Capital Cost Allowance

Capital Cost Allowance (CCA) is effectively the means by which Canadian businesses may claim depreciation expense. Depreciable items are deemed to belong to different classes which depreciate at different rates and are subject to different rules. For the most common classes the value of all assets belonging to that class are accumulated in a pool, and the designated percentage for that class may be claimed on the balance in that class at the end of the taxation year. To prevent a flurry of tax motivated purchases in the dying days of a taxation year only half of value of net additions to the class are considered in the year for purposes of the current year's calculation.

Some examples of asset classes are,

Class	Rate	Description
Class 1	4%	Buildings acquired after 1987
Class 3	5%	Building acquired before 1987
Class 8	20%	Assets not included in other classes
Class 10	30%	Cars costing less than 30 000
Class 12	100% (no half year rule)	Small equipment and tools costing less than $500
Class 13	Original lease period plus one renewal period (Minimum 5 years and Maximum 40 years)	Improvements made to leased premises
Class 14	Length of life of property (no half year rule)	Franchises, Concessions, Patents, and Licences
Class 17	8%	Parking lots
Class 43	30%	Machinery and equipment used for production
Class 44		Patents acquired after April 26, 1993
Class 45	45%	Computer equipment and systems software acquired after March 22, 2004 and before March 19, 2007
Class 46	30%	Database and network equipment acquired after March 22, 2004
Class 50	55%	Computer equipment and systems software acquired after March 18, 2007
Class 52	100% (no half year rule)	Computer equipment and systems software acquired after January 27, 2009 and before February 2011. Only applies to new equipment used in Canada.

In contrast to the practice followed in the United States for depreciation there is no penalty for failing to claim Capital Cost Allowance. Where a taxpayer claims less than the amount of CCA to which he is entitled the pool remains intact, and available for claims in future years. Unclaimed amounts are not subject to recapture.

External links

CCA Classes - a list of commonly used assets in a business