Why your new computer isn't a one-year write-off
Equipment that lasts, like a computer, monitors or a desk, is generally a capital purchase. Instead of deducting the whole cost in the year you buy it, you usually claim part of it each year through capital cost allowance (CCA). Monthly subscriptions, like data feeds and platform fees, are generally deducted in the year you pay them.
First: is your trading a business?
Everything below assumes your trading is a business, for example because you earn prop firm payouts as a self-employed trader or through your own corporation. Whether it is a business depends on your facts, and that is a question for your accountant. If it is not a business, different rules apply.
Current expenses vs capital purchases
The Canada Revenue Agency splits business costs into two kinds. Current expenses are used up within the year, such as a monthly data feed, platform fees or a software subscription. They are generally deducted in the year you incur them.
Capital purchases last for years, such as computer hardware, monitors and furniture. Their cost is generally spread over several years through CCA, because the equipment keeps earning income for you over that time.
How capital cost allowance works
Depreciable property is grouped into classes. Each class has a maximum rate, and each year you can claim up to that rate on the class's remaining balance (its undepreciated capital cost). Classes that often come up for traders:
| CLASS | COMMON EXAMPLES | MAXIMUM RATE |
|---|---|---|
| Class 50 | Computer hardware and systems software acquired after March 18, 2007 | 55% |
| Class 8 | Furniture and equipment not included in another class, such as a desk or chair | 20% |
| Class 12 | Certain software you buy outright, and some small tools | 100% |
In the year you buy an asset, a half-year rule normally limits your claim to half the usual amount. In recent years the government has also introduced temporary incentives that change first-year claims, and these rules change often. Your accountant will know which apply to your purchase date.
A worked example
You buy a $2,000 computer used only for trading. It goes in Class 50 at 55%. Assuming the half-year rule applies and no special incentive, the claims would look like this:
| YEAR | BALANCE AT START | CLAIM | BALANCE AFTER |
|---|---|---|---|
| Year 1 | $2,000.00 | $550.00 (55% × ½) | $1,450.00 |
| Year 2 | $1,450.00 | $797.50 | $652.50 |
| Year 3 | $652.50 | $358.88 | $293.62 |
The claim keeps getting smaller each year. What happens when you sell or throw out the computer depends on what is left in the class, which is another reason to keep your records.
Things that change the number
- Personal use. If you also use the equipment personally, generally only the business-use portion can be claimed.
- CCA is optional. You can usually claim less than the maximum in a year, or nothing, and keep the balance for later years. Your accountant may recommend this in a low-income year.
- Corporations. If the equipment is bought by your trading corporation, the corporation claims the CCA on its own return.
Questions your accountant will ask
- When did you buy it, and when did you start using it for trading?
- What did it cost, including tax?
- Is it used only for trading, or partly personally?
- Who bought it: you, or your corporation?
- Do you still have the receipt?
What to keep
Keep the receipt for as long as you own the equipment, and generally for six years after the end of the tax year you last claim it or dispose of it. A photo or PDF works, as long as it is readable.
Drop the receipt into the Ledger. Pivotext reads the amount and date, stores the receipt with the entry, and flags the purchase for your accountant as "may be a capital asset". It doesn't choose the class or calculate your claim. That stays with your accountant. Join the beta
Official sources
Pivotext guides are general information about how Canadian tax rules commonly apply to traders. They are not tax, accounting or legal advice, and they may not fit your situation. Rules change. Confirm anything you rely on with a qualified accountant.