Enhanced first year allowance:
• Road Group, a transportation business, will be able to use the enhanced first year allowance to help purchase five new semi-trucks in 2019, with a total value of $1 million. Of that amount, Road Group will be able to deduct $600,000 for tax purposes, compared to $200,000 without the Accelerated Investment Incentive.
Current First year allowance for class 16 (half year rule): 40%*(1/2* $1million) = $200,000
New First year enhanced allowance: 40%*(1.5*$1milion) = $600,000
Full Expensing for Manufacturing and Processing Machinery and Equipment property:
• Autoparts Corporation (AC) is an automobile parts manufacturer. In 2019, Autoparts is planning to purchase $1 million in new automotive assembly equipment to modernize its facilities. Immediate expensing would allow Autoparts to fully deduct this investment, reducing its current-year taxable income. Without immediate expensing, Autoparts’s deduction for this capital investment would be limited to $250,000 in the first year.
Current First year allowance for class 53 (half year rule): 50%*(1/2* $1 million) = $250,000
New First year enhanced allowance: 100% = $1 million
Full Expensing for Clean Energy Equipment:
• Community Apartments, a small apartment rental company, is seeking to invest in electric vehicle chargers for use by tenants at its two rental apartment buildings. The acquisition and installation cost for six chargers is $18,000. With immediate expensing, this amount can be deducted in full in the first year, compared to $2,700 under current rules. This will result in additional federal and provincial tax savings which will allow Community Apartments to make energy efficiency improvements to its buildings.
Current First year allowance for class 43.1 (half year rule): 30%*(1/2* $18,000) = $2,700
New First year enhanced allowance: 100% = $18,000
• Warehouse Inc. is a distributor of refrigerated goods, with a large warehouse that requires significant amounts of energy. In order to offset a portion of its electricity requirements, Warehouse Inc. invests in a solar array with solar panels costing $500,000. Immediate expensing will allow Warehouse Inc. to deduct its entire capital investment in the first year, as opposed to $125,000 under current rules, resulting in federal and provincial tax savings.
Current First year allowance for class 43.2 (half year rule): 50%*(1/2* $500,000) = $125,000
New First year enhanced allowance: 100% = $500,000