Small Businesses Air Quality Improvement Tax Credit

Tax Updates

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The federal government has announced a new tax credit to assist small businesses in improving their indoor air quality and ventilation. The Small Businesses Air Quality Improvement Tax Credit provides small businesses with a 25 per cent refundable tax credit on eligible air quality improvement expenses incurred from September 1, 2021 to December 31, 2022.

Small businesses can claim eligible air quality improvement expenses of up to $10,000 per location and $50,000 in total, providing a maximum credit of $2,500 per location and $12,500 in total.

Eligibility

Eligible businesses include unincorporated sole proprietors and Canadian-controlled private corporations (CCPCs) with taxable capital employed in Canada of less than $15 million in the preceding taxation year of when the qualifying air quality expenses are incurred.

Qualifying corporations or individuals that are members of a partnership could claim eligible expenses in proportion to their interest in the partnership.

Eligible locations include properties used by an eligible business primarily for ordinary commercial activities in Canada, including rental activities.

Eligible air quality improvement expenditures include:

  • The purchase, installation, upgrade, or conversion of heating, ventilation, and air conditioning (HVAC) systems; and
  • Devices using high efficiency particulate air (HEPA) filters, which are designed to increase outdoor air intake and improve air filtration.

Expenditures related to an HVAC system are only eligible if:

  • The system is designed to filter air at a rate above the minimum efficiency reporting value (MERV) of 8; or
  • The system is designed to filter air at a rate equal to MERV 8 and to achieve an outdoor air supply rate above what is required for the space by relevant building codes.

W&P is Here to Help

Our team at Williams & Partners is available to provide further information and assistance to businesses and individuals with concerns regarding this tax credit. If you have any questions or concerns, please do not hesitate to contact our office.

Yours very truly,
Williams & Partners