Should I Buy Equipment for My Business Before Year-End? (Canada)

As year-end approaches, many business owners start thinking about purchases they've been putting off. Maybe you need a new laptop, camera, piece of machinery, or other equipment for your business. If you're going to buy it anyway, does it make sense to purchase it before year-end to reduce your taxes?

Sometimes it does, but spending money just to get a tax deduction isn't always a good decision. There's also a difference between buying ordinary business supplies and purchasing equipment that will be used for several years.

In Canada, equipment purchases are generally subject to capital cost allowance (CCA) rules, which determine how much of the cost you can deduct for income tax purposes.

How Does Capital Cost Allowance Work?

When you purchase supplies or pay for regular operating expenses, those costs are generally deductible in the year they're incurred, assuming they meet the usual tax requirements.

Equipment is different. If you purchase something that will provide value to your business over several years, such as a computer, camera, or piece of machinery, it's generally considered a capital asset.

Rather than deducting the entire purchase price as an ordinary expense, you calculate a deduction using the CRA's capital cost allowance rules.

Different types of equipment fall into different CCA classes, each with its own depreciation rate and applicable rules. For example, furniture and certain equipment are commonly included in Class 8, which has a 20% annual CCA rate. General-purpose computer equipment is generally included in Class 50, which has a 55% annual rate.

These rates don't necessarily tell you how much you can deduct in the year of purchase. Special first-year rules may allow you to claim more than the regular rate, depending on the type of asset and when it becomes available for use:

• Enhanced first-year deduction. Under the Accelerated Investment Incentive, many assets get a larger CCA claim in their first year than the regular rate would give. For a Class 8 asset, that's generally 30% of the cost in the first year instead of 10%.
• Immediate expensing for some assets. Certain assets, including computers, can be fully deducted in the year they become available for use, subject to the rules and dates that apply. Not every asset qualifies for every measure, so it's important to check the rules for the specific purchase.

A proposal to be aware of, not to rely on. On September 15, 2026, the federal government proposed immediate expensing for most depreciable property acquired on or after that date (the "Productivity Mega Deduction"). It is not law. Proposals can change before they're enacted, or may not be enacted at all. Don't plan a purchase, or claim a deduction, on the basis of a proposed measure without getting professional tax advice first. The rest of this article uses the rules that are currently in force.

Does Buying Equipment Before Year-End Reduce Your Taxes?

Let's say you're a self-employed photographer considering a new camera that costs $5,000. You've had a profitable year and are thinking about making the purchase in December rather than January.

A camera is generally Class 8 equipment. Under the enhanced first-year rule, the first-year CCA claim would be about 30% of its cost, with the rest claimed over later years. At an assumed marginal income tax rate of 30%, the first-year effect looks like this:

Item	Amount
Equipment purchase	$5,000
First-year CCA claim (about 30%)	$1,500
Assumed marginal tax rate	30%
Estimated income tax savings in the first year	$450
Cost still to be deducted in later years	$3,500

This example assumes the camera is used entirely for business and that you have enough income to benefit from the deduction. It excludes sales taxes and any other tax effects.

Even if the whole $5,000 were deductible in one year, at a 30% rate it would save about $1,500 in tax. The purchase would still cost you about $3,500.

The important point is that a deduction doesn't mean the government reimburses you for the purchase. You still spent the money, and the tax deduction only reduces part of the cost.

If your business doesn't need the equipment, you're spending most of that money on something you could have done without.

Does the Equipment Have to Be Purchased and Used Before Year-End?

This is an important part of year-end tax planning. Buying equipment in December doesn't automatically mean you can claim CCA for that year.

Under CRA rules, equipment generally needs to be available for use before you can claim CCA. For most business equipment, this can mean that it has been delivered and is ready to perform the function for which it was purchased, even if you haven't started using it.

For example, if you order a new laptop on December 20 but it isn't delivered until January, you generally wouldn't be able to claim CCA on it in December simply because you placed the order or paid for it.

If the laptop was delivered in December and was ready for business use, it may qualify for a deduction in that year, subject to the applicable rules.

This is why the purchase date alone isn't always enough. Delivery, installation, and whether the equipment was available for use can affect the timing of your deduction.

What About Equipment Used for Both Business and Personal Purposes?

If you're a sole proprietor, you may purchase equipment that you use partly for business and partly for personal activities.

For example, you might purchase a laptop that you use 80% for your business and 20% for personal activities. Generally, only the business-use portion of the equipment's cost is eligible for CCA.

A $2,000 laptop used 80% for business would therefore have an eligible business portion of $1,600 before applying the relevant CCA rules.

The same principle applies to equipment such as cameras, phones, and vehicles. If there is personal use, you'll need a reasonable method of determining and supporting the business portion.

Vehicles can be particularly complicated because separate CCA classes, cost limits, and other restrictions may apply. If you're purchasing a vehicle before year-end, it's worth reviewing the tax treatment before making the purchase.

Is It Better to Buy Equipment This Year or Next Year?

The answer depends on more than the CCA deduction.

If your business has had a profitable year and you expect lower income next year, claiming a deduction sooner may be beneficial. On the other hand, if your income is relatively low this year but you expect a much more profitable year ahead, it may be worth considering whether deferring the purchase or the deduction would make more sense.

CCA is generally a discretionary deduction. You don't have to claim the maximum amount available every year, and you may choose to claim less or none, subject to the applicable rules. This can give you some flexibility when planning your taxes.

You should also consider cash flow. Buying equipment reduces the cash available to your business, regardless of how much tax you save. If the purchase is going to leave you short of funds for operating expenses, payroll, or upcoming tax payments, the deduction may not be worth accelerating the purchase.

Financing doesn't automatically prevent you from claiming CCA either. If you purchase equipment using a loan, you may still be able to claim CCA based on its eligible capital cost, even though you're paying for it over time. The loan principal itself isn't a separate business expense, while interest may be deductible where the requirements are met.

How Do You Record Equipment Purchases for Your Taxes?

For Canadian sole proprietors, business income and expenses are generally reported using Form T2125 as part of the personal income tax return.

Regular operating expenses are reported in their appropriate categories, while depreciable equipment is generally tracked separately through the CCA calculation.

You'll need to retain records showing what you purchased, the cost, when the equipment became available for use, and how much of it is used for business.

If you're organizing your business bank and credit card statements using Heightly, larger purchases that may be equipment are flagged for you to confirm, so they're kept out of your regular expenses. Heightly helps categorize transactions for tax preparation, but it doesn't calculate CCA or determine the appropriate depreciation deduction.

You'll still need to complete the CCA calculation separately when preparing your tax return.

Should You Make the Purchase Before Year-End?

If your business needs the equipment and you're already planning to purchase it, buying before year-end may allow you to claim a deduction sooner. Depending on the equipment and the applicable CCA rules, that deduction could be substantial.

But tax savings shouldn't be the only reason to make a purchase. Consider whether the equipment will improve your business, whether you can afford it, and whether the deduction would be more valuable this year or in a future year.

Before making a large purchase solely for tax planning, it's worth checking with your accountant. CCA rules have changed several times in recent years, further changes have been proposed but aren't law, and the timing and amount of the deduction can vary depending on the asset.

Buying equipment your business needs can be a good investment. Buying equipment you don't need just to reduce your taxable income usually isn't.

This article discusses Canadian capital cost allowance rules in force as of November 10, 2026. It mentions a proposed measure for awareness only; proposed measures are not law and shouldn't be relied on without professional tax advice. It is intended as general information and does not replace professional tax advice. CCA rates and accelerated deduction rules depend on the type of equipment, acquisition date, available-for-use date, and applicable legislation.