# Capital cost allowance: deducting equipment, vehicles and buildings

> How CCA spreads the cost of business assets over several years: classes and rates, the first-year rules, selling, recapture and terminal losses.

- Web page: https://taxnotes.ca/guides/capital-cost-allowance/
- For: Self-employed · Topic: Self-employment
- Last reviewed: 2026-10-11

When you buy something for your business that will last for years, such as a computer, furniture, a vehicle or a building, you can't deduct the whole cost in the year you buy it. Instead, you deduct part of the cost each year as capital cost allowance (CCA), worked out on Form T2125, Statement of Business or Professional Activities.

## Capital or current?

Ordinary running costs, like supplies or a routine repair, are current expenses that you deduct in full in the year (see [what you can deduct](https://taxnotes.ca/guides/what-can-i-deduct/)). A purchase is usually capital if it gives a lasting benefit, improves something beyond its original condition, or is a separate asset rather than a replacement part.

An asset's capital cost is generally what you paid for it, plus related fees such as legal or installation costs, plus later improvements you didn't deduct as current expenses, less any government grant or rebate you got for it. Land isn't depreciable, and neither are living things such as trees or animals.

## How the yearly claim works

You group your assets into classes, each with its own rate. For most classes, the rate applies to the balance left in the class, called the undepreciated capital cost (UCC), and each claim lowers that balance. If a 20% class starts the year at $4,000 and nothing is added or sold, the most you can claim is $800, leaving $3,200 for next year.

A few rules shape the claim:

- **It's optional.** You can claim any amount from zero to the maximum. In a year when you won't owe tax, you might claim less and keep a larger balance for later years.
- **The asset has to be available for use.** For property other than a building, that's usually the earliest of when you first use it to earn income, when it's delivered and able to produce what you sell, and the second tax year after the year you bought it. Buildings have their own available-for-use rules.
- **Short first year.** If your first fiscal period (business year) is shorter than 365 days, reduce the claim in proportion to the number of days.
- **Fill in the chart anyway.** Even in a year you claim nothing, show your additions and sales on the form.

## Common classes and rates

The CRA's Classes of depreciable property page lists these and others:

- **Class 1 (4%):** most buildings acquired after 1987, including parts such as wiring and plumbing.
- **Class 8 (20%):** furniture, appliances, machinery, tools costing $500 or more, and other equipment that isn't in another class.
- **Class 10 (30%):** motor vehicles and some passenger vehicles. Pricier passenger vehicles go in **Class 10.1 (30%)**, each listed separately with a capped cost; see [vehicle expenses](https://taxnotes.ca/guides/vehicle-expenses/).
- **Class 12 (100%):** tools, kitchen utensils and medical or dental instruments costing less than $500, which you can mostly write off in the year you buy them, and software other than systems software (subject to the half-year rule below).
- **Class 50 (55%):** computer hardware and its systems software. Under proposed changes described on the CRA's classes page, new Class 50 property acquired after April 15, 2024, that becomes available for use before 2027 would be eligible for an enhanced first-year deduction of 100%.
- **Class 54 (30%):** zero-emission vehicles that would otherwise be in Class 10 or 10.1, with their own first-year rules.

## The first year

**The half-year rule.** In the year you buy an asset, you can usually claim CCA on only half of your net additions to the class (what you added, less what you sold). Some property is exempt, including most Class 12 small tools.

**The accelerated investment incentive.** Property acquired after November 20, 2018, that becomes available for use before 2028 can qualify for a larger first-year claim, and the half-year rule is effectively suspended for it. For property that would normally be subject to the half-year rule:

- available for use before 2024: up to three times the normal first-year claim
- available for use from 2024 to 2027 (the phase-out): two times the normal first-year claim, which works out to the full class rate on the full cost

For example, a $10,000 Class 8 asset bought and put to use in 2024 would normally allow $1,000 in the first year (20% of half the cost); under the incentive, it's $2,000. You get the boost only in the first tax year the property is available for use, and it doesn't change the total you can deduct over the asset's life. It generally doesn't apply to property you or someone you don't deal with at arm's length owned before, or that was transferred to you on a tax-deferred (rollover) basis.

