Y2K can bring some tax relief

Zoomer | January 1st, 2006

Small and medium-sized business owners may not be thrilled with the hassles of Y2K, but there is one silver lining in the millennium clouds. The federal government is offering a (small) measure of tax relief for small business to address the year 2000 computer compliance problem.

Under the tax relief program, accelerated capital cost allowance (CCA) deductions of up to $50,000 will be provided to small- and medium-sized firms for computer hardware and software acquired to replace systems that are not year 2000 compliant. What does this mean in English?

If you buy a new computer now, you can write the whole thing off against last year’s taxes, instead of spreading out the expense over several years as is the norm for “capital” expenses like cars and computers. Depending on your income, this could provide some instant tax savings.

You have to purchase the new hardware and/or software before June 30, 1999 in order to get the deduction, and various other rules apply. The requisite forms are available from Revenue Canada, but it’s probably best to ask your accountant to ensure that your business is eligible.