Insights
Nov 21, 2025
Mackisen
Claiming Capital Cost Allowance (CCA) — Montreal CPA Firm Near You: How to Deduct Depreciable Property, Apply CCA Classes, Handle Dispositions, and Stay CRA-Compliant
Capital Cost Allowance (CCA) allows business owners, professionals, contractors, and self-employed individuals to deduct the cost of depreciable property over several years. Because assets like buildings, machinery, vehicles, equipment, furniture, and technology decline in value with use, CRA does not allow you to deduct the full cost in the year you purchase them. Instead, you deduct a portion each year according to CCA rules.
CCA is one of the most powerful deductions for reducing business income on Form T2125. But it is also one of the most technical—every asset falls into a specific CCA class, each class has its own rules, and certain special incentives (like accelerated depreciation) apply. Miscalculating CCA can cause CRA reassessments, recapture income, or lost deductions.
This guide explains what CCA is, how to calculate it, when to apply it, how to treat property used personally and for business, and how to handle dispositions, capital gains, and replacement property rules.
Legal and Regulatory Framework
Under the Income Tax Act, depreciable property used in business or professional activities must be deducted over time. Depreciable property includes:
Buildings
Vehicles (motor vehicles, automobiles, passenger vehicles)
Furniture and fixtures
Equipment and machinery
Computers and digital hardware
Tools
Leasehold improvements
Each type of property belongs to a CCA class, which determines the annual deduction rate. CCA must be calculated using a prescribed method (primarily the declining-balance method) and cannot exceed the limits set by CRA.
You cannot deduct the full cost upfront, and CCA cannot create or increase a business loss unless specific exceptions apply. Some property is also subject to additional restrictions (e.g., passenger vehicles with cost limits, zero-emission incentives).
Key Court Decisions
Courts have upheld several principles regarding CCA:
CCA is a discretionary deduction — taxpayers may claim all, part, or none of the allowable CCA in any given year.
CRA may deny CCA if the taxpayer cannot prove the asset exists or is used for business.
Records must clearly show the cost, purchase date, and business use of each asset.
If an asset is sold, stolen, destroyed, or converted to personal use, the taxpayer must recognize recapture or terminal loss.
“Personal use” assets cannot generate CCA unless actually used to earn business income.
CRA has also won cases involving inflated asset values, artificially accelerated depreciation, and non-arm’s-length transactions where purchase price did not reflect fair market value.
Why CRA Targets CCA
CCA is heavily reviewed because:
Assets often have mixed personal/business use
Vehicles frequently trigger errors
Property values may be inflated or misclassified
Businesses may claim assets that are not used for income
Accelerated incentives may be applied incorrectly
Disposal rules (recapture, terminal loss) are often misunderstood
CCA reduces taxable income significantly
CRA checks:
Purchase invoices
Asset listings
Business-use percentages
Disposition records
GST/QST documentation
CCA class selection
Opening/closing balances
Accurate CCA reporting helps avoid reassessments.
Mackisen Strategy
Mackisen supports businesses and self-employed individuals by:
Classifying assets into correct CCA classes
Preparing detailed CCA schedules
Calculating declining-balance and accelerated amounts
Determining business versus personal use
Applying special incentives (e.g., zero-emission vehicles)
Handling replacement property rules
Tracking recapture and terminal loss
Managing GST/QST implications
Ensuring assets from non-arm’s-length transactions are reported correctly
We integrate CCA with your financial statements, tax planning, and long-term strategy.
Real Client Experience
A client purchased a luxury vehicle and claimed full CCA incorrectly. Mackisen recalculated CCA using prescribed limits and prevented CRA penalties.
A contractor replaced equipment after a flood and qualified for replacement property rules. We deferred recapture and minimized tax.
A professional used home furniture as part of a home office. We separated personal vs. business use, applied the correct CCA class, and avoided a CRA review.
A business owner sold a rental building with accumulated CCA. We calculated recapture, capital gains, and applied rollover rules where permitted.
CCA Overview: How It Works
CCA deducts the cost of depreciable property over time using CRA-defined classes. Key principles include:
Declining-Balance Method
Most CCA classes use a percentage applied to the undepreciated capital cost (UCC) remaining at the start of the year.
