To encourage investment in green technology, the Canada Revenue Agency lets business owners claim an accelerated capital cost allowance for electrical vehicle charging stations. Implemented with Budget 2016, this program complements existing deductions for clean energy technology.
What Is Accelerated Capital Cost Allowance?
“Accelerated” simply means that the CRA sets a high allowance rate so that your clients can write off the asset quickly. In the case of electrical vehicle charging stations, the CRA has created two unique classes, 43.1 and 43.2. If a purchase falls into class 43.1, the rate is 30%; if it falls into class 43.2, the rate is 50%. For example, if your client purchases an electrical vehicle charging station for $10,000 and it falls into class 43.2, the client can claim $5,000 as a business expense the year of purchase. That is the cost of $10,000 multiplied by the capital cost allowance rate of 50%.
What Assets Are Eligible?
To claim the accelerated capital cost allowance, your clients must purchase the electrical vehicle charging station after March 21, 2016. If the charging station was put into use on or before that date, they cannot claim the accelerated allowance. If the electrical vehicle charging station supplies more than 10 kilowatts and less than 90 kilowatts of continuous power, it falls into class 43.1. If it supplies 90 kilowatts or more, it falls into class 43.2. Essentially, the more power the charging station provides, the faster you can write it off. As an accountant or bookkeeper, you may want to help your clients compare the effect of these two categories. In some cases, the generous rate of class 43.2 may allow some clients to afford a more expensive, high-power charging station than they could without the accelerated allowance.
What Is the Benefit of the Accelerated Allowance?
Without class 43, many of these types of purchases would fall into other classes, and they would receive capital cost allowance rates of 4% to 30%. That greatly reduces how much your clients can write off each year, and a lower write-off increases their business tax liability in the short term. By allowing business owners to write off these purchases in a faster way, the government hopes to encourage more investment into renewable and conservation expenses.
What Other Expenses Qualify?
Class 43 also includes certain machinery and equipment used in the manufacture of goods in Canada as well as established technologies for clean energy generation and energy conservation. In some cases, this includes startup expenses for qualifying projects, including feasibility studies and clearing roads. To keep tabs on which assets and expenses are covered, you may want to consult the Technical Guide to Canadian Review and Conservation Expenses. As an accountant, it’s important to keep tabs on the the CRA’s budget proposals so you can give your clients the best advice possible. When you’re familiar with new items, like the accelerated capital cost allowance for electrical vehicle charging stations, you can give your clients more effective advice, which ultimately makes your services more valuable.