Writing Off GPU Servers in Canada: Class 50 and Full Expensing

Can we write off GPU servers in full in the first year?

Yes, if they were acquired after April 15, 2024 and available for use before 2027, and either no one has claimed CCA on them before or no one related to you owned them before (see used servers below). GPU servers in Class 50 and switches in Class 46 then get a first-year deduction of up to 100% of their cost. Cooling and power gear is usually Class 8, which gets up to 30% in year one.

This is law, not a proposal. The Budget 2025 Implementation Act, No. 1 (assented March 26, 2026) put the factors into the regulations: Class 50's 55% rate and Class 46's 30% rate are each topped up to the full cost, with no half-year cut (s. 103; Reg. 1100(2)). This page calls that extra first-year amount the top-up (Budget 2025's Productivity Super-Deduction, per Finance Canada). The CRA's class summary still says "proposed"; the enacted regulation is what applies.

The full deduction is a maximum. A corporation may claim any amount from zero up to it, class by class, on Schedule 8 of its T2 (T2 guide). It is often called immediate expensing for computer and network gear, but it is separate from the older immediate expensing for CCPCs, which needed property available for use before 2024 (Reg. 1104(3.1)); see Capital cost allowance.

It is not simple if servers went live near year-end, are rented to one customer, came from a related company, or a US-led round is coming. Gather invoices, delivery and power-on dates, the colocation contract and customer leases.

What CCA class are GPU servers, switches, cables and cooling gear?

GPU servers are Class 50; switches are Class 46; cooling and power gear is usually Class 8. The general CCA mechanics (half-year rule, recapture, terminal loss) are in Capital cost allowance.

The class wording sets the edges (Schedule II; Reg. 1104(2)):

• Class 50 covers general-purpose electronic data processing equipment: equipment that runs stored programs the user can change. A GPU server fits. It excludes equipment used principally for process control or monitoring, so cooling-plant controllers are not Class 50.
• Class 46 covers data network infrastructure equipment, "including data switches", but not wires or cables, and nothing in Class 50. No CRA source addresses the back-end switch fabric inside a GPU cluster; check how yours is classed.
• Cables and optics. Whether in-rack cables bought with the servers are ancillary Class 50 equipment or Class 42 is unsettled. No source addresses optical transceivers; they plug into switches, which points to Class 46, but check.
• Software other than systems software is Class 12 (100%); systems software follows its hardware.

Until 2027 both classes reach the full amount, so the split matters mainly later and on a sale. Cooling or power plant built into a building is building or leasehold property, outside this page. A chip or cooling startup that manufactures goods for sale may have Class 43 machinery (30%) with its own enhanced first-year factor; check whether yours qualifies.

Selling old GPUs takes proceeds up to cost off the class; a class already at zero gives recapture. Selling used GPUs to buyers abroad can need an export permit, which is outside tax. Quebec and Alberta corporations file their own returns; check their CCA rules.

When are servers "available for use", and why does December 31, 2026 matter?

No CCA is allowed until property is available for use (ITA 13(26)). For equipment that is the earliest of (ITA 13(27)):

1. first use to earn income;
2. delivery to you, or to a person using it for you, plus being capable, alone or with gear you already have, of performing a commercially saleable service;
3. the start of your first tax year beginning more than 357 days after the end of the year you acquired it.

The CRA counts equipment delivered and able to produce in a year as available that year, even if use starts later (Folio S3-F4-C1, ¶1.34). Servers boxed on a colocation data centre's dock with no network in place are at risk. Records that show this: rack-and-stack sign-offs, power-on and burn-in logs, and cross-connect tickets. A deposit or purchase order is not an acquisition.

"Before 2027" is a calendar date, not your tax year. For a tax year that starts in 2026 and ends in 2027, the factor is blended by what went live in each calendar year (Reg. 1100(2.011)(b)). With a March 31 year-end, servers that go live in January 2027 get no top-up. See Choosing or changing a year-end.

