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Capital cost allowance, or CCA, is how the CRA lets you deduct the cost of equipment, vehicles and buildings over several years instead of all at once. Most classes use a declining balance: a class 8 asset, such as office furniture, is written off at 20% of what’s left each year.
How does capital cost allowance work?
You buy something that lasts, say an $8,000 piece of equipment for a small business. You can’t deduct $8,000 this year the way you would a box of printer paper. The CRA sorts the asset into a class, and each class has a rate.
Each year you apply the rate to the undepreciated capital cost, the UCC, which is what’s left after earlier claims. The amount shrinks as the balance shrinks. The CRA’s wording is that you can claim any amount you like, from zero to the maximum. Skipping a year when your income is low can make sense, since the unclaimed balance stays in the class and you can use it later when a deduction is worth more to you, though we can’t tell you the right year without your numbers.
Which CCA classes and rates come up most?
The CRA publishes the full list. These are the ones small businesses and landlords meet most often.
| Class | Rate | What the CRA puts in it |
|---|---|---|
| 1 | 4% | Most buildings bought after 1987 (extra allowances for some uses) |
| 8 | 20% | Business property not in another class |
| 10 | 30% | Motor vehicles, systems software, some older computer hardware |
| 10.1 | 30% | A passenger vehicle not in class 10 |
| 12 | 100% | Tools and instruments costing less than $500 |
| 14.1 | 5% | Goodwill, franchises |
| 50 | 55% | Computer hardware acquired after March 18, 2007 |
| 54 | 30% | Zero-emission passenger vehicles, with a capital cost limit |
Land isn’t depreciable. The CRA also says you can’t claim CCA on most land or on living things such as trees or animals.
What does a CCA schedule look like on $8,000?
Take that $8,000 in class 8 at 20%. In the first year the half-year rule normally lets you claim CCA on only half the net addition, so the claim is $800 and the UCC falls to $7,200.
Year two gives $1,440 (20% of $7,200) and leaves $5,760. Year three gives $1,152 and leaves $4,608, and year four gives $921.60. Nothing ever reaches zero, which is exactly why it’s called declining balance.
What does that deduction do to a tax bill? Try a landlord in Ontario with $80,000 of other income and $16,000 of net rent. Our rental income tax calculator shows $4,744 of extra tax. Deduct that $1,440 and the net rent drops to $14,560 and the extra tax to $4,317. That’s $427 saved. The rental tax calculator also has a building cost box that applies the 4% class 1 rate, and for other classes you enter the claim as an expense as we did here.
Is the half-year rule still the rule?
Not always, and this is where old articles go wrong. The Accelerated Investment Incentive suspends the half-year rule for eligible property. It applies to property acquired after November 20, 2018 and available for use before 2028, and it’s being phased out. For property available for use in 2024 to 2027, the CRA describes a first-year deduction of two times the normal one where the half-year rule would have applied. On our $8,000 that would mean $1,600 in year one instead of $800, then smaller claims later. The total over the asset’s life doesn’t change. It just arrives sooner.
There’s also news from September 2026. The Department of Finance proposed a Productivity Mega Deduction, immediate expensing for most depreciable property acquired after September 15, 2026. It’s a proposal, not law, as far as we could find. Buildings in classes 1 and 3, goodwill and franchises, and certain vehicles are listed as excluded. Until it passes, plan on the rules above and watch the CRA’s class pages.
What goes wrong with CCA claims?
Recapture catches people out. If you sell an asset for more than its remaining UCC after claiming CCA, the CRA adds the difference back to income. If you sell for less and the class is empty, you may claim a terminal loss.
Other common slips:
- Putting a car in the wrong class, since passenger vehicles have special limits.
- Claiming CCA on the land part of a property.
- Forgetting that a short fiscal year prorates the claim.
For a corporation the same rules feed into taxable income, and you can see what that does in the corporate tax calculator. Sole proprietors can carry the deduction into the self-employed tax calculator, but remember it lowers income tax and not CPP there. To see your overall tax before and after a claim, use the income tax calculator.
Where do the classes and rates come from?
The CRA’s pages on basic information about capital cost allowance, CCA classes and the Accelerated Investment Incentive, plus the Department of Finance release of September 2026. The tax example comes from our calculator’s 2026 Ontario and federal rates. We have no link with the CRA or any government body.
Frequently asked questions
What is CCA in tax?
Capital cost allowance is the deduction the CRA allows for depreciable property used to earn business or rental income. You claim it over several years using a rate for the asset's class.
Do I have to claim the maximum CCA each year?
No. The CRA says you can claim any amount from zero to the maximum. Unclaimed balance stays in the class.
What is the half-year rule?
In the year you acquire property you can usually claim CCA on only half of your net additions to the class. The Accelerated Investment Incentive suspends it for eligible property.
Can I claim CCA on land?
No. The CRA says you can't claim CCA on most land.
What is recapture?
If you sell an asset for more than its remaining undepreciated cost after claiming CCA, the extra is added to your income.
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Information only. This page is general information, not tax, legal or accounting advice. Tax-Services.ca is an independent publisher: we don't prepare or file tax returns or offer tax services, and we have no connection with the CRA, Revenu Québec, any government or any company named on this page. Check the figures that matter with an official source or a qualified professional.