How does equipment purchase lower my pharmacy’s taxable income?
According to Canada’s capital cost allowance (CCA) tax deduction, Class 53, businesses are allowed to immediately deduct (or write off) from their taxable income in the first year of purchase, 50% of the price of a qualified equipment that is purchased and put into use before the end of fiscal year-end – December 31, 2021 for most businesses. Currently, Canada’s Revenue Agency (CRA) also has a temporary accelerated CCA on Class 53 equipment, where it will allow 100% deduction of the price of qualified equipment in the first year of purchase if bought after November 20, 2018 and put into use before 2023. Take home – eligible equipment bought and put in use before December 31, 2021, is eligible for full write off in you Corporate Income Tax Returns.
Can I have an example of what this looks like when I file my Corporate Income Tax Returns?
My pharmacy’s gross income is $1,000,000
My pharmacy’s cost of goods sold & operating expenses is $700,000 (purchases, office supplies, insurance, salaries, etc.)
My pharmacy’s taxable income is $300,000 (Gross Income – Operating Income = Taxable Income)
Can I have an example of what this looks like at the equipment level with Medisca’s Taxman Sale?
On top of that – my pharmacy’s qualified Class 53 equipment purchases this year totals to $50,000. According to the CRA’s accelerated CCA, I can also deduct this full amount from my taxable income, bringing my taxable income down to $250,000 – You only have to pay taxes on this amount!
Is there a better time of year to purchase equipment for tax savings?
Catalog cost of Maz® KK-300SS is $21,000
Medisca’s Taxman Savings cost of Maz® KK-300SS is $15,500 plus $3,000 Medisca Credit*
Amount that can be deducted from my taxable income is $15,500 (full price can be deducted)
Tax savings based on an average Federal and Provincial Corporate Income Tax Rate of 27% is $5,265**
Total Savings of $6,765 plus $3,000 Medisca Credit with Medisca’s Taxman Savings***
The shorter the length between purchase and filing your taxes – the quicker the savings. Purchasing equipment at the end of the fiscal year means you only need to wait a few months when you file your Corporate Income Tax Returns to see the benefit.
What equipment qualifies for tax deduction?
Class 53 recognizes equipment or machinery that is used in Canada primarily in the manufacturing or processing of goods for sale or lease. It is recommended that you consult with your tax advisor for further details.
*Offer expires December 31, 2021. See product page for more details on this promotion
**The tax savings refers to the amount that business would save in taxes by deducing the full equipment cost from their taxable income, which is permissible according to the CRA's accelerated CCA. Tax rate differ per province and corporate size. Note that this is for demonstration purposes only, and should not be relied on as tax advice.
***Total savings refers to the amount that a business would save in taxes plus the amount saved with Medisca’s taxman savings sale.
The content of this webpage is for informational purposes only of a general nature and does not address the circumstances of any particular individual or entity. Nothing contained herein shall be considered financial advice and should not be relied on. You should seek independent financial and taxation advice to validate how the information contained herein relates to your unique circumstances.