In Canada, the concept of immediate expensing (or full first-year write-off) lets eligible businesses deduct the full cost of certain capital property in the year it becomes available for use instead of depreciating it over many years via CCA (Capital Cost Allowance).
While the policy has evolved, understanding how it works in 2025, its limits, eligibility, interactions with other incentives, and planning considerations is crucial for business owners and tax professionals.
What is Immediate Expensing under CRA rules?
Immediate expensing allows a business to deduct 100 % (or a high percentage) of the cost of eligible depreciable property in the year it is put into use.
This accelerates the tax relief of capital investments.
Read More On CRA Taxes & Rates
Under the Income Tax Regulations (section 1104), a new measure introduced via Bill C-19 allows certain eligible persons or partnerships (EPOPs) to apply this deduction to “immediate expensing property,” subject to conditions and limits.
The eligible property must satisfy some conditions (new, not previously owned in a non-arm’s length transfer, etc.) and must be designated on the tax return in the year it becomes available for use.
Who qualifies to use immediate expensing in 2025?
To be eligible to claim immediate expensing under the rules:
- You must be an eligible person or partnership (EPOP) per ITR 1104. That includes:
• Canadian-controlled private corporations (CCPCs) that are residents, or
• Individuals (other than trusts) resident in Canada, or
• Certain partnerships whose members are all EPOPs. - The property must be depreciable capital property subject to CCA rules, but not a property in CCA classes 1 to 6, 14.1, 17, 47, 49, or 51 (which are typically buildings, long-life assets, and similar).
- The property must be new to you—not previously owned by you or a non-arm’s length person, and not acquired via a tax-deferred rollover.
- The property must become available for use in the taxation year. You must designate the property for immediate expensing in that year’s return.
- If your business is part of an associated group of EPOPs, the $1.5 million limit (see next section) is shared among them.
Note that multi-tiered partnerships (i.e., partnerships that have other partnerships as members) are excluded from claiming under immediate expensing.
What is the $1.5 million limit and how is it applied?
One key constraint is the immediate expensing limit (IEL): up to $1,500,000 per taxation year, of eligible property cost can be expensed.
That limit is shared among all associated EPOPs.
- If your eligible property acquisitions exceed that limit in a year, you can choose which portion of your eligible additions to designate as immediate expensing, and the remainder is treated under regular CCA rules.
- The limit cannot be carried forward to future years. If you don’t use the full $1.5M in a given year, the unused portion is lost.
- For short taxation years (less than 365 days), the limit is prorated accordingly.
How immediate expensing interacts with other tax incentives
Immediate expensing does not reduce your eligibility for other enhanced deductions or incentives, such as:
- Full expensing for manufacturing and processing machinery and clean energy equipment under the connected Accelerated Investment Incentive (AII) measures.
- Accelerated CCA or enhanced first-year allowances under the AII (which may be phased or modified).
Also, when claiming immediate expensing, the half-year rule (which normally limits CCA in the year of acquisition) does not apply for the portions of property designated under immediate expensing.
But note that immediate expensing measures are currently phasing out for property that becomes available after 2023 and before 2028, particularly for manufacturing, processing, clean energy, and zero-emission vehicles.
Budget 2024 proposed reinstating or extending some of the immediate expensing measures for certain equipment acquired after January 1, 2025, that becomes available before 2030, but these remain draft proposals.
How to claim immediate expensing on a tax return
To claim immediate expensing:
- Designate the property on your tax return in the year it becomes available for use. The property must be listed as a Designated Immediate Expensing Property (DIEP).
- Fill in the CCA forms (for example, T2 Schedule 8 for corporations) using the newly added columns to reflect the immediate expensing amounts. The CRA’s capital cost allowance guides specify these form areas.
- If you’re in an associated group of EPOPs, you must fill in Area G to state how the $1.5 million limit is allocated among group members before proceeding with CCA calculations.
- The addition cost of property goes in Area B / C additions, and the portion designated for immediate expensing is separated in the designated columns.
If a property qualifies but was not designated originally, one may consider amending the return, if permitted.
Planning strategies and considerations for 2025
- Timing matters: Because unused limit cannot be carried forward, timing your capital acquisitions in years where you have capacity is important.
- Class selection: If you exceed the $1.5M limit, prioritize applying immediate expensing to property in CCA classes with lower depreciation rates to capture more benefit.
- Associated group coordination: In group scenarios, allocate the $1.5M strategically between related corporations or businesses to maximize tax benefit.
- Monitor phasing rules: Because many immediate expensing provisions are in phase-out and proposed reinstatement phases, keep abreast of legislative changes, especially for new equipment classes (e.g., classes 44, 46, 50) that may gain 100 % expensing eligibility under new proposals.
- Keep proper records: Document acquisition dates, costs, usage, and ensure the property was not acquired from related parties in rollovers, as that would disqualify it.
- Watch for CRA processing delays: Some tax return systems or schedules may not yet accommodate immediate expensing claims seamlessly; you may receive requests for supporting details.