Personal Finance

Tax question - depreciate business "capital" or write off as expense?

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  • Dec 5th, 2018 8:54 pm
[OP]
Member
Nov 10, 2018
264 posts
112 upvotes

Tax question - depreciate business "capital" or write off as expense?

As some of you may know, and others may be shocked to hear, for those of you who are self employed or have a T2200 and work from home as per your employer, you can writeoff a number of business expenses. Some of you may be surprised to hear that things like floor mats (for your office chair) and/or USB cables for your phone/computer, cannot, technically, be written off as a "business expense" since these are considered capital items and thus have to be put into the right asset class and depreciated accordingly.

Because of this, I have never bothered to write off these items. That said, I read this which piqued my curiosity:

"Is It an Expense or a CCA Asset Depreciation?

Nowadays many business users replace inexpensive mobile phones, laptops or tablets every two years or so and record the entire amount as a business expense, rather than depreciating the asset under CCA. There are no hard and fast rules for this, but for small amounts (under $500) the CRA does not seem to quibble with the practice."

https://www.thebalancesmb.com/capital-c ... rs-2948646

Writing off small items as a business expense and calling it a day is what probably most people do, and if this is the case and the CRA is reasonable, i'd be inclined to do the same since depreciating a $6 USB cable is a PITA.

Does anyone here just write off these trivial items as a business expense vs depreciating the capital item as per the Income Tax Act?

Thanks
4 replies
Sr. Member
Mar 3, 2018
561 posts
339 upvotes
GTA
Technically if something is going to last more then a year it is depreciated. Such as computer hardware vs. paper that is expensed. CRA is not going to reassess you over immaterial timing differences. It would be a problem if large amounts are involved. You should be fine if the items involved are under a couple of hundred dollars.
[OP]
Member
Nov 10, 2018
264 posts
112 upvotes
DaveTheDude wrote:
Dec 5th, 2018 5:37 pm
Technically if something is going to last more then a year it is depreciated. Such as computer hardware vs. paper that is expensed. CRA is not going to reassess you over immaterial timing differences. It would be a problem if large amounts are involved. You should be fine if the items involved are under a couple of hundred dollars.
I believe based on common sense that one should be fine, but to be clear, i'm wondering if the CRA has agreed with any RFDers on here. Anyone survive a reassessment or formal audit using this line of thought? Did the CRA rule this way for you/others?
Sr. Member
Mar 3, 2018
561 posts
339 upvotes
GTA
angryaudifanatic wrote:
Dec 5th, 2018 8:12 pm
I believe based on common sense that one should be fine, but to be clear, i'm wondering if the CRA has agreed with any RFDers on here. Anyone survive a reassessment or formal audit using this line of thought? Did the CRA rule this way for you/others?
I have been involved in many CRA audits. You will never find an actual ruling to support this policy. It is generally understood that small immaterial amounts are not reassesed during an audit. Especially if they involve just timing of a deduction otherwise allowable.

For example lets say they reassess your small items that were expensed when CCA should have been claimed. They now have to not only reassess the year audited but also subsequent years to allow a CCA deduction. Not going to happen for small amounts as it is too much time and work for an auditor with no net tax recovery.
[OP]
Member
Nov 10, 2018
264 posts
112 upvotes
DaveTheDude wrote:
Dec 5th, 2018 8:37 pm
I have been involved in many CRA audits. You will never find an actual ruling to support this policy. It is generally understood that small immaterial amounts are not reassesed during an audit. Especially if they involve just timing of a deduction otherwise allowable.

For example lets say they reassess your small items that were expensed when CCA should have been claimed. They now have to not only reassess the year audited but also subsequent years to allow a CCA deduction. Not going to happen for small amounts as it is too much time and work for an auditor with no net tax recovery.
Posts like this are amazing in value and a reason why I enjoy being among folks like you. Thank you

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