Buying Equipment Through a Corporation
CCA classes, the 2026 first-year deduction, GST/HST recovery, buy vs lease, and selling or trading in equipment.
The short version
- Equipment that lasts more than a year isn't expensed when the corporation buys it. It's depreciated through capital cost allowance (CCA), class by class.
- For equipment acquired after 2024 and available for use before 2030, the reaccelerated incentive gives a first-year claim of 1.5 times the class rate (three times the usual half-year claim). A $100,000 machine in a 30% class can be deducted $45,000 in year one.
- Small tools under $500 and most software are Class 12 and written off in full.
- The corporation claims back the GST/HST it paid on equipment used more than 50% in its taxable business, in full, on its next return.
- A deduction is worth the corporation's tax rate: about 11 cents per dollar on small business income in Ontario. Buying equipment just to save tax is spending a dollar to save 11 cents.
Buying Equipment Through Your Corporation
Every December, equipment dealers enjoy a small wave of business owners who've just been told they "should buy something before year-end." Sometimes that's smart timing on a purchase you needed anyway. Sometimes it's a $90,000 machine bought to save $10,000 of tax. Here's how equipment is treated in a corporation, what the first-year rules are for 2026, and how to tell the difference.
Expense or Capital?
| Purchase | Treatment |
|---|---|
| Supplies, small consumables, repairs that restore what you had | Deducted in full when bought |
| Tools under $500, most software | Class 12: 100% CCA |
| Computers and systems software | Class 50: 55% |
| Furniture, most machinery and equipment | Class 8: 20% |
| Heavy construction equipment (excavators, loaders) | Class 38: 30% |
| Trucks and vans that aren't passenger vehicles, trailers | Class 10: 30% |
| Passenger vehicles | Class 10.1: 30% on up to $39,000; see corporate vehicle expenses |
Improvements that make an asset better than it was are capital, not repairs. The line is the same one landlords fight about; see repairs vs capital improvements.
First-Year Deduction in 2026
Normally, only half the usual rate can be claimed in the year an asset arrives (the half-year rule). Under the reaccelerated investment incentive, property acquired after 2024 and available for use before 2030 gets 1.5 times the full rate in its first year instead. The difference is large:
| $100,000 excavator, Class 38 (30%) | Half-year rule | Reaccelerated incentive |
|---|---|---|
| Year 1 CCA | $15,000 | $45,000 |
| Year 2 CCA | $25,500 | $16,500 |
| Ontario corporate tax saved in year 1 at 11.2% | $1,680 | $5,040 |
| Same, if the income would be taxed at 26.5% | $3,975 | $11,925 |
The incentive speeds up the deduction; it doesn't make it bigger. Over the life of the machine, the total CCA is the same. On October 1, 2026, the federal government also announced a Productivity Mega Deduction promising immediate expensing of a broader range of investment. Its details and start date weren't final when we checked. The full rules are on capital cost allowance.
Buy now, buy in January, or lease?
Enter the equipment, price, your corporation's year-end, expected profit and province. The assistant works out the CCA class, the first-year deduction, the tax saved and the GST/HST recovered for each option.
GST/HST on Equipment
Equipment is capital personal property for GST/HST. If the corporation uses it more than 50% in its taxable business, it claims the full GST/HST as an input tax credit; if 50% or less, none at all. On the $100,000 excavator in Ontario, that's $13,000 back on the next return, which is often worth more in cash flow than the first year of CCA. Passenger vehicles have their own cap. Rules are on input tax credits explained.
Buy, Lease or Finance
| Buy (cash or loan) | Lease | |
|---|---|---|
| Deduction | CCA; interest on a loan is deductible | Lease payments, as paid |
| First-year boost | Yes, under the incentive | No |
| GST/HST | Full ITC up front, if used mainly for business | ITC on each payment |
| Selling later | Proceeds reduce the class; can cause recapture | Return it, or buy it out |
The tax result is often closer than the salesperson suggests. Pick based on cash flow, how long you keep equipment, and the actual interest rate.
Selling or Trading In
When you sell, the lesser of the sale price and the original cost comes off the class balance. If that takes the class below zero, the negative amount is recapture: income in the year of sale. Sell for more than you paid and the excess is a capital gain. A trade-in counts as a sale. The corporation also charges GST/HST on equipment it sells, if it's registered. Timing matters: a big sale and a big purchase in the same class and year can cancel out.
Corporation or You?
- Buy in the corporation when the equipment is used in its business. It pays with dollars taxed at 11.2%, not with what's left after your personal tax.
- Personal use is a benefit. The company boat, ATV or snowblower that mostly lives at the cottage is a taxable shareholder benefit, and the corporation loses the deductions.
- Owning personally and renting to the company is possible but makes you a landlord of equipment, with rental income to report. It's rarely worth the complexity.
- Just incorporated? Equipment you owned as a sole proprietor can move in under a section 85 election; see corporation vs sole proprietorship.
Rules of Thumb
- Buy what the business needs, when it needs it. Tax timing is a tiebreaker, not a reason.
- It must be "available for use" by year-end to claim CCA that year. Ordered isn't enough; delivered and ready is.
- Claim the GST/HST on the return for the period you bought it.
- Keep the invoice and the class. Schedule 8 of the T2 tracks every class.
Contractors buying tools personally should read tools and equipment. The overview is on Canadian corporate tax explained.
Equipment Purchase Questions
Can my corporation write off equipment in the year it buys it?
Usually not in full. Equipment is deducted through capital cost allowance. Under the reaccelerated incentive, property acquired after 2024 and available for use before 2030 gets 1.5 times the normal first-year rate. Tools under $500 and most software can be written off in full.
How much tax does buying equipment save my corporation?
The deduction times the corporation’s tax rate. For an Ontario CCPC on small business income, about 11.2 cents per dollar deducted.
Does buying equipment before year-end help?
Only if it is available for use by year-end and you need it anyway. The first-year incentive moves deductions earlier but does not increase the total.
Can my corporation claim the HST on equipment?
Yes, in full, if the equipment is used more than 50% in its taxable business. If it is used 50% or less, no input tax credit is available.
Is leasing better than buying for a corporation?
Not automatically. Leases are deducted as paid; purchases get CCA and possibly a larger first-year deduction. Compare cash flow, interest cost and how long you keep the equipment.
Sources: CRA, Classes of depreciable property; GST/HST input tax credits; Department of Finance, Productivity Mega Deduction (October 2026). Checked October 2026. The reaccelerated incentive is from Bill C-15 (2026); CRA's guides still described it as proposed when we checked. Class assignments are simplified and some assets fall into other classes. The Productivity Mega Deduction details were not final.
Last reviewed October 5, 2026 against CRA and Government of Canada sources. How we check our facts.