What is Capital Cost Allowance?
Capital Cost Allowance (CCA) is the tax depreciation you can claim on business assets in Canada. Instead of deducting the full cost in the year of purchase, you spread the deduction over several years using the declining balance method.
CCA Classes and Rates
| Class | Description | Rate | Examples |
|---|---|---|---|
| Class 1 | Buildings | 4% | Most buildings acquired after 1987 |
| Class 8 | Furniture & Equipment | 20% | Office furniture, appliances, tools $500+ |
| Class 10 | Vehicles | 30% | Motor vehicles under threshold, trailers |
| Class 10.1 | Luxury Vehicles | 30% | Passenger vehicles over $38,000 |
| Class 12 | Small Tools & Software | 100% | Tools under $500, computer software |
| Class 14.1 | Intangibles | 5% | Goodwill, trademarks, customer lists |
| Class 50 | Computer Equipment | 55% | Computers, systems software, data processing |
| Class 54 | Zero-Emission Vehicles | 30% | Electric vehicles, hydrogen fuel cell |
Common Small Business Assets
| Asset | Class | Rate |
|---|---|---|
| Laptop/Desktop computer | Class 50 | 55% |
| Software (MS Office, etc.) | Class 12 | 100% |
| Office desk and chair | Class 8 | 20% |
| Company car (under $38K) | Class 10 | 30% |
| Company car (over $38K) | Class 10.1 | 30% |
| Electric vehicle | Class 54 | 30% |
| Building | Class 1 | 4% |
| Goodwill | Class 14.1 | 5% |
| Tools under $500 | Class 12 | 100% |
| Tools $500+ | Class 8 | 20% |
Vehicle Cost Limits (2024-2025)
How the Declining Balance Method Works
CCA is calculated on the undepreciated capital cost (UCC) - the remaining balance after previous deductions. Each year, you claim a percentage of the remaining balance, not the original cost.
Example: Class 8 Office Furniture ($10,000)
| Year | UCC Start | CCA (20%) | UCC End |
|---|---|---|---|
| 1 | $10,000 | $2,000 | $8,000 |
| 2 | $8,000 | $1,600 | $6,400 |
| 3 | $6,400 | $1,280 | $5,120 |
| 4 | $5,120 | $1,024 | $4,096 |
| 5 | $4,096 | $819 | $3,277 |
Accelerated Investment Incentive
The half-year rule is suspended for property acquired before 2028. This means you can claim full CCA in the year you acquire an asset, not just half.
Enhanced Deduction (2024-2030)
For property acquired after 2024 and before 2030, you can claim 150% of the normal CCA in the first year. This significantly accelerates your tax deductions.
Tips for Small Businesses
Have Questions About CCA?
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CCA rules are complex and change frequently. This is general guidance only. Consult a tax professional for your specific situation.
Sources
- CRA Classes of Depreciable Property
- CRA Schedule 8 - Capital Cost Allowance
- CRA Guide T4002 - Business and Professional Income