Lasting purchases have their cost deducted over years through capital cost allowance (CCA), and the class a property belongs to sets how. Class 12 is the fast one: small tools, utensils, and application software — inexpensive or short-lived property that the Canada Revenue Agency (CRA) lets you write off quickly. On Form T2125, Statement of Business or Professional Activities, it is one of the class rows in Area A.
What goes in this class
- tools, medical or dental instruments, and kitchen utensils costing less than the small-tools threshold, acquired on or after May 2, 2006
- china, cutlery, linen, and uniforms
- computer software that is not systems software — application software
- video-cassettes, video laser discs, and digital video disks that you rent and do not expect to rent to any one person for more than seven days in a 30-day period
The class has its own rate, set out on the CRA's page of classes.
What does not
A tool that cost at or above the small-tools threshold. It goes to Class 8. The CRA states the cost per tool that separates the two.
Electronic communication devices and electronic data processing equipment. These are specifically excluded from Class 12. Computer hardware and its systems software have their own classes.
The half-year rule splits this class
Most small tools in Class 12 are not subject to the half-year rule. They are fully deductible in the year of purchase.
Some Class 12 property is subject to it: dies, jigs, patterns, moulds and lasts, the cutting or shaping part of a machine, and software.
What to keep
Keep the purchase invoice or receipt for each item, showing the seller, the date, what it was, and what it cost. Cost per tool is what separates Class 12 from Class 8, so an invoice that itemizes a box of tools is worth more than one that gives a single total.
For software, keep the invoice that names the product — it is what shows whether what you bought was application software or something else. Dossier tags the document and files it with the year's records, so it is there when you file. Don't send it in with your return — keep it in case the CRA asks to see it.
Official CRA sources
Source: Canada Revenue Agency (canada.ca). Not tax advice.