Buying a Car Before Year End?

Evelyn Jacks

Should you buy or lease a new vehicle or computer before year end?  It’s a great question for financial advisors and their clients to discuss before year end. Canada’s tax system has some excellent incentives for people in the market for buying business assets before year end.  Here’s an overview of the provisions that were first introduced with the November 21, 2018 Fall Economic Statement:

• The Accelerated Investment Incentive (AII) was introduced to bring a fast tax write off in the first year of acquisition – triple the half year deduction – for assets acquired after November 20, 2018 and before 2024, when a gradual phase-out will begin until 2027.
• A 100% first year write-off was introduced for zero-emission vehicles.  To be eligible under Class 54 or 55, there are a variety of pre-conditions, such as acquisition after March 18, 2019, no other federal purchasing assistance, and the requirement for the vehicle to be used on streets and highways (trolley busses and trains, for example are specifically excluded). 

Plug-in hybrids, with a battery capacity of at least 7kWh will qualify, as will cars that are electric or powered by hydrogen.  The 100% write off will apply for cars purchased before 2024; but a phase-out rate is also available: 

• 75% after 2023 and before 2026
• 55% after 2025 and before 2028

• For computer hardware, manufacturing and processing equipment, clean energy generation equipment and, importantly, certain intellectual property, the depreciation rate was increased to 100% and a new permanent deduction of 30% became available. 

As a result of some of these tax changes, Canada’s business tax competitiveness, when compared to the U.S. and other countries in the Organisation for Economic Co-operation and Development (OECD), has improved.  

In 2019, our country’s METR (Marginal Effective Tax Rate) was 13.7% compared to 44.1 per cent in the year 2000.  This gave Canada the distinction of having the lowest METR in the G7 and a rate that was below the average of the OECD, according to Finance Canada.  

Learn more news about opportunities for business owners and interact with your questions with our special guest experts at the November 18 Virtual CE Summits . Check out the agenda and be sure to enrol by November 16.