What Is Capital Cost Allowance (CCA)?
Capital Cost Allowance (CCA) is an annual deduction in the Canadian income tax code that can be claimed on depreciable assets. Claimed as a percentage of the asset's cost for a number of years, the CCA is typically allowed for purchases that are expected to last for several years, such as buildings, plant and equipment, or machinery, as well as additions and improvements to such assets. The deduction is not allowed for spending on non-durable items such as business supplies.
Businesses can claim from zero to the maximum amount of CCA in any given year, and carry over any amount less than the maximum to claim for the next year.
Capital Cost Allowance (CCA) Deductions
The Canada Revenue Agency sets out at least 19 classes of annual rates at which CCA can be claimed, varying by the type of asset. Real estate has some of the lowest rates, ranging from 4% to 10%, depending on when it was acquired and the construction materials. As assets that rapidly depreciate, computers, systems software and motor vehicles have high CCA rates, of between 30% and 50%. A few categories of tools, work uniforms, and computer software are claimable at 100%—that is, the full value may be claimed in the first eligible year for CCA.
A business needn't claim the maximum allowable amount of CCA in any given year, but may instead claim any amount from zero to the maximum. Any amount less than the maximum will be carried over to the next year and will be available to claim.