CCA Classes a Canadian Small Business Actually Uses

Capital cost allowance is not one deduction, it is about twenty of them, and the class you assign an asset to decides how fast you get your money back. A $3,000 laptop in Class 50 and a $3,000 desk in Class 8 are the same cheque, but they produce very different deductions in year one.

The 60-second version

Class picks the rate. Class 8 is 20%, Class 10 is 30%, Class 50 is 55%, Class 12 is 100%, Class 1 buildings are 4%.[1]
$500 is the line for tools. Under $500 goes to Class 12 and is written off in full. $500 or more goes to Class 8 at 20% a year.[1]
The half-year rule normally lets you claim CCA on only half a new addition in its first year - but the accelerated investment incentive suspends it for most property acquired after 20 November 2018.[2]
The incentive is being phased down. For property available for use in 2024 through 2027, the enhanced first-year allowance is two times the normal deduction, not three.[2]
CCA is permissive. You may claim any amount from zero up to the maximum, and unclaimed capital cost stays in the pool for a later year.[3]

Why the class matters more than the amount

Most write-ups of capital cost allowance publish the entire schedule of classes and leave you to it. That table is not the useful part. The useful part is that two purchases of identical size can differ by a factor of ten in what they return to you this year, purely because of where they land.

Take $10,000 of spending in a year, and assume the accelerated investment incentive applies at its current phase-out level.

$10,000 of computer hardware in Class 50 (55%) - $5,500 deductible in year one.
$10,000 of office furniture in Class 8 (20%) - $2,000 deductible in year one.
$10,000 spent finishing a commercial building, Class 1 (4%) - $400 deductible in year one.
$10,000 of hand tools at $300 each, Class 12 (100%) - the entire $10,000 deductible in year one, with no half-year rule on most small tools.[1]

Same money out the door. A $5,100 spread in the deduction. Nothing about the class assignment is optional - the Income Tax Regulations decide it based on what the asset is - but knowing the rates before you buy changes what you buy and when.

The classes a small business actually touches

Schedule II of the Income Tax Regulations runs to more than fifty classes. Most Canadian small businesses will never use more than seven of them.

Class 8 - 20%. The catch-all. Furniture, appliances, machinery, fixtures, outdoor signs, refrigeration equipment, photocopiers, and any tool costing $500 or more. If an asset does not obviously belong somewhere else, this is where it goes.[1]

Class 10 - 30%. Motor vehicles and passenger vehicles that do not meet the Class 10.1 conditions. Also older computer equipment acquired before 23 March 2004.[1]

Class 10.1 - 30%. A passenger vehicle that cost more than the prescribed ceiling. For a vehicle bought in 2025 that ceiling is $38,000 before tax. Each Class 10.1 vehicle sits in its own separate class.[1]

Class 12 - 100%. Tools, medical and dental instruments and kitchen utensils costing less than $500. Also china, cutlery, linen, uniforms, and application software that is not systems software. Most small tools in Class 12 escape the half-year rule entirely and are fully deductible in the year of purchase - but application software in Class 12 is subject to it.[1]

Class 14.1 - 5%. Goodwill, and intangibles with no fixed life such as an unlimited-term franchise or licence. This class absorbed the old eligible capital property regime on 1 January 2017. Property that was in that regime before 2017 depreciates at 7% rather than 5% for tax years ending before 2027.[1]

Class 50 - 55%. General-purpose computer hardware and its systems software acquired after 18 March 2007. This is the fastest ordinary class most businesses will use, and it is frequently misfiled into Class 8 at 20%.[1]

Class 1 - 4%. Buildings acquired after 1987. An eligible non-residential building can be elected into a separate class to pick up an additional 2% allowance, for 6% total, or an additional 6% for a 10% total if at least 90% of it is used in Canada to manufacture or process goods for sale or lease. The election is made by attaching a letter to the return for the year of acquisition; skip it and you are stuck at 4%.[1]

Land is never depreciable property. When you buy a building, only the building portion goes into a CCA class.[1]

The $500 line, and the $1,000 election

Two dollar thresholds do more day-to-day work in a small business than any rate does.

The first is $500 for tools. A tool costing less than $500 goes to Class 12 and is deducted in full. A tool costing $500 or more goes to Class 8 and takes roughly a decade to fully deduct at 20% declining balance.[1] A $480 tool and a $520 tool are not remotely the same purchase in tax terms.

The second is $1,000, and almost nobody uses it. Where photocopiers, fax machines, electronic telephone equipment or similar Class 8 equipment costs $1,000 or more, you may elect to place it in a separate Class 8. The rate does not change. What changes is that when you dispose of everything in that separate class, the remaining undepreciated capital cost becomes an immediately deductible terminal loss instead of quietly sitting in the general pool being depreciated at 20% forever. Any balance left in the separate class at the end of the fifth year transfers back to the general class.[1]

That is the right election for equipment you expect to replace on a cycle and scrap rather than sell.

