Capital cost allowance (CCA) explained, with the common CCA classes

Capital cost allowance (CCA) is how Canadian tax law lets you deduct the cost of things that last more than a year, such as equipment, vehicles, computers and buildings. Instead of deducting the full price in the year you buy, you deduct a set percentage of the remaining balance each year. The percentage depends on the asset's class: 55% for computers (class 50), 30% for most vehicles (class 10), 20% for most other equipment (class 8), and 100% for small tools under $500 (class 12). In the year you buy, the normal claim is usually halved by the half-year rule, though the reinstated Accelerated Investment Incentive suspends that for property acquired since 2025.

The CRA explains the rules in chapter 4 of its business income guide. Sole proprietors claim CCA on line 9936 of Form T2125. Corporations claim it on Schedule 8 of the T2.

The classes small businesses use most

From the CRA's list of classes:

Class	Rate	What goes in it
1	4%	Most buildings bought after 1987, and their parts such as wiring, plumbing and heating
8	20%	Furniture, appliances, machinery, tools of $500 or more, outdoor signs, refrigeration equipment, and property not in another class
10	30%	Motor vehicles, and some passenger vehicles
10.1	30%	Passenger vehicles costing more than the yearly limit: $39,000 before tax for those bought in 2026
12	100%	Tools, medical or dental instruments and kitchen utensils under $500; software that isn't systems software
14.1	5%	Goodwill and other intangible property, such as when you buy a business
16	40%	Taxis, daily rental vehicles, and freight trucks rated above 11,788 kg
43	30%	Machinery and equipment used mainly to manufacture or process goods for sale or lease
46	30%	Data network infrastructure equipment and its systems software
50	55%	Computers and systems software
54	30%	Zero-emission passenger vehicles, with a $61,000 before-tax limit

The vehicle limits for 2026 come from Finance Canada's January 2026 announcement. If you buy a $55,000 SUV for the business in 2026, CCA is worked out on $39,000 plus the sales tax on $39,000, not on $55,000. Claiming vehicle expenses covers the rest of the vehicle rules.

How the calculation works

Each class has a running balance called the undepreciated capital cost (UCC). Every year:

1. Start with last year's closing UCC.
2. Add what you bought in the class this year, and subtract what you sold (up to what it cost).
3. Apply the half-year rule to this year's net additions, if it applies (see below).
4. Multiply by the class rate. That's the most CCA you can claim this year.
5. Subtract the CCA you actually claim. What's left is next year's starting UCC.

Because each year's claim is a percentage of a shrinking balance, the balance never quite reaches zero while you still own the asset.

A few rules from the CRA's guide that matter:

• You claim per class, not per item. Two laptops and a printer bought in different years all sit in one class 50 balance.
• CCA is optional. The CRA says you can claim "any amount you like, from zero to the maximum allowed for the year." A business with a loss, or very low income, sometimes claims less to keep the balance for later years.
• The asset has to be available for use. Generally, that's when you first use it to earn income. Equipment ordered in December that arrives in February is a next-year addition.
• Only the business share. If you use a vehicle 70% for business, you claim 70% of the CCA.
• GST/HST you claim back doesn't go in. If you claim an input tax credit, the capital cost is the price before tax.

When you sell an asset, the proceeds come off the class. If that leaves a negative balance, or if you sell the last asset in a class, there can be an adjustment to income. Your accountant handles those.

The half-year rule

In the year you add something to a class, you can usually claim CCA on only half of the net addition. The rule exists so that something bought on December 30 doesn't get a full year's deduction.

The CRA's guide lists property that the half-year rule doesn't apply to, including property under the Accelerated Investment Incentive (AIIP) and its reinstated version (RIIP), zero-emission vehicles, and a few specific classes.

The Accelerated Investment Incentive in 2026

The status as of October 2026:

• The original incentive. For property acquired after November 20, 2018, the Accelerated Investment Incentive suspended the half-year rule and allowed up to one and a half times the normal rate on net additions. The CRA says that gave most property a first-year claim of three times the normal amount. It began phasing out for property available for use after 2023.
• The reinstatement. Budget 2025 brought it back. The CRA's page for small businesses says the reaccelerated investment incentive (RII) applies to qualifying property acquired on or after January 1, 2025, that becomes available for use before 2034, with a four-year phase-out for property that becomes available for use after 2029. The enabling law, Bill C-15, received Royal Assent on March 26, 2026, according to Finance Canada. Some CRA pages still describe it as proposed.
• A newer proposal. On September 15, 2026, the government proposed a "Productivity Mega Deduction": immediate expensing of a broad range of property acquired on or after September 15, 2026. As of this writing it's a proposal, not law. Property that doesn't qualify would still get the enhanced first-year deduction.

What it means in practice: most equipment a small business bought in 2025 or 2026 gets a larger first-year claim than the normal half-year calculation below. How much larger depends on the class, and your accountant or tax software applies the right factor. If you bought something large after September 15, 2026, ask your accountant whether the new proposal could affect it.

A worked example, using the normal rules

A cabinet maker in Saskatchewan buys two things in 2026, with no other assets in either class:

• A table saw for $3,000 (class 8, 20%)
• A laptop for $2,400 (class 50, 55%)

Here's the claim under the normal half-year rule, before any enhanced first-year deduction:

Year 1 (2026)

• Table saw: $3,000 × 50% × 20% = $300. Closing UCC: $3,000 − $300 = $2,700.
• Laptop: $2,400 × 50% × 55% = $660. Closing UCC: $2,400 − $660 = $1,740.
• Total CCA: $960

Year 2 (2027)

• Table saw: $2,700 × 20% = $540. Closing UCC: $2,160.
• Laptop: $1,740 × 55% = $957. Closing UCC: $783.
• Total CCA: $1,497

Year 3 (2028)

• Table saw: $2,160 × 20% = $432. Closing UCC: $1,728.
• Laptop: $783 × 55% = $430.65. Closing UCC: $352.35.

If these purchases qualify for the reinstated incentive, the year 1 claim is higher than $960 and the later years are correspondingly lower. The total deducted over the life of the assets is the same. The incentive changes the timing, not the total.

Compare a set of chisels for $450. That's a tool under $500, so it goes in class 12 at 100%.

Repairs or capital?

The question that comes up most in bookkeeping: is this an expense or an asset? The usual test is whether the spending restores something to how it was (a repair, deducted now) or makes it better than it was or lasts years (capital, through CCA). Replacing a broken truck window is a repair. Putting a new engine in a truck to extend its life may be capital. Ask your accountant about anything large, and keep the invoice either way.

Where Spark Books helps

In Spark Books, a large purchase on your uploaded statement can be recorded as an asset rather than an expense, with its receipt attached and the GST/HST split out. That gives your accountant a clean list of the year's additions in the year-end package. Spark doesn't calculate CCA, pick classes or apply the incentive. Your accountant does that when preparing the return. It's free, with no card.