.

That’s why it usually makes sense to make those big purchases near the end of the year, instead of the start. ¬†So get out there and buy yourself that new gravel truck for a Christmas present. ¬†You can always justify it by saying you are doing some savvy tax planning!

Filed under: Business tax by David Boese No Comments »