Capital cost allowance (CCA)

Note: Line 22900 was line 229 before tax year 2019.

You cannot deduct the cost of a property, such as a vehicle or musical instrument that you use to earn your income. However, you can deduct a percentage of the property's cost. The part of the cost you can deduct or claim is called depreciation or, for income tax purposes, capital cost allowance (CCA).

Definitions

You may need to know the meaning of certain terms before you can determine your claim for CCA.

Accelerated investment incentive property (AIIP) is a property (other than property included in class 54 or 55) that meets the following conditions:

  • you acquired it after November 20, 2018 and becomes available for use before 2028;
  • the property has never been used for any purpose before being acquired and no other person or partnership has claimed capital cost allowance (or a terminal loss) for the property.

Note

Draft legislation was released on July 30, 2019, that proposes to remove the requirement, effective November 20, 2018, that the property has never been used for any purpose before being acquired, but continues to require that no person or partnership, including the taxpayer, can have claimed capital cost allowance (or a terminal loss) in a taxation year ending prior to the acquisition.

Accelerated Investment Incentive will provide an enhanced first-year allowance for certain eligible property that is subject to the Capital Cost Allowance (CCA) rules. In general, the incentive will be made up of two elements:

  • applying the prescribed CCA rate for a class to up to one-and-a-half times the net addition to the class for the year;
  • suspending the existing CCA half-year rule (and equivalent rules for Canadian vessels and class 13 property).

Available for use – generally, the earlier of:

  • the time the property is first used by the claimant to earn income
  • the time the property is delivered or is made available to the claimant and is capable of producing a saleable product or service.

Capital cost is the amount on which you first claim CCA. Generally, the capital cost of the property is what you pay for it. Capital cost also includes items such as delivery charges, the GST and provincial sales tax (PST), or the HST.

Depreciable property is any property on which you can claim CCA. Depreciable properties are usually grouped into classes. Your CCA claim is based on the class of your property.

Fair market value is usually the highest dollar value you can get for your property in an open and unrestricted market, between a willing buyer and a willing seller who are acting independently of each other.

Proceeds of disposition is usually the amount you received or will receive for your property. In most cases, it refers to the sale price of the property. When you trade-in a property to buy a new one, your proceeds of disposition is the amount you receive for the trade-in.

Undepreciated capital cost (UCC) is the balance of the capital cost left for further depreciation at any given time. The amount of CCA you claim each year will lower the UCC of the property.

To determine if you are eligible to claim CCA, read Can you claim CCA.

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