Definitions

capital cost

Capital Cost Allowance

Capital Cost Allowance (CCA) is effectively the means by which Canadians may claim depreciation expense. Depreciable items are deemed to belong to different classes which depreciate at different rates and are subject to different rules. For the most common classes the value of all assets belonging to that class are accumulated in a pool, and the designated percentage for that class may be claimed on the balance in that class at the end of the taxation year. To prevent a flurry of tax motivated purchases in the dying days of a taxation year only half of net additions to the class are considered purchased in the year for purposes of the current year's calculation.

Some examples of asset classes are,

Class Rate Description
Class 1 4% Buildings acquired after 1987
Class 3 5% Building acquired before 1987
Class 8 20% Assets not included in other classes
Class 10 30% Cars costing less than 30 000
Class 12 100% Small equipment and tools costing less than $500
Class 13 No Specific Rate Improvements made to leased premises
Class 14 No Specific Rate Franchises, Concessions, Patents, and Licences
Class 17 8% Parking lots
Class 43 30% Machinery and equipment used for production
Class 44 Patents acquired after April 26, 1993
Class 45 45% Computer equipment and systems software acquired after March 22, 2004
Class 46 30% Database and network equipment acquired after March 22, 2004
In contrast to the practice followed in the United States for depreciation there is no penalty for failing to claim Capital Cost Allowance. Where a taxpayer claims less than the amount of CCA to which he is entitled the pool remains intact, and available for claims in future years. Unclaimed amounts are not subject to recapture.

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