It is my spouse's first year self-employed. He has started a guitar building shop. He has a lot of equipment in his shop (over $500). How do we claim these tools?

Forum|Forum|1 year ago
July 15, 2024
1 reply
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I believe there is a way to claim these tools so they are deducted every year he is self-employed over the next 4 years.

student_1234

As per the Canada Revenue Agency (CRA):

" You might acquire a depreciable property, such as a building, furniture, or equipment, to use in your business or professional activities.

Since these properties may wear out or become obsolete over time, you can deduct their cost over a period of several years. This yearly deduction is called a capital cost allowance (CCA).

You cannot deduct the full cost of depreciable property when you calculate your net business or professional income for the year in which you acquired the property. "

As for the CCA class for Equipments and Tools (costing more than $500), the CRA says:

" Class 8 (20%)

Class 8 with a CCA rate of 20% includes certain property that is not included in another class. Examples are furniture, appliances, and tools costing $500 or more per tool, some fixtures, machinery, outdoor advertising signs, refrigeration equipment, and other equipment you use in the business.

Photocopiers and electronic communications equipment, such as fax machines and electronic telephone equipment, are also included in Class 8.

Include data network infrastructure equipment and systems software for that equipment acquired before March 23, 2004, in Class 8. If acquired after March 22, 2004, include it in Class 46.

Include buildings you use to store fresh fruit or vegetables at a controlled temperature, by or for the persons by whom they were grown, in Class 8 instead of Class 1, Class 3, or Class 6. Also include in Class 8 any buildings you use to store silage. "

" Class 12 (100%)

Class 12 includes property such as tools, medical or dental instruments, and kitchen utensils that cost less than $500 and were acquired on or after May 2, 2006.

Class 12 includes china, cutlery, linen and uniforms. It also includes video-cassettes, video laser discs and digital video disks that you rent and do not expect to rent to any one person for more than 7 days in a 30-day period.

Most small tools in Class 12 are not subject to the half-year rule. They are fully deductible in the year of purchase. If the tool costs $500 or more, include it in Class 8 with a CCA rate of 20%.

Class 12 tools that are subject to the half-year rule include dies, jigs, patterns, moulds and lasts, as well as the cutting or shaping part of a machine.

Include in Class 12 with a CCA rate of 100% computer software that is not systems software. Software in Class 12 is subject to the half-year rule.

Class 12 specifically excludes electronic communication devices and electronic data processing equipment. "

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