# CCA What if item purchased near end of year? What if item breaks in second year?



## tsnbmm (Mar 27, 2018)

I'm reading through CRA website and my head is starting to spin a bit. 

Trying to understand how to do capital cost allowance and have a few questions.

I have several items $50 to $150 like cell phones, bluetooth headsets etc. 

1. do I total these up and keep them all in the same line of info if in the same class?
2. What if something breaks in eg. the 2nd year? Is there a way to write off the whole item or do I just get the eg. 30 percent from the first year/ two years?

I bought a car to use for deliveries mid december. Does the date matter/ do I need to specify that or am I still going to get the full 30 percent or whatever percent it is for that class (minus personal use)? (it was a car under $1000)

I realize I'm perhaps making it too complicated and some of the cheaper items could just be listed as current expenses but I'm trying to understand how to do it all correctly. 

Thank you


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## Jimmy (May 19, 2017)

For the car , if it is < $30K it goes in Class 10. Say car cost $1,000 incl taxes for ex. This is your initial underappreciated capital cost 'UCC'.

It gets a little complicated in the 1st year. There is the '1/2 year rule' and also prorating. So you take the 30% and the 1/2 year rule makes it only 15%. 

So UCC = $1,000, 1/2 yr rule = 30% x 1/2 x $1000 = $150

You would claim CCA for yr 1 = $150 in this ex.

https://www.canada.ca/en/revenue-ag...-discussion-capital-cost-allowance.html#p1_42

https://www.canada.ca/en/revenue-ag...t-allowance/classes-depreciable-property.html


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## Jimmy (May 19, 2017)

tsnbmm said:


> I'm reading through CRA website and my head is starting to spin a bit.
> 
> Trying to understand how to do capital cost allowance and have a few questions.
> 
> ...


Yes. Add them all up and all telephone equipment goes in class 8. 20%. Same rules 1/2 yr, prorating etc. 

https://www.canada.ca/en/revenue-ag...t-allowance/classes-depreciable-property.html


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## tsnbmm (Mar 27, 2018)

Jimmy said:


> For the car , if it is < $30K it goes in Class 10. Say car cost $1,000 incl taxes for ex. This is your initial underappreciated capital cost 'UCC'.
> 
> It gets a little complicated in the 1st year. There is the '1/2 year rule' and also prorating. So you take the 30% and the 1/2 year rule makes it only 15%. Then if you brought the car into service for say just the last 6 months, the amt is then prorated another 50%.
> 
> ...


Okay thank you. So the half year rule applies in first year no matter what?

I'm not sure I even had this car on the road until January despite buying it mid december. In that case I guess there would be no deduction for that year but the half-year thing would be done with ?


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## tsnbmm (Mar 27, 2018)

Jimmy said:


> Yes. Add them all up and all telephone equipment goes in class 8. 20%. Same rules 1/2 yr, prorating etc.
> 
> https://www.canada.ca/en/revenue-ag...t-allowance/classes-depreciable-property.html


great. thank you


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## tsnbmm (Mar 27, 2018)

Jimmy said:


> For the car , if it is < $30K it goes in Class 10. Say car cost $1,000 incl taxes for ex. This is your initial underappreciated capital cost 'UCC'.
> 
> It gets a little complicated in the 1st year. There is the '1/2 year rule' and also prorating. So you take the 30% and the 1/2 year rule makes it only 15%. Then if you brought the car into service for say just the last 6 months, the amt is then prorated another 50%.
> 
> ...


I think I could calculate that on my own but in filling the simpletax.ca fields, I'm not so sure. If I have starting UCC as $1000, would i leave additions and proceeds empty then write something in the "half year" field?


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## Jimmy (May 19, 2017)

tsnbmm said:


> Okay thank you. So the half year rule applies in first year no matter what?
> 
> I'm not sure I even had this car on the road until January despite buying it mid december. In that case I guess there would be no deduction for that year but the half-year thing would be done with ?


Yes for class 10 and most classes. 

*Actually correction*

You only have to worry about 'prorating' if your business year was < then 12 months. It doesn't matter when you bought the asset. So don't worry about prorating if you were in business for the entire year.
So in my ex above, the deduction is just for the 1/2 yr rule only

So UCC = $1,000, 1/2 yr rule = 30% x 1/2 x $1000 = $150



> I think I could calculate that on my own but in filling the simpletax.ca fields, I'm not so sure. If I have starting UCC as $1000, would i leave additions and proceeds empty then write something in the "half year" field?


That sounds right. Sorry, not familiar w that software.


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## tsnbmm (Mar 27, 2018)

Jimmy said:


> Yes for class 10 and most classes.
> 
> *Actually correction*
> 
> ...


Okay thank you for the clarifications. Much appreciated.


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## RussT (Jul 11, 2016)

Two thoughts...

I would not capitalize the small items you mentioned. Just expense them and take the writeoff now.

Regardless of when the car was purchased, I think you can't claim CCA until it is ready for use. If that was January 2018 then there is no claim in 2017. The half year rule then applies to 2018.


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## Synergy (Mar 18, 2013)

I'm not convinced that an item has to be used in order for it to be expensed or capitalized. 

Purchase a printer in December, didn't use it until the following year (waiting for the specialty paper to be delivered) so I can't expense it in the year purchaed? Doesn't seem to make sense to me.

December is one the best time to purchase a vehicle for your business as you can take advantage of the 1/2 year rule.


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## Jimmy (May 19, 2017)

> I'm not convinced that an item has to be used in order for it to be expensed or capitalized.


Yes that is right . The asset only has to be 'available for use' in Canada. That is a US rule. 



> When you purchase a capital asset before year-end as part of your tax planning strategies, you need to be aware of the available for use rule. To be eligible to claim CCA, the title to the asset has to have been obtained, you must have possession of the asset, and it must be available for use (unlike in the U.S. where the asset has to be in use).
> 
> This means that having rights under a contract to acquire it in the future is not enough. Find more on the subject on CRAs website under CCA> How to claim.


https://www.bookkeeping-essentials.com/cca.html


Here is a good article about your exact situation and as mentioned the tax advantage to buy a car at your fiscal YE just to get the 1/2 yr CCA.

https://www.thebalancesmb.com/claim-cca-business-vehicle-2948623


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## RussT (Jul 11, 2016)

I agree. The OP indicated the vehicle in question may not have been "on the road" in December. I took that to mean it may not have been delivered, e-tested, insured or licensed until January. If it was ready to use in December but was simply not needed until January then CCA would be taken in December. 

There, all my nits have been picked.


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