Tax treatment of renewable energy equipment

Just a quick reminder that the CRA allows accelerated depreciation of equipment, machinery and assets used for the construction and development of renewable energy. There are 16 categories included in this accelerated group:

  1. Cogeneration and Specified-Waste Fuelled Electrical Generation Systems
  2. Thermal Waste Electrical Generation Equipment
  3. Active Solar Heating Equipment and Ground-Source Heat Pump Systems
  4. Small-Scale Hydro-Electric Installations
  5. Heat Recovery Equipment
  6. Wind Energy Conversion Systems
  7. Photovoltaic Electrical Generation Equipment
  8. Geothermal Electrical Generation Equipment
  9. Landfill Gas and Digester Gas Collection Equipment
  10. Specified-Waste Fuelled Heat Production Equipment
  11. Expansion Engine Systems
  12. Systems to Convert Biomass into Bio-Oil
  13. Fixed Location Fuel Cell Equipment
  14. Systems to Produce Biogas by Anaerobic Digestion
  15. Wave or Tidal Energy Equipment
  16. District Energy Systems/Equipment
  17. Depending on the year of acquisition, those assets can be depreciated at either 30% or 50%.

    The CRA created a technical regulatory body (The Industrial Innovation Group) that determines whether or not your assets qualify for this class. This authority publishes an annual technical interpretation, which is very detailed and well outlined. Every year this manual increases in detail and in number of industry projects that qualify for this accelerated depreciation class.

    In addition to accelerated depreciation of machinery, plant and equipment, renewable energy project start-up costs such as feasibility studies and pre-construction development expenses may be treated as Canadian renewable and conservation expenses (CRCE). For most taxpayers, these expenses may be deducted in the year incurred or carried forward for deduction in a future year.