Invoices in US dollars go into the class at the Canadian-dollar spot rate for the day the amount arose (ITA 261(2)(b)).

What do servers that go live after 2026 get, and what does cooling gear get now?

After 2026, new Class 50 and Class 46 additions get no top-up, but, if available for use before 2034, no half-year cut either: the first-year maximum is the plain 55% or 30% on the full cost. New Class 8 gear gets 1.5 times the class rate (30%) if available for use before 2030 (Reg. 1100(2), elements A.1 and F). The "one and a half times" rule that applies to most classes does not apply to Class 50 or Class 46 after 2026.

Proposed, not law: on September 15, 2026 the Department of Finance proposed a permanent Productivity Mega Deduction: immediate expensing of most depreciable property acquired on or after that date (Finance Canada). It was not in any statute on Justice Laws when this page was checked; until it is enacted, current law applies.

Do used or refurbished servers qualify?

They can. The first-year top-up applies to property that was either never depreciated by anyone, or never owned by you or anyone not at arm's length with you and not received on a tax-deferred transfer (Reg. 1104(4) and (4.01)). A used server bought from an unrelated reseller can qualify. A server that a founder, parent or sister company already claimed CCA on, then moved into the company, generally does not get the top-up and falls under the half-year rule.

How do a short first year, or a round that ends the tax year early, cut the claim?

In a tax year under 12 months, CCA, including the full first-year amount, is limited to days in the year over 365 (Reg. 1100(3); T2 guide). A company incorporated July 1 with a December 31 year-end can claim at most 184/365 of the cost of servers live that year; the rest stays in the class at 55% a year. A round that changes CCPC status or control can also end the tax year early: see Losing CCPC status to foreign investors.

Do we have to claim CCA in a loss year?

No. CCA is optional, and unclaimed balances stay in the class with no expiry (Folio S3-F4-C1, ¶1.15). But the top-up applies only in the tax year the property becomes available for use (Reg. 1100(2)). Skip it, and the servers fall back to 55% declining balance.

Claiming in a loss year turns the cost into a non-capital loss, which can be carried back 3 tax years or forward 20 tax years (ITA 111(1)(a)). The trade-off: claiming locks in the full deduction but puts it in a loss pool that a later control change restricts; skipping keeps a class balance that survives a control change up to the servers' value. See Business losses.

Can CCA create a loss if we rent the servers out?

Usually not. Property used principally to earn rent or leasing revenue is leasing property. It goes in its own class, and its CCA cannot exceed the net income from leasing property, so it cannot create or add to a loss (Reg. 1100(15) and (17); Reg. 1101(5c)). The limit does not apply to a corporation whose principal business throughout the year is leasing, with at least 90% of gross revenue from it (Reg. 1100(16)). A first-year top-up lost to the cap does not come back.

Whether GPU revenue is rent depends on the contract. A whole server reserved to one customer for a term looks like a lease; compute sold by the hour on servers you run looks like a service (see Reg. 1100(17.2) and (17.3)). No CRA source rules on GPU compute.

Specified leasing property is stricter: property used mainly to earn rent, leased for a term of more than one year when signed to an arm's-length customer, where the leased tangible property that is not exempt was worth over $25,000 when the lease was signed, limits CCA to the principal part of a notional loan, and CCA in the year acquired can be nil (Reg. 1100(1.1) to (1.12)). Class 50 computer equipment is exempt unless one item costs over $1,000,000 (Reg. 1100(1.13)(a)(i.1)). Switches are not on the exempt list. A rack-scale system bought as one item above that amount and leased out needs checking.

What happens to our CCA when a US fund takes control?

On an acquisition of control, any class balance above the class's fair market value, after the CCA claimed for that year, is deducted in the tax year that ends just before closing (ITA 111(5.1)). GPU servers lose value fast, so the write-down can be large. It joins the pre-closing loss, which is usable afterwards only while the same business is carried on for profit or with a reasonable expectation of profit, and only against income from it or a similar business (ITA 111(5)). Whether your round is an acquisition of control is covered in Losing CCPC status to foreign investors; a flip is in Moving a Canadian startup under a Delaware parent.

