Immediate Expensing ($1.5M)

Definition

Immediate expensing is a temporary incentive that allowed a Canadian-controlled private corporation (CCPC), and later certain unincorporated businesses, to deduct 100% of the cost of eligible depreciable property in the year it became available for use, up to $1.5 million per taxation year shared across an associated group. The rules were introduced in Budget 2021 and enacted in 2022. For CCPCs, the incentive applied to property acquired on or after April 19, 2021 that became available for use before January 1, 2024. The original measure has not been extended in the consolidated regulations: Regulation 1104(3.1), as consolidated to July 21, 2026, still limits it to property that became available for use before 2024 (before 2025 for individuals and partnerships of individuals). For a 2026 purchase the first-year claim comes from the accelerated investment incentive instead.

See Accelerated Investment Incentive Property (AIIP) for the separate September 2026 proposal and enacted-rule distinction. Designation is required; Regulation 1104(3.1) generally allows it within 12 months after the relevant filing due date. For an eligible person or partnership other than a CCPC, the deduction also cannot exceed income from the source in which the property is used, computed before CCA.

Key rules

• Eligible Persons and Partnerships (EPOPs):
  • CCPCs: property acquired on or after April 19, 2021 and available for use before January 1, 2024.
  • Individuals resident in Canada throughout the year, and Canadian partnerships whose members were all individuals: property acquired on or after January 1, 2022 and available for use before January 1, 2025.
  • Canadian partnerships with a CCPC among their members: property acquired on or after January 1, 2022 and available for use before January 1, 2024.
  • Property that becomes available for use after those dates is not immediate expensing property, whenever it was acquired. 2026 acquisitions therefore rely on ordinary CCA and the accelerated first-year rules in AIIP.
• $1.5M annual cap (Regulation 1104(3.2)):
  • Shared across associated eligible persons and partnerships by an agreement filed with CRA, similar to the Small Business Deduction limit (Regulation 1104(3.3)).
  • Pro-rated by days over 365 for a taxation year shorter than 51 weeks (Regulation 1104(3.5)).
  • No carry-forward of unused cap.
• Eligible classes: all CCA classes except 1 to 6 (buildings and related), 14.1 (Class 14.1 intangibles), 17 (roads and similar), 47 (transmission and distribution), 49 (pipelines), and 51 (natural gas distribution). Classes 10.1 (luxury passenger vehicles) are included but subject to the prescribed capital cost limit.
• No half-year rule applies to property that is immediately expensed.
• Recapture and terminal loss rules still apply to the UCC pool in the normal way when the asset is later sold.

Example

A CCPC with a December 31, 2023 year end acquired a $900,000 packaging line (class 53) on June 10, 2023 and a $400,000 set of class 8 equipment on August 1, 2023. It was a CCPC throughout its full 2023 calendar tax year, is not associated with another eligible person or partnership, and has the full $1.5M limit. Assume both assets became available for business use in 2023, meet the property-eligibility tests, and were designated on time.

1. Eligible for immediate expensing: $900,000 + $400,000 = $1,300,000. Under the $1.5M cap.
2. Deduction in 2023: $1,300,000 as immediate expensing. UCC at year end for those classes is zero for the newly acquired property.
3. No half-year rule applied. AIIP alone would have given $1,020,000: the class 53 line was already written off in full under AIIP for property available for use before 2024 ($900,000), but the class 8 equipment would have been limited to $400,000 × 1.5 × 20% = $120,000. Immediate expensing was the better choice.

For 2026 acquisitions the measure is not available, so the corporation uses the accelerated investment incentive: most classes get 1.5 × cost × rate in the first year, and some are written off in full, such as class 50 computers acquired after April 15, 2024 and available for use before 2027, and zero-emission vehicles and manufacturing and processing machinery available for use before 2030. See AIIP.

Common mistakes

• Applying immediate expensing to 2026 acquisitions. Regulation 1104(3.1) was not extended: it covers property that became available for use before 2024 for CCPCs and partnerships with a CCPC member, and before 2025 for individuals and partnerships made up only of individuals.
• Double-claiming AIIP and immediate expensing on the same property. Deduct immediate expensing first, reduce UCC, and calculate any remaining ordinary or accelerated CCA under the applicable rules. The same cost cannot be deducted twice.
• Forgetting to share the $1.5M cap across associated corporations. CRA adjusts excess claims and charges arrears interest.
• Immediately expensing buildings or class 14.1 intangibles. They are excluded classes.
• Ignoring the pro-ration for short tax years. A 181-day fiscal year has a cap of $743,835.62 (181/365 of $1.5M).

Official sources

CRA class descriptions, enacted first-year factors, and eligibility definitions.

Related concepts

Immediate expensing is a CCPC-only (originally) alternative to AIIP and modifies the normal CCA calculation. When an immediately expensed asset is later sold, recapture or terminal loss may arise.