Howdy everyone. As Tax season comes to a close here in Canada, we at TCG Machines wanted to give all of our wonderful customers a gift for this joyous holiday: a guide on how to recover the cost of your PhyzBatch-9000 through tax deductions (Yippee!). This post only covers Canada, the USA, and the United Kingdom, so apologies to all of our EU customers (however, feel free to investigate the opportunities and every countries tax code is it’s own magical snowflake )
Quick Disclaimer: The goal of this post is to inform you of your options and get you to speak to licensed tax professional about how best to act on these options. We are not licensed tax professionals, we build card robots, so please keep this in mind before taking the advice written below as fact.
This guide is split up into 3 sections for each of the countries that we will go over, so please feel free to skip to the information that is relevant to you, we won’t be offended.
The United States has multiple different ways to recover value from your machine through tax deductions, with the main three being:
All 3 of these options can be used sequentially - meaning, the first may apply and then potentially the second and/or the third.
A PhyzBatch acquired under the purchase plan is subject to depreciation as there is no question over ownership.
Machines on a lease-to-own agreement are potentially subject to depreciation. We typically consider these agreements as financing, meaning that you own the machine as soon as you receive it, and are paying it off in installments (similar to a financed vehicle). This would qualify it for depreciation expense. Please speak to a tax professional to see if your lease-to-own agreement qualifies.
Rental plans and payments cannot be depreciated, but can be deducted as a business expense if you are using the machine to generate income.
Any cost that is associated with acquiring the machine is depreciable This includes:
This does not include
Section 179 allows businesses to deduct up to 100% of the cost of equipment in the year that it is acquired, this includes our lovely trading card sorter. Section 179 allows for a total decoction equal to your yearly income, or a cap of 2,500,000 USD if your income exceeds this. This limit effects the total deductions you claim across ALL depreciable assets. If you choose no to deduct 100% of the value of your machine, or you have exceeded your limit under Section 179, you may also choose to apply bonus depreciation.
Bonus depreciation is applied after section 179 and allows you to deduct 100% of the cost of your assets without being limited by your businesses yearly income or the $2,500,000 limit. The 100% rate only applies to assets acquired after January of 2025. If your machine was acquired before that date, you are still eligible to deduct 60% of the cost (after deductions from section 179). Unlike section 179, you cannot choose the percentage that you depreciate your equipment by, you either opt into the full amount, or you opt out. If you still have undepreciated costs on your machine after applying both of these options, or you have opted out, your machine can still be deducted under MACRS depreciation.
MACRS Depreciation is the default option for all assets that still have undepreciated balances after using the other 2 options. Under this, the PhyzBatch has a 5 year cost recovery period using the 200% declining balance method. The gist of it is, over the course of 5 years, you will recover the cost of your PhyzBatch through tax deductions, with the depreciable amount being larger during the first couple of years, and then trailing off. The specific rates change depending on when you acquired your machine or other equipment during the year so ask a tax professional if you are looking for more specific information.
All depreciation information is filed on form 4562 (Depreciation and Amortization) and then attached to your respective tax return.
The Canadian government lets you deduct the cost of equipment over time using something called Capital Cost Allowance (CCA). With CCA, you do not depreciate each piece of equipment individually, but add it to a pool of similar equipment, and deduct a percentage amount from that pool every year. These pools are called classes, and each have a specific percentage of CCA available to claim each year.
Most machinery, such as the PhyzBatch-9000 falls under Class 8, which is deducted by 20% each year.
We are generally considered class 50 - general equipment electronic data processing equipment - however we recommend exercising caution to ensure it’s reflected as such in your fillings federally. Class 50 equipment is depreciated 55% per year or immediately depending on your preference.
If your business is a Canadian-Controlled Private Corporation (CCPC), or you are an individual or partnership who are all residents of Canada, you may be eligible to recollect the cost of your machine in faster using the Immediate Expensing Incentive or the Re-Accelerated Investment Incentive depending on when your machine was put into service.
The Immediate Expensing Incentive allows businesses to deduct up to 100% of the cost of Immediate Expensing Property in the year that it is acquired, this includes our lovely trading card sorter as it is considered a Class 8 asset. The Immediate Expensing Incentive allows for a total decoction equal to your yearly income, or a cap of 1,500,000 CAD if your income exceeds this. This limit effects the total deductions you claim across ALL immediate expensing property. If you choose not to deduct the value of your machine, or you have exceeded your expensing cap, the remaining value of your machine will go into the Class 8 pool, and be deducted under the yearly rate. Even though this option is no longer available in the current year, this information might be useful if you are interested in amending the tax return for the year that your PhyzBatch was put into service.
