How to claim the Accelerated Investment Incentive on your tax return

How to claim the Accelerated Investment Incentive on your tax return

If your business bought equipment or other capital assets in the last few years, you may be able to claim a larger deduction for that cost in year one. The Accelerated Investment Incentive (AII) changes how Capital Cost Allowance (CCA) works, letting eligible Canadian businesses deduct up to three times the normal first‑year amount. This reduces your taxable income right away, so you don’t have to spread deductions over many years.

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What is the Accelerated Investment Incentive?

The Accelerated Investment Incentive is not a grant or a cash refund. It is a federal tax incentive delivered through the CCA system under the Income Tax Act.

Here’s what it does:

• Applies to eligible depreciable property bought after November 20, 2018
• Increases the first‑year CCA deduction
• Removes the half‑year rule for eligible assets
• Allows up to three times the normal first‑year CCA, depending on the asset class and year
• Phases down after 2023 and ends for most property after 2028

There is no dollar cap on how much you can claim. The limit depends on the cost and class of eligible property.

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How to Claim the Accelerated Investment Incentive

Claiming the Accelerated Investment Incentive happens as part of your regular tax filing. There is no separate application.

1. Confirm your asset is eligible

You must have acquired eligible depreciable property for business use. Common examples include:

• Machinery and equipment
• Manufacturing and processing equipment
• Clean energy equipment (specific CCA classes)
• Computer hardware and certain software

Property is generally not eligible if:

• It was acquired from a non‑arm’s‑length party and CCA was previously claimed
• It was transferred on a tax‑deferred rollover
• It falls into excluded classes such as certain mining or leasing property

2. Identify the correct CCA class

Each asset must be placed in its proper CCA class (for example, Class 8, Class 43.1, Class 53).

This matters because:

• The normal CCA rate determines the enhanced first‑year deduction
• Some classes qualify for full expensing, while others qualify for accelerated CCA only

If you’re unsure, CRA’s CCA class tables or your accountant can confirm.

3. Calculate the enhanced first-year deduction

Under the Accelerated Investment Incentive:

• The half‑year rule does not apply
• You can claim CCA on up to 1.5 times the net addition to the class
• This results in up to three times the normal first‑year deduction

Example (simplified):

• Asset cost: $100,000
• Normal CCA rate: 20%
• Standard first year: $10,000
• With AII: up to $30,000 in year one

Actual results vary by class and year.

4. Report the claim on your tax return

You claim the Accelerated Investment Incentive:

• On Form T2125 (sole proprietors)
• On Schedule 8 (corporations)
• As part of your regular CCA calculation

There is no checkbox for AII. The enhanced deduction is calculated automatically when you apply the correct rules to eligible property.

5. Keep records in case of review

CRA expects you to keep:

• Purchase invoices
• In‑service dates
• Proof of business use
• CCA class calculations

Poor documentation is a common reason for reassessments.

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How Accelerated CCA Affects Future Years

The Accelerated Investment Incentive increases deductions now, but reduces what’s available later.

• You pay less tax upfront
• You have lower CCA balances in future years
• Total deductions over time remain similar

AII helps businesses that have high income now or need more cash flow.

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Common Mistakes and FAQs

Common Mistakes to Avoid

Claiming ineligible property
Not all equipment qualifies. Assets acquired on rollover or from related parties may be excluded.

Using the wrong CCA class
Misclassifying an asset can reduce your deduction or trigger a CRA adjustment.

Forgetting the phase‑down rules
The enhanced benefit decreases after 2023 and does not apply forever.

Assuming it’s a grant
The Accelerated Investment Incentive reduces taxable income. It does not provide cash back.

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Frequently Asked Questions

Q: Is the Accelerated Investment Incentive a grant or tax credit?
No. It is a tax incentive delivered through the CCA system. It reduces taxable income rather than providing a cash payment.

Q: Can I claim the Accelerated Investment Incentive on used equipment?
Generally yes, as long as the equipment was not acquired from a non‑arm’s‑length party that already claimed CCA.

Q: Is there a limit to how much I can claim?
There is no overall dollar cap. Your claim depends on the cost and CCA class of eligible property.

Q: Does the Accelerated Investment Incentive still apply after 2023?
Yes, but the enhanced deduction gradually phases down and ends for most property by 2028.

Q: What is full expensing under the Accelerated Investment Incentive?
Certain manufacturing, processing, and clean energy equipment can be deducted at 100% in the first year, instead of being depreciated over time.

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GrantHub lists federal and provincial tax incentives alongside hundreds of grant programs for Canadian businesses. You can check which ones fit your profile as you plan your tax strategy.

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Next Steps

The Accelerated Investment Incentive can significantly reduce your tax bill, but only if your assets are classified and claimed correctly. Tools like GrantHub’s eligibility matcher let you filter tax incentives and grants by province, industry, and asset type in seconds.

If you’re planning new equipment purchases, it’s also worth exploring related Canadian programs such as capital equipment grants and clean technology incentives before you file. See also: Capital Cost Allowance explained for Canadian businesses, Manufacturing and processing grants in Canada, and Clean technology funding programs.

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