Capital Cost Allowance (CCA): Deducting Business Assets
When your corporation buys equipment, furniture, or vehicles, you can't deduct the full cost in the year of purchase. Instead, you claim , which is the tax version of depreciation. CCA lets you write off the cost of business assets over several years, based on prescribed rates for different classes of property. The CRA CCA classes guide is the authoritative rate source.
Understanding CCA classes, rates, and special rules like the Accelerated Investment Incentive Property (AIIP) can save your corporation significant tax.
How CCA Works
Each depreciable asset your corporation owns belongs to a CCA class. Each class has a maximum rate at which you can deduct the cost of assets in that class. CCA is calculated on a declining balance basis for most classes, meaning you apply the rate to the remaining undepreciated cost each year.
The basic formula:
Annual CCA Claim
Undepreciated Capital Cost (UCC) x CCA Rate
= Maximum CCA deduction for the year
CCA is optional. You can claim any amount from zero up to the maximum. In loss years, you might choose to claim less CCA to preserve the UCC for future years when you have more income to offset.
Common CCA Classes
Here are the classes most relevant to small Canadian corporations, sorted by how fast you can write them off:
| CCA Class | Rate | Assets Included |
|---|---|---|
| Class 1 | 4% | Buildings acquired after 1987 |
| Class 8 | 20% | Office furniture, equipment, phones, printers, tools (costing $500+) |
| Class 10 | 30% | Motor vehicles (under $37,000 cost limit for passenger vehicles in 2025), trailers |
| Class 10.1 | 30% | Passenger vehicles exceeding the prescribed cost limit ($37,000 in 2025) |
| Class 12 | 100% | Small tools, utensils, kitchen equipment (under $500 each), software (if not Class 50) |
| Class 50 | 55% | Computer hardware, systems software, acquired after March 18, 2007 |
| Class 54 | 30% | Zero-emission passenger vehicles (cost limit $61,000 in 2025) |
| Class 55 | 40% | Zero-emission vehicles other than passenger vehicles |
The Half-Year Rule
For most CCA classes, the (also called the 50% rule) applies in the year you acquire the asset. You can only claim CCA on half the net addition to the class in the first year.
Example: Your corporation buys a $3,000 desk (Class 8, 20% rate) on March 15.
| Year | UCC Start | Half-Year Adjustment | CCA Claim | UCC End |
|---|---|---|---|---|
| Year 1 | $3,000 | 50% applied: CCA on $1,500 | $1,500 x 20% = $300 | $2,700 |
| Year 2 | $2,700 | No adjustment | $2,700 x 20% = $540 | $2,160 |
| Year 3 | $2,160 | No adjustment | $2,160 x 20% = $432 | $1,728 |
The half-year rule exists to prevent corporations from buying assets at year-end and claiming a full year's CCA for a few days of ownership.
Accelerated Investment Incentive Property (AIIP)
The rules replaced the half-year rule for eligible assets acquired after November 20, 2018 and before 2028. Under AIIP, instead of applying the half-year rule, you get an enhanced first-year deduction.
For most CCA classes, AIIP provides a first-year CCA rate of three times the normal rate (up to 100% of the cost). The calculation works by applying the CCA rate to 1.5 times the net addition in the first year.
AIIP First-Year CCA (Class 8 example)
$3,000 x 1.5 x 20% = $900
= First-year CCA: $900 (vs. $300 under half-year rule)
This is a significant improvement over the old half-year rule. For a $3,000 desk, your first-year deduction triples from $300 to $900.
AIIP eligibility requirements:
- The property must be acquired after November 20, 2018
- It must not have been used (or acquired for use) before acquisition
- It must be available for use in the year
- The property must be acquired for use in Canada
| Rule | First-Year Treatment | Year 2+ |
|---|---|---|
| Half-year rule (pre-AIIP) | CCA rate applied to 50% of cost | Normal declining balance |
| AIIP (2018-2027) | CCA rate applied to 150% of cost | Normal declining balance on remaining UCC |
Disposition of Assets
When you sell or dispose of an asset, you reduce the UCC of its class by the lower of: the proceeds of disposition, or the original capital cost.
Two important outcomes:
Recapture: If the UCC of a class goes below zero after a disposition, the negative amount is "recaptured" and added to your corporation's income. This represents CCA you claimed in prior years that exceeded the actual depreciation.
Terminal Loss: If you dispose of the last asset in a class and the UCC is still positive, you can deduct that remaining UCC as a terminal loss. This is a full deduction in the year of disposition.
CCA on Vehicles: Special Rules
Passenger vehicles have extra restrictions:
| Rule | 2025 Limit |
|---|---|
| Maximum cost for CCA (Class 10) | $37,000 (plus applicable sales tax) |
| Maximum cost for zero-emission vehicles (Class 54) | $61,000 (plus applicable sales tax) |
| Maximum monthly lease deduction | $1,050 |
| Maximum annual interest deduction on car loans | $300/month |
If your corporation buys a vehicle costing more than $37,000, the excess goes into Class 10.1. You still claim CCA at 30%, but only on the capped amount.
Practical Example
Your corporation buys three assets in 2025:
- MacBook Pro: $3,500 (Class 50, 55% rate, AIIP eligible)
- Office desk and chair: $2,000 (Class 8, 20% rate, AIIP eligible)
- Used vehicle: $25,000 (Class 10, 30% rate, AIIP eligible if not previously used by related party)
| Asset | Class | Cost | First-Year CCA (AIIP) |
|---|---|---|---|
| MacBook Pro | 50 | $3,500 | $3,500 x 1.5 x 55% = $2,887.50 |
| Desk and chair | 8 | $2,000 | $2,000 x 1.5 x 20% = $600.00 |
| Vehicle | 10 | $25,000 | $25,000 x 1.5 x 30% = $11,250.00 |
| Total | $30,500 | $14,737.50 |
That's $14,737.50 in deductions in the first year alone, reducing your corporate taxable income and saving roughly $1,621 in federal/provincial small business tax (at 11%).
How ledg Helps
ledg tracks your corporation's asset purchases and automatically assigns them to the correct CCA class. At year-end, you'll see your UCC balances and maximum CCA claim for each class, ready for your T2 return.
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