NOTE: Lease to Own and Rental plans do not qualify for immediate depreciation in Canada. Instead, you would follow the regular depreciation of the machine for the duration of your term and for the ownership period thereafter.
Usually, you can only claim half of the available CCA for a machine in the first year that it was put into service (Half-Year Rule), but under the re-accelerated investment incentive, this rule is suspended and you can claim more than the usual amount of CCA in the first year instead. The additional amount that you can claim changes by class and by year, but for your machine in 2026, it will be 1.5 times the amount.
Purchased equipment can have CCA claimed on the full value of the machine, as their is no question that you are the owner.
Machines on a lease-to-own agreement likely also qualify for CCA as we typically consider these agreements as financing, meaning that you own the machine as soon as you receive it and are paying it off in installments (similar to a financed vehicle). Please speak to a tax professional to see if your lease-to-own agreement qualifies for CCA.
Rental plans and payments cannot be claimed under CCA, but can be deducted as a business expense if you are using you PhyzBatch to generate income.
Anything that is considered an acquisition cost for the machine is claimable. This includes
This does not include
The acquisition date of the machine determines when it becomes deductible, not the purchase date. We keep track of when machines are first activated so feel free to reach out to us if you need this information for tax purposes.
Additionally, you may only claim HALF of the available amount of CCA for the first year that your machine is put into service. This rule only applies to machines that are not being deducted under the Re-Accelerated Investment Incentive, or the Immediate Expensing Incentive.
Sole proprietors using our machines to generate income can claim this deduction on their Statement of Business Activity (Form T2125)
Incorporated businesses can claim this deduction on Schedule 8 of the T2 Return
In the UK, you can reclaim the value of your PhyzBatch through tax deductions using Capital Allowances rather than traditional depreciation. Your two main options to claim Capital Allowances are through the Annual Investment Allowance (AIA) or your Main Pool.
A PhyzBatch acquired under the purchase plan qualifies to be claimed under capital allowance as there is no question over ownership.
A machine on a lease-to-own is considered a “hire purchase” and qualifies to be claimed under Capital Allowances with the stipulation that the machine has to still be in use. However, our un-professional interpretation of the tax law is that the LTO or Rental plan must result in a fully purchased machine, else you may regain tax burden if you cancel before it’s fully paid off.
Rental plans and payments do not qualify, but can be deducted as a business expense if you are using the machine to generate income.
Any cost that is associated with acquiring the machine is depreciable This includes
This does not include
AIA allows businesses to deduct up to 100% of the cost of equipment in the year that it is acquired, this includes our lovely trading card sorter. AIA allows for a total deduction of up to £1,000,000 . This limit effects the total deductions you claim across ALL depreciable assets. If you choose not to deduct 100% of the value of your machine, or you have exceeded your limit under AIA, the remaining amount will go into your Main Pool
The Main Pool is a collection of unclaimed capital allowance for assets of a similar type. It has a “writing down allowance” of 18% meaning that 18% of it’s total value can be deducted from your taxable income each year. If you choose not to claim a full deduction for your machine using AIA or you choose only to claim a portion, the remaining value will go into your Main Pool.
The acquisition date of the machine determines when it becomes deductible, NOT the purchase date. We keep track of when machines are first activated so feel free to reach out to us if you need this information for tax purposes.
Additionally, in the first year that an item is added to your Main Pool, you may only claim a percentage of the value of your machine’s capital allowance that is directly proportional to the percentage of the year that the machine was in use. For example, if you began using your machine on March 31st, you would only be able to claim 75% of the capital allowance on your taxes that year.
Incorporated business can claim this deduction on their Corperation Tax Return and sole proprietors can claim it on their Self Assessment.
The short of the above (if you’ve skipped to the end of this article without reading it) is that a PhyzBatch-9000 is an investment which often provides tax incentives pretty much across the board.
We know how daunting it can be to invest in automation for your business, and we are hoping that this guide can help make that decision a little easier by helping you reduce your tax burden. Our goal here is always to make our customers’ business more profitable so, if even one person finds this guide useful, it will make all of the diving through CRA, IRS, and UK.GOV pages worth it.
Thank you for reading, and we’d like to wish you all a merry tax season, and a happy new (tax) year!
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