Capital Cost Allowance is effectively the means by which Canadian

Canada

Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...

 businesses may claim depreciation

Depreciation

Depreciation refers to two very different but related concepts:# the decrease in value of assets , and# the allocation of the cost of assets to periods in which the assets are used ....

 expense

Expense

In common usage, an expense or expenditure is an outflow of money to another person or group to pay for an item or service, or for a category of costs. For a tenant, rent is an expense. For students or parents, tuition is an expense. Buying food, clothing, furniture or an automobile is often...

. 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 tax

Tax

To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...

ation year. To prevent a flurry of tax motivated purchases in the dying days of a taxation year only half of value of net additions to the class are considered 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% (no half year rule)	Small equipment and tools costing less than $500
Class 13	Original lease period plus one renewal period (Minimum 5 years and Maximum 40 years)	Improvements made to leased premises
Class 14	Length of life of property (no half year rule)	Franchises Franchising Franchising is the practice of using another firm's successful business model. The word 'franchise' is of anglo-French derivation - from franc- meaning free, and is used both as a noun and as a verb.... , Concessions, Patent Patent A patent is a form of intellectual property. It consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time in exchange for the public disclosure of an invention.... s, 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 and before March 19, 2007
Class 46	30%	Database and network equipment acquired after March 22, 2004
Class 50	55%	Computer equipment and systems software acquired after March 18, 2007
Class 52	100% (no half year rule)	Computer equipment and systems software acquired after January 27, 2009 and before February 2011. Only applies to new equipment used in Canada.

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.

External links

• Income Tax Regulations, Schedule II - CCA Classes (detailed)
• Income Tax Regulations, Part XI - Capital Cost Allowance rates
• CCA Classes - a list of commonly used assets in a business