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T2 Immediate Expensing

Updated: 2022-09-28

General Rule

The April 2021 Federal budget introduced a temporary measure for Canadian-Controlled Private Corporations (CCPCs) to immediately expense (known as “immediate expensing”) costs of certain depreciable capital property in the year of acquisition up to an annual maximum limit of $1.5 million. This annual limit must be shared with any eligible person or partnership (EPOP) and is subject to proration if a corporation has less than 51 weeks in its taxation year.

Eligible properties include depreciable properties in all CCA classes, except those in classes 1 to 6, 14.1, 17, 47, 49 and 51 which are generally long-lived assets such as buildings and goodwill. Eligible properties are called designated immediate expensing property (DIEP). DIEPs must be acquired after April 18, 2021, and become available for use before 2024.

New T2 Schedule 8

On July 28, 2022, the CRA issued a new T2 Schedule 8 (T2SCH8) to allow eligible corporations to claim immediate expensing.

This new version includes a table in Part 1 for allocating the $1.5 million limit among associated eligible persons or partnerships (EPOPs). In addition, the Part 2 CCA table now contains extra columns to accommodate the immediate expensing calculation.

Note: TaxCycle T2 does not yet include this new version of Schedule 8. We will add it in a future release. Meanwhile, we have revised TaxCycle’s current Schedule 8 and S8Asset forms to calculate immediate expensing by incorporating the new columns from the Part 2 CCA table. Immediate expensing claims are included in column 217 of the Part 2 CCA table on Schedule 8. However, these new columns and the new Part 1 table are not transmitted to the CRA when you file the return.

S8Claim: Limit Allocation

When you open, carry forward or create a T2 file, TaxCycle automatically calculates the maximum immediate expensing limit as $1.5 million.

To share this between one or more associated EPOPs:

  1. Open the S8Claim worksheet.
  2. Go to the Immediate Expensing Incentive available to CCPCs section.
  3. Enter the filing corporation’s allocated limit either by percentage or amount.
  4. If the filing corporation has less than 51 weeks in its taxation year, TaxCycle automatically prorates the immediate expensing limit for the corporation.

Screen Capture: S8Claim

Note: TaxCycle will not transmit immediate expensing limit allocation information to the CRA when filing. However, it will use the corporation’s share of the above immediate expensing limit to warn you if an excessive immediate expensing limit is claimed on Schedule 8. In a future release, TaxCycle will transmit the latest Schedule 8 that contains the Part 1 immediate expensing limit allocation table.

S8Asset

An immediate expensing deduction is calculated to be the lesser of:

  • the UCC of a designated immediate expensing property (DIEP), or
  • the immediate expensing limit available to the corporation.

The S8Asset in the 2022 T2 modules contains a section to calculate the deduction accordingly.

Screen Capture: S8Asset

  1. To claim immediate expensing for an addition, you must enter the transaction date.
  2. If the corporation is a CCPC and the transaction date falls after April 18, 2021, and before 2024, TaxCycle automatically answer Yes to the DIEP? question, making the addition eligible for the immediate expensing deduction. If, for any reason, the addition is not a DIEP, override the DIEP? question to No.
  3. For a DIEP acquired and disposed of in the same tax year, enter the details of the disposition and answer Yes to the DIEP? question in the Dispositions column on the right side of the same section.

Screen Capture: DIEP additions and dispositions

If, after entering the addition, the corporation is eligible to claim immediate expensing deduction, TaxCycle triggers a Quick Fix review message to enter an amount for the immediate expensing limit. Click one of the links in this message to enter the immediate expensing limit just for that particular asset or for all the assets in all CCA classes.

Screen Capture: Enter IEL to all CCA classes

After you enter the limit, TaxCycle automatically calculates the immediate expensing deduction will and includes it in the total CCA claim field.

Screen Capture: CCA (including immediate expensing deduction amount)