Office expenses

[Mtommy]

Hello all,

This is my first post. I am a sole proprietor and I live and work in Ontario. I bought a monitor in 2011 and wanted to claim for it in the 2011 taxes.

Can I claim the full amount or am I only allowed to claim a portion of it. I thought that I could have claimed the full amount but my accountant told me that I could only claim a portion of it. I would just like a second option. I am not an accountant and I have not been self employed for long so I am new to this.

Any help is much appreciated.

[MoneyGal]

How much did you spend? It's likely what your accountant is telling you is that you CAN claim the whole amount, but over time -- using what's called the capital cost allowance. Essentially when you buy an item which is relatively expensive and is expected to last a while, you can't write off the whole cost in one year against your current income.

[Just a Guy]

Capital depreciation allows you to claim a portion the first year and more in subsequent years. It varies depending on what you buy. Software is 50% the first year and 50% the next. I don't remember what it was for hardware, but upgrades were 100% in the year of purchase. Not sure if a monitor can be classified as an upgrade like a memory stick. That's why there are accountants.

[sharbit]

I bought a monitor in 2011 and wanted to claim for it in the 2011 taxes

This isn't an expense but an asset and therefore it falls under CCA rules. The logic behind this is that the use of the monitor would typically continue into future years, plus you can resell it so there are limits to how much you can claim each year. An expense is typically something you pay for once and the benefit is used up therefore you get the full deduction at that time. So, in your case you dont "use up" the monitor - it continues to exist. This is an over simplification but hopefully you get the idea.

The monitor would likely fall under class 52 in which case you'll get it all back in CCA depreciation. The rate would be 100% with no half year rule but there’s partial year rules that may qualify - regardless, trust your accountant. There's lots of gotcha's with business tax and capital assets and the difference in your payable tax won't be that much.

[Homerhomer]

The monitor would likely fall under class 52 in which case you'll get it all back in CCA depreciation. The rate would be 100% with no half year rule but there’s partial year rules that may qualify - regardless, trust your accountant. There's lots of gotcha's with business tax and capital assets and the difference in your payable tax won't be that much.

That would depend on when the monitor was purchased since the tax break wasn't extended.

[MoneyGal]

Here you go -- here is the complete list of CCA classes:

http://www.cra-arc.gc.ca/tx/bsnss/tp...prcbl-eng.html

[mrbizi]

This isn't an expense but an asset and therefore it falls under CCA rules. The logic behind this is that the use of the monitor would typically continue into future years, plus you can resell it so there are limits to how much you can claim each year. An expense is typically something you pay for once and the benefit is used up therefore you get the full deduction at that time. So, in your case you dont "use up" the monitor - it continues to exist. This is an over simplification but hopefully you get the idea.

ch.

A monitor typically costs only $150, I read somewhere if it's not >$500, CCRA will not expect you to capitalize the expense?

[MoneyGal]

Yes -- for items in Class 8 which cost less than $500, you don't need to capitalize the cost. See the link I posted earlier and go to Class 8 for the details.

[TaxGuy]

If it was purchased after February of this year, then it would not be 100% deductible.

Purchases such as computer equipment, software, vehicles, buildings and land can’t be deducted in the year purchased. Instead they may be written off over a period of years (except land that can’t be written off).