Servers bought in the 12 months before closing, for a business not already carried on before that window, are treated as bought just after closing, so no CCA can be claimed on them in the tax year that ends at closing (ITA 13(24)); the write-down test still counts them (ITA 111(5.1)). How that meets the first-year top-up is unsettled, so a round within 12 months of a purchase needs review.

What if a Delaware parent buys the servers instead?

A US owner gets bonus depreciation, but not for servers used mainly outside the US. Compare:

See Writing off GPU servers in the US and GPU servers hosted in Canada.

Example

All figures in Canadian dollars and illustrative.

A seed-funded GPU cloud's first cluster

A Toronto GPU cloud, a CCPC formed the year before with a December 31 year-end, closes a seed round. In November 2026 it buys eight eight-GPU servers at $500,000 each ($4,000,000, Class 50), $400,000 of switches and optical transceivers (Class 46) and a $200,000 coolant distribution unit (Class 8). All are new, from unrelated sellers, and live in a Toronto colocation data centre by December 15. Loss before CCA: $1,000,000.

• Maximum CCA: $4,000,000 + $400,000 + $60,000 (20% x 1.5 on the unit) = $4,460,000. Claiming it all makes a $5,460,000 non-capital loss.
• If two servers ($1,000,000) go live only in January 2027, Class 50 CCA for 2026 is $3,000,000. Those two get at most $550,000 (55%, no half-year cut) in 2027. Under the proposed Mega Deduction, if enacted as announced, those two would get $1,000,000 in 2027, and the coolant unit, bought after September 15, 2026, its full $200,000 in 2026.
• Skipping CCA keeps $4,600,000 in the classes but gives up the top-up: later years run at 55%, 30% and 20% declining balance.

Renting four servers to one lab

The same company buys four more servers ($2,000,000), live December 1, and rents all four bare-metal to one research lab on a two-year lease at $70,000 a month. Most revenue is hourly compute, so leasing is well under 90% of gross revenue. December net rent after power and colocation costs is $50,000. CCA on the leased servers' separate class is capped at $50,000, not $2,000,000. The other $1,950,000 stays in that class at 55% a year, still capped by net rent. The lease covers the servers only, and each costs under $1,000,000, so the specified leasing rules don't apply. Dedicated switches leased with them, or one rack-scale system over $1,000,000, could be different.

A Series A that changes control

Suppose instead the company claimed no CCA on the eight servers in 2026 or 2027, so Class 50 holds $4,000,000. A US fund buys 60% of the voting shares in a Series A closing July 1, 2028, an acquisition of control, so the tax year ends just before closing. The servers are worth $1,500,000. The short-year maximum is roughly $1.1 million (55% of $4,000,000, prorated by days). A forced deduction of roughly $1.4 million brings the class down to $1,500,000. The exact split turns on the day count, but the total is $2,500,000. That $2,500,000 joins the pre-closing loss, usable later only against the same or a similar business. The $1,500,000 class balance carries on unrestricted. Had the company claimed the full $4,000,000 in 2026, all of it would sit in the restricted loss pool.

Different for you?

• IRAP or other government funding paid for the servers, or they are used for SR&ED: see IRAP and other government funding.
• A US round is coming: see Losing CCPC status to foreign investors, or get data centre tax help.
• The round is a flip under a Delaware parent: see Moving a Canadian startup under a Delaware parent.
• You are using or carrying back a loss: see Business losses.
• You rent servers to customers on fixed terms: the leasing limits need a contract review. Get data centre tax help.
• A US company owns the servers: see Writing off GPU servers in the US and GPU servers hosted in Canada.
• You are claiming GST/HST paid on the servers: see Filing GST/HST and input tax credits.
• Investors read your financial statements: book depreciation differs from CCA; see Year-end financial statements. Rates and the small business deduction are in How corporations are taxed.