Half-Year Rule
In the year you acquire most assets, you can only claim half of the normal CCA.
Accelerated Investment Incentive
Accelerated CCA allows up to 3× the normal CCA in the first year for eligible property acquired after November 20, 2018. Restrictions apply.
Fiscal Period Less Than 365 Days
If your fiscal period is short, CCA is prorated accordingly.
CCA is claimed annually at your discretion—you may claim less to preserve UCC for future years if your income is low.
CCA Classes: Common Property Types
Some of the most common CCA classes include:
Class 10 / 10.1 — passenger vehicles
Class 16 — trucks and vans
Class 8 — furniture, equipment, and appliances
Class 1 — buildings
Class 13 — leasehold improvements
Class 50 — computer hardware
Class 43.1 / 43.2 — clean energy equipment
Class 54 / 55 — zero-emission vehicles
Class 17 — paved surfaces
The CCA rate for each class varies. For example:
Class 10 — 30%
Class 1 — 4%
Class 50 — 55%
Class 54 (ZEV) — 100% write-off (accelerated) in year 1
Choosing the right class is essential for compliance.
Personal Use of Property
If you use property for both personal and business purposes:
You must calculate the business-use percentage
CCA can only be claimed on the business portion
If personal use increases significantly, CCA may stop or recapture may apply
Converting personal property to business use requires reporting the lower of:
Fair market value, or
Original cost
This avoids artificial inflation of deductions.
Grants, Subsidies, and Rebates
If you receive a grant, subsidy, or rebate that subsidizes the cost of an asset:
You must reduce the capital cost of the property by the amount received
CCA should be calculated using the adjusted cost base
This applies to:
Clean-energy incentives
Zero-emission rebates
Government equipment subsidies
These rules prevent double-dipping.
Non-Arm’s-Length Transactions
If you buy property from:
A family member
A corporation you control
A related partnership
Special rules apply:
Capital cost may be limited to the seller’s UCC
Fair market value restrictions may apply
Gains may be triggered for the seller
Mackisen ensures proper classification and valuation.
Dispositions, Recapture, and Capital Gains
When you dispose of depreciable property (sell, trade in, scrap, lose, or convert to personal use):
Recapture
If disposal proceeds exceed remaining UCC, the difference is recapture, taxable as income.
Terminal Loss
If UCC remains after disposing of all assets in a class, you may deduct a terminal loss.
Capital Gains
If disposal proceeds exceed the original cost, the excess is a capital gain, separate from recapture.
Buildings
Buildings have special rules for:
Disposition
Replacement
Capital improvements
Disaster-related subsidies
Replacement Property Rules
If property is lost, stolen, destroyed, or disposed of and replaced within specific timelines:
You may be able to defer capital gains and recapture
Replacement must be similar in nature and use
Conditions vary by property type
This preserves tax deferral under certain business interruptions or disasters.
How to Calculate CCA
The standard formula is:
CCA = (UCC × CCA rate) × (Half-year rule, if applicable)
Steps:
Determine the correct CCA class
Start with opening UCC
Add new acquisitions
Subtract dispositions
Apply the half-year rule
Apply the CCA rate
Deduct allowable CCA
CCA is reported on:
Form T2125 (Part 6)
T2 Schedule 8 (corporations)
T3 Trust Return for estate-owned assets
Common Questions
Can I write off the full cost of an asset in the year purchased?
No. CCA spreads the deduction over several years unless you qualify for accelerated incentives.
Do I have to claim CCA every year?
No. You may claim all, part, or none.
Can I claim CCA on a home office?
Yes, but doing so may jeopardize your principal residence exemption.
Can vehicles be depreciated?
Yes, but passenger vehicles have strict limits.
Do grants affect CCA?
Yes, they reduce the capital cost.
Why Mackisen
With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you're claiming CCA on vehicles, equipment, buildings, or professional assets, our expert team ensures precision, transparency, and protection from audit risk.
If you purchase capital property, Mackisen can classify assets correctly, calculate CCA, apply incentives, and minimize tax exposure.
