Rental – classes of depreciable property
On this page, you will find information on the following:
The following explains the most common classes of depreciable rental property and the rates that apply to each class. Also included are the classes and rates for motor vehicle expenses.
- Class 1 (4%)
- Class 3 (5%)
- Class 6 (10%)
- Class 8 (20%) (also see Note)
- Class 10 (30%)
- Class 10.1 (30%)
- Class 13
- Class 14
- Class 14.1 (5%)
- Class 16 (40%)
- Class 31 (5%)
- Class 32 (10%)
- Class 43.1 (30%)
- Class 43.2 (50%)
- Class 45 (45%)
- Class 50 (55%)
- Class 53 (50%)
- Class 54 (30%)
- Class 55 (40%)
- Class 56 (30%)
Most land is not depreciable property. Therefore, when you acquire rental property, only include the cost of the building.
A rental building may belong to Class 1, 3, 6, 31, or 32, depending on what the building is made of and the date you acquire it.
A condominium unit in a building belongs to the same class as the building. For example, if you own a condominium in a Class 3 building, the unit in the building is Class 3 rental property. If the whole building qualifies as a Class 31 or Class 32 rental property (a multiple-unit residential building), then each unit within the building is a Class 31 or Class 32 rental property. For more information, go to Interpretation Bulletin IT-304, Condominiums.
Leasehold interest in real property that is a rental property
A leasehold interest is the interest of a tenant in any leased tangible property.
If you are a taxpayer or partnership and own a leasehold interest in a real property that is a rental property, include the leasehold interest in Class 1, 3, 6, or 13 (or Class 3, 6, or 13 for tax years before 1988).
It may be necessary in some situations to divide the capital cost of a leasehold interest into more than one prescribed class. For example, where you expend an amount to obtain a leasehold interest in land and construct a building that falls into Class 3, the capital cost of acquiring the lease will be included in Class 13 and the capital cost of the building will be included in Class 3.
When all the property in the class is disposed of, the undepreciated capital cost UCC is fully deductible as a terminal loss.
The capital cost of a leasehold interest of Class 13 property includes an amount that a tenant spends:
- on improvements or alterations to a leased property that is capital in nature, other than improvements or alterations that are included as part of the building or structure
- to obtain or extend a lease or sublease of the property and pays it to the landlord
The maximum CCA rate depends on the type of leasehold interest and the terms of the lease.
Certain amounts are not included in the capital cost of a leasehold interest. These include:
- an amount paid by a tenant to cancel a lease
- an amount paid by a tenant instead of rent or as a prepayment of rent
For more information on leasehold interests, go to Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance.
- they are located in Canada
- they contain two or more units
- they provide their occupants with a relatively permanent residence
If the entire MURB qualifies under Class 31 or 32 rental property, then each unit within the building falls under the same class.
To be included in Class 31 with a CCA rate of 5%, the building must have been acquired after 1979 and before June 18, 1987. To be included in Class 32 with a CCA rate of 10%, the building must have been acquired before 1980.
For 1994 and following years, you can no longer create or increase a rental loss by claiming CCA on a Class 31 or Class 32 property.
When a MURB no longer qualifies as a Class 31 or Class 32 rental property, you have to transfer it to the correct class.
For more information about the 1994 change in the CCA limit on MURBs, see Interpretation Bulletin IT-195, Rental Property - Capital Cost Allowance Restrictions.
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