Updated Checked by the Tax-Services.ca editorial team How we check
Capital cost allowance (CCA) is how you deduct the cost of a business asset over several years instead of all at once. You group assets into CRA classes, claim a fixed percentage of what’s left each year, and you can claim less than the maximum, even nothing.
How does capital cost allowance work?
You can’t write off a $10,000 machine in the year you buy it. The CRA makes you spread the cost, and CCA is the tool. Each asset belongs to a class with a set rate, and you apply that rate to the class’s undepreciated capital cost (UCC), which is the balance not yet written off.
The method is declining balance. You claim a percentage of the remaining UCC every year, not of the original price, so the deduction shrinks over time. Land never qualifies. It doesn’t wear out, so the CRA doesn’t let you depreciate it.
In the first year a half-year rule usually applies. The CRA says that for Class 8 and Class 10 you can only claim CCA on 50% of your net additions that year. For the terms themselves, the CRA’s page on how to calculate the CCA deduction defines capital cost, UCC and “available for use”.
Which class does your asset go in?
| Class | Rate | What goes in it, per the CRA |
|---|---|---|
| 1 | 4% | Most buildings, including electrical and mechanical parts |
| 6 | 10% | Some buildings of frame, log, stucco on frame or metal |
| 8 | 20% | Furniture, appliances, tools of $500 or more, machinery, other equipment |
| 10 | 30% | Motor vehicles and some passenger vehicles |
| 10.1 | 30% | Passenger vehicles over the cost limit ($38,000 plus tax for 2025 purchases) |
| 12 | 100% | Tools under $500, uniforms, software that isn’t systems software |
| 16 | 40% | Taxis, daily rental cars, heavy freight trucks |
| 50 | 55% | General-purpose computer equipment acquired after March 18, 2007 |
The CRA class page gives the passenger vehicle cost limit only for 2025 purchases. If you’re buying a vehicle this year, look up the limit for your purchase date before you work out the claim.
What does a claim look like over several years?
Say you buy a $10,000 piece of Class 8 equipment and the half-year rule applies. The rate is 20%. In year one you claim 20% of half the cost, which is $1,000. After that it’s 20% of whatever UCC is left.
| Year | UCC at start | Claim | UCC at end |
|---|---|---|---|
| 1 | $10,000.00 | $1,000.00 | $9,000.00 |
| 2 | $9,000.00 | $1,800.00 | $7,200.00 |
| 3 | $7,200.00 | $1,440.00 | $5,760.00 |
| 4 | $5,760.00 | $1,152.00 | $4,608.00 |
| 5 | $4,608.00 | $921.60 | $3,686.40 |
Notice that after five years more than a third of the cost is still waiting to be claimed. That’s the nature of declining balance. It never quite reaches zero by itself.
What is a claim worth? Take an Ontario business owner with $80,000 of income. The marginal tax rate calculator shows 29.6% on other ordinary income at that level, so the $1,000 claim saves roughly $296 of income tax in year one. Not nothing, but it’s a few hundred bucks, not a refund of the purchase.
Has the Accelerated Investment Incentive changed this?
Yes, and it’s worth checking before you buy. The CRA’s accelerated investment incentive page (last updated July 2025) describes property acquired after November 20, 2018 and available for use before 2028. It suspends the half-year rule, and for 2024 to 2027 it gives a first-year deduction of two times the normal one. On this asset that would be $2,000 rather than $1,000.
Parliament has since moved the goalposts. The Budget 2025 Implementation Act, No. 1, which was assented to on March 26, 2026, includes reinstating the accelerated investment incentive and immediate expensing for certain qualifying assets. The Parliamentary Budget Officer describes the measure as applying to eligible property acquired on or after January 1, 2025 and available for use before 2030, then phased out over four years starting in 2030. The multiple that applies to your purchase depends on the class, your acquisition date and the date the asset is ready for use, so read the CRA’s current page before you rely on the $2,000 figure above.
Do you have to claim the maximum?
No, and this catches people out. The CRA says you can claim any amount from zero up to the maximum in a given year. If your income is low this year, claiming less keeps UCC higher for a year when the deduction would save more tax. The rate you pay is what decides it, so the income tax calculator is a quick way to compare two years.
Self-employed people report CCA on Form T2125, and the CRA’s guide T4002 covers it. A corporation claims it on its own return, and the corporate tax calculator shows the tax that follows. If you’re self-employed, see the self-employed tax calculator.
What happens when you sell the asset?
Sell it for more than the UCC of the class and the UCC goes negative. That negative amount is recapture, and it’s added to your income. Sell the $10,000 machine for $7,000 after year three and UCC of $5,760 turns into minus $1,240. So you report $1,240 of recapture.
Now the reverse. If you no longer own anything in the class and UCC is still positive, the CRA calls it a terminal loss. The rules on who can deduct it differ, and employees can’t. Read the CRA page for your situation first.
Selling can also trigger a capital gain when the price beats what you paid. The capital gains tax calculator handles that side.
Mistakes and limits
Rental owners have their own rule: CCA can’t create a rental loss. Our rental income tax calculator applies CCA only as a 4% claim on a building cost you enter, capped so it can’t create a loss, and a rental loss lowers the tax there. A rental buyer also has to split the price between land and building, because only the building is depreciable.
Property has to be available for use before you can claim. Buying a machine in December that sits in a box until March doesn’t start the clock.
Keep a simple schedule for each class, with opening UCC, additions, sales, the claim and closing UCC. Update it every year at tax time and the next claim takes ten minutes.
And we don’t have a CCA calculator yet. The arithmetic above is simple enough for a spreadsheet, and a corporate accountant will do the same sums with more classes.
Where the numbers come from
The class rates, the half-year rule, the recapture rules and the Accelerated Investment Incentive come from Canada Revenue Agency pages read in 2026. The reinstatement details come from the federal statute and the Parliamentary Budget Officer. The tax rate comes from the calculator on this site. This is an independent guide, not government advice.
Frequently asked questions
What is capital cost allowance?
It's the CRA's way of letting you deduct the cost of depreciable property over several years, using set rates by asset class.
Can I claim less than the maximum CCA?
Yes. The CRA says you can claim any amount from zero up to the maximum allowed in a year.
What is the half-year rule?
For Class 8 and Class 10, you can claim CCA on only 50% of your net additions in the first year.
Can I claim CCA on land?
No. Land isn't depreciable property.
What is recapture?
It's income you report when your UCC goes negative after you sell assets for more than the balance.
- Canadian tax credits and government benefits explained
The difference between tax credits and benefits in Canada, how they're worked out from your return, and the calculators for the ones people claim most