CCA: Buy in December or Wait for January?

Late December brings the same question to every self-employed Canadian: do I buy the laptop now, or wait until January? The instinct says an invoice dated December 28 buys a full extra year of deduction. The instinct is right about the principle and wrong about which date to look at.

The date that counts is not the invoice date

A durable asset is not deducted all at once: it is spread over several years, through capital cost allowance (CCA). If the mechanism is new to you, start with our introduction to CCA; what follows assumes you have it.

To decide which year a purchase belongs to, the Canada Revenue Agency (CRA) does not look at the payment date. It looks at the date the property becomes available for use — the moment it is in your hands and fit to work. The CRA page on calculating CCA gives four markers for property other than a building, and keeps the earliest of the four:

• "the date you first use it to earn income";
• "the time the property is delivered or made available to you and is capable of producing a saleable product or service";
• "the second tax year after the year you acquire the property";
• "the time just before you dispose of the property".

The first two settle it in practice. The other two are safety nets, for an asset that sits unused for years.

For a year-end purchase the consequence is blunt. A laptop paid for on December 28 but delivered on January 6 is not available for use in December: it belongs to the following year, invoice or no invoice. The reverse holds too — a tool delivered on December 20 and usable right away counts for the year that is ending, even if you pay for it in January.

Your year is not necessarily the calendar year

A second trap, quieter. The CRA writes: "Base your CCA claim on your fiscal period ending in the current tax year and not the calendar year."

A fiscal period is the twelve-month stretch your business keeps its books over. For most self-employed people it ends on December 31, so "December" really is the deadline. But if yours closes on another date, that date is what counts. The question is not "before New Year's?", it is "before the end of my fiscal period?".

The half-year rule, and what is left of it

That leaves how much you deduct in that first year. The basic rule is called the half-year rule, and it is discouraging. According to the CRA's basic information on CCA, "in the year you acquire a depreciable property, you can usually claim CCA only on one-half of your net additions to a class". Half the rate, then, for the year of the purchase.

Except that a federal measure puts it on hold. The accelerated investment incentive provides for "suspending the CCA half-year rule" for property acquired after November 20, 2018 and available for use before 2028. In exchange, the first year earns an enhanced deduction: three times the normal first-year deduction originally, brought down to two times since the phase-out that began in 2024.

Do the arithmetic: two times half a rate is the full rate. A property available for use in 2026 is therefore deducted, in its first year, at the full rate of its class and on the full cost.

December or January: what waiting costs

The rate depends on the class the asset falls into. The CRA lists them on its classes of depreciable property page. Here is what a $3,000 purchase yields depending on when the asset becomes usable, for a fiscal period ending December 31.

Be clear about what "$0" means: the deduction is not lost, it is pushed back a year. The whole schedule slides. What you gain by buying in December is a year's head start on your own money — the deduction multiplied by your marginal rate, meaning the tax rate that hits your last dollar earned, collected twelve months sooner. Our Quebec net salary calculator shows that marginal rate from your income.

One exception is worth flagging: small tools in Class 12 were never subject to the half-year rule anyway, the CRA noting that "most small tools in Class 12 are not subject to the half-year rule". For them the incentive changes nothing — 100% stays 100%.

And there is a heavier deadline than December 31: the incentive requires property available for use before 2028. A computer put into service in 2028 falls back under the half-year rule. On $3,000 of Class 50 equipment, the first year then drops from $1,650 to $825.

Three cases where December changes nothing

The asset will not be ready in time. Equipment ordered on December 15 and delivered in January is next year's purchase. Before rushing an order for tax reasons, check the delivery time, not the invoice date.

Your fiscal period does not end on December 31. Your deadline then sits elsewhere in the year, and December is a month like any other.

You have no tax to reduce this year. CCA is optional: you can claim less, or none at all. The CRA points out that "even if you are not claiming a deduction for CCA for the current tax year, fill in the appropriate areas of the form to show any additions and dispositions during the year". The undeducted balance stays available for later, and it will be worth more in a year when your income, and so your marginal rate, is higher.

The habit to build before you pay

1. Ask for the delivery date, not the invoice date. That is what decides the year.
2. Note the date you actually start using the asset. It is the first of the CRA's four markers, and often the easiest to show.
3. Check the class before you buy. On $3,000, the first-year deduction ranges from $600 to $3,000 depending on the class.
4. Keep 2028 in mind. That deadline, far more than December 31, is what will change the arithmetic.

CCA is then calculated in Area A of form T2125, and the result is carried to line 9936 of your return.