What is a 'Capital Cost Allowance - CCA'

A capital cost allowance (CCA) is a yearly deduction or depreciation that can be claimed for income tax purposes on the cost of certain assets. The term capital cost allowance relates (CCA) mainly to taxation in Canada. CCA can be claimed on the assets of a business that are expected to last for several years, such as buildings, plant and equipment, or machinery, as well as on additions and improvements to such assets. CCA is generally calculated based on the declining balance method.

BREAKING DOWN 'Capital Cost Allowance - CCA'

The Canada Revenue Agency sets down the rates at which CCA can be claimed for various classes of assets. The CCA rate for assets that are subject to rapid obsolescence such as computers, software and motor vehicles is much higher than the CCA rate for longer-life assets like buildings. Note that a business does not have to claim the maximum allowable amount of CCA in a given year, but can claim any amount from zero to the maximum.

RELATED TERMS
  1. Capital Consumption Allowance - ...

    The amount of money a country has to spend each year to maintain ...
  2. Comparable Company Analysis - CCA

    A process used to evaluate the value of a company using the metrics ...
  3. Business Asset

    A piece of property or equipment purchased exclusively or primarily ...
  4. Replacement Cost

    The cost to replace the assets of a company or a property of ...
  5. Long-Term Assets

    1. The value of a company's property, equipment and other capital ...
  6. Depreciation

    1. A method of allocating the cost of a tangible asset over its ...
Related Articles
  1. Insights

    Walmart Stock: Analyzing 5 Key Suppliers (WMT)

    Find out which suppliers generate large portions of their revenues from Wal-Mart Stores, Inc. and why their relationships are so unique.
  2. Investing

    What is Comparable Company Analysis?

    Investors that use comparable company analysis to evaluate companies compare the metrics of similar businesses operating in the same industry.
  3. Investing

    Understanding Capital Assets

    A capital asset is one that a company plans on owning for more than one year, and uses in the production of revenue.
  4. Investing

    Canada: A New Frontier For Real Estate Investors

    This property market is easy to access and provides profitable opportunities.
  5. Investing

    Explaining Capitalized Cost

    A capitalized cost is an expense associated with a fixed asset that is added to the basis of that asset and expensed over its depreciable life.
  6. Investing

    Explaining the Declining Balance Method

    The declining balance method is a system for calculating an asset’s rate of depreciation against its non-depreciated balance.
  7. Managing Wealth

    What's an Asset?

    An asset is a resource with economic value.
  8. Financial Advisor

    How Does Depreciation Reduce My Tax Bill?

    How the depreciation tax rule can assist real estate investors.
  9. Small Business

    Writing Off the Expenses of Starting Your Own Business

    Learn how to navigate the complicated rules for writing off the expenses of starting your own business. It could save you a lot of money.
  10. Taxes

    Filling Out Form 4562: Investopedia Explains

    Step-by-step, how to fill out the depreciation and amortization form for your business tax return.
RELATED FAQS
  1. What are some examples of the main types of capital expenditures (CAPEX)?

    Learn about different expenses with acquiring assets that are considered capital expenditures and should be depreciated over ... Read Answer >>
  2. Why do companies often treat events such as the purchase of an asset or construction ...

    Understand the capitalized costs of fixed assets and learn how they are reflected on a company's balance sheet and income ... Read Answer >>
  3. What are typical forms of capital assets within a manufacturing company?

    Learn the typical forms of capital assets for a manufacturing company, such as land, buildings, equipment, goodwill and trademarks. Read Answer >>
  4. Are capital assets normally immediately expensed or are they amortized/depreciated ...

    Understand the distinction between capital assets and business expenses, and learn whether capital assets are usually expensed ... Read Answer >>
  5. What is an adjusted cost basis and how is it calculated?

    Learn what adjusted cost basis is, how it is calculated, and why this metric is important for investors, business owners ... Read Answer >>
Hot Definitions
  1. Federal Direct Loan Program

    A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct ...
  2. Cash Flow

    The net amount of cash and cash-equivalents moving into and out of a business. Positive cash flow indicates that a company's ...
  3. PLUS Loan

    A low-cost student loan offered to parents of students currently enrolled in post-secondary education. With a PLUS Loan, ...
  4. Graduate Record Examination - GRE

    A standardized exam used to measure one's aptitude for abstract thinking in the areas of analytical writing, mathematics ...
  5. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  6. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
Trading Center