**Proposed changes.** The CRA's 2025 business income guide (T4002) describes proposed changes that would limit the incentive to property acquired before 2025. Property acquired after 2024 that becomes available for use before 2034 would generally be "reaccelerated investment incentive property" instead, which would also get an enhanced first-year allowance with no half-year rule. Follow the guide for the year you're filing.

**Immediate expensing has ended.** The temporary full write-off applied only to property that became available for use before 2025 for individuals and partnerships made up only of individuals, and before 2024 for others.

## Selling or getting rid of an asset

When you sell, subtract from the class the lower of what you got for the asset (less selling costs) and what it originally cost. Then:

- **Recapture.** If that leaves the class balance below zero, the negative amount is recaptured CCA, and you add it to your income. Sometimes you can postpone it, for example when you replace the asset with a similar one.
- **Terminal loss.** If a balance is left but no property remains in the class at the end of your fiscal period, you can usually deduct the balance as a terminal loss.
- **Capital gain.** If you sell for more than the asset cost, the excess is a capital gain, reported separately. You can't have a capital loss on depreciable property, though you may have a terminal loss.

Class 10.1 vehicles work differently: recapture and terminal loss don't apply to them unless the vehicle was designated for immediate expensing (see [vehicle expenses](https://taxnotes.ca/guides/vehicle-expenses/)).

## Assets you also use personally

Claim only the business share. If 60% of your driving is for business, for example, you'd claim 60% of the CCA on the vehicle. When you sell a mixed-use asset, work out the business part of any recapture or terminal loss.

If you start using something you already owned personally in the business, you're treated as having disposed of it at that time. If it's worth less than you paid, its capital cost for CCA is generally its fair market value; if it's worth more, you may have a capital gain unless you file an election. The CRA's Personal use of property page shows how to work out the cost.

You can also claim CCA on the business part of a home you own, but the CRA warns that it can have a negative effect on your principal residence exemption. See [business use of your home](https://taxnotes.ca/guides/business-use-of-home/) before you decide.

## What to do

- Sort each purchase into current or capital, and keep the invoice (see [keeping records](https://taxnotes.ca/guides/keeping-records/)).
- Show each asset you buy or sell in the right class on Form T2125, even in a year you don't claim CCA, and note when it became available for use.
- Decide each year how much CCA to claim, and before you sell an asset, check for recapture or a terminal loss.
- Estimate the effect on your tax with the [income tax calculator](https://taxnotes.ca/calculators/income-tax/).

## Sources

1. [Claiming capital cost allowance (CCA)](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/claiming-capital-cost-allowance.html) (canada.ca)
2. [Basic information about capital cost allowance](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/claiming-capital-cost-allowance/basic-information-about-capital-cost-allowance.html) (canada.ca)
3. [How to calculate the deduction for capital cost allowance (CCA)](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/claiming-capital-cost-allowance/calculate-deduction-capital-cost-allowance.html) (canada.ca)
4. [Current or capital expenses](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/business-expenses/current-capital-expenses.html) (canada.ca)
5. [Classes of depreciable property](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/claiming-capital-cost-allowance/classes-depreciable-property.html) (canada.ca)
6. [Accelerated investment incentive](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/claiming-capital-cost-allowance/accelerated-investment-incentive.html) (canada.ca)
7. [Personal use of property](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/claiming-capital-cost-allowance/personal-use-property.html) (canada.ca)
8. [Capital gains (claiming capital cost allowance)](https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/report-business-income-expenses/claiming-capital-cost-allowance/capital-gains.html) (canada.ca)
9. [Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income: Chapter 4 – Capital cost allowance](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4002/t4002-6.html) (canada.ca)
10. [Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income: Find out if this guide is for you (definitions)](https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4002/t4002-2.html) (canada.ca)

Tax figures in this guide come from the TaxNotes.ca rates tables (https://taxnotes.ca/rates/), which cite the Canada Revenue Agency and, for Quebec, Revenu Québec.

Last reviewed: October 11, 2026

How to cite: "Capital cost allowance: deducting equipment, vehicles and buildings", TaxNotes.ca, last reviewed 2026-10-11, https://taxnotes.ca/guides/capital-cost-allowance/. For a figure or rule, also cite the official source listed above.

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