The half-year rule and what replaced it

The default rule is that a new addition to a class is only half-recognised in its first year. Buy $10,000 of Class 8 furniture and the base for the first-year calculation is $5,000, not $10,000, giving $1,000 of CCA rather than $2,000.

The accelerated investment incentive changed this for property acquired after 20 November 2018 and available for use before 2028. It does two things at once: it suspends the half-year rule, and it applies the class rate to up to one-and-a-half times the net addition for the year.[2]

CRA's own example is the clearest illustration. A Class 10 property costing $300 acquired in 2021:[2]

Under the normal rules: the half-year rule cuts the base to $150, and 30% of $150 is $45 of CCA.
Under the incentive: the addition is adjusted upward by 50% to $450, no half-year reduction applies, and 30% of $450 is $135 of CCA.

Three times the first-year deduction. Note what the incentive is not: it is not extra money. Total deductions over the life of the asset are unchanged - the year-one UCC in the example drops to $165 instead of $255, so every later year's claim is smaller. It is a timing benefit, and for a business that needs cash now, timing is the whole point.

The phase-out, and the part most guides have not caught up with

The incentive is winding down. For eligible property that becomes available for use during the 2024 to 2027 phase-out period, the enhanced first-year allowance drops from three times to two times the normal first-year deduction for property that would otherwise face the half-year rule. The half-year rule remains effectively suspended throughout.[2] For property not normally subject to the half-year rule, the enhancement falls from one-and-a-half to one-and-a-quarter times.

There is a further layer that a lot of published guidance has not absorbed. CRA's class guidance describes proposed changes under which new additions of Class 44, Class 46 and Class 50 property are eligible for an enhanced first-year deduction of 100% where the property is acquired after 15 April 2024 and becomes available for use before 2027.[1] For a business buying computer hardware, that is the difference between 55% and the entire cost in year one.

The same guidance describes a reinstated enhanced first-year deduction for zero-emission vehicles in Classes 54 and 55 acquired after 2024, and a new enhanced first-year CCA for Class 53 manufacturing and processing equipment acquired on or after 1 January 2025 and before 2026.[1]

These are described by CRA as proposed. Confirm the enacting legislation has passed before you rely on any of them for a filed return - but know they exist, because the difference in a year-one deduction is large enough to change when you buy.

Recapture, terminal loss, and the pool nobody watches

CCA classes are pools, not individual assets. You add the cost of additions, subtract the lesser of proceeds and original cost on dispositions, and claim CCA on the balance.

Two things happen at the edges. If the pool goes negative because you sold an asset for more than its remaining depreciated value, the negative amount is recaptured into income in that year. If you dispose of the last asset in a class and a positive balance remains, that balance is a terminal loss, fully deductible.[3]

The trap is a pool with a stale balance and no assets in it. Sell the last piece of Class 8 equipment and forget to trigger the terminal loss, and you leave a deduction sitting there being claimed at 20% a year instead of taken in full.

Class 10.1 is the standing exception: because each vehicle sits alone in its own class, there is neither recapture nor terminal loss on disposal. That is covered in detail in our piece on vehicle expenses and the CRA mileage log.

CCA is optional, and that is a planning tool

Capital cost allowance is a permissive deduction. You may claim any amount from nil up to the calculated maximum for the year, and nothing is lost by claiming less - the undepreciated capital cost simply stays in the pool for future years.[3]

This matters in two situations. In a loss year, claiming CCA deepens a loss you may not be able to use, while claiming nothing preserves the full pool for a profitable year. And for an unincorporated business, claiming CCA that drops income below the level where personal credits are already absorbing tax buys you nothing while permanently reducing a future deduction.

Claiming the maximum every year by reflex is the most common CCA mistake that costs real money, and it is invisible on the return.

What to keep

For every depreciable asset, keep the purchase invoice showing the date acquired, the cost before and after sales tax, and enough description to defend the class. Keep the date the asset became available for use, which is what starts the clock and determines which incentive rules apply - not the date you paid.[2] On disposal, keep the proceeds and the date. Keep the continuity schedule for each class showing opening UCC, additions, dispositions, CCA claimed and closing UCC.

The continuity schedule is the record CRA asks for, and it is the one small businesses most often cannot produce, because it lives in the accountant's working papers rather than the business's own books.

Frequently asked questions

What CCA class is a computer in Canada?

General-purpose computer hardware and its systems software acquired after 18 March 2007 belongs in Class 50, with a 55% declining-balance rate. Application software that is not systems software is Class 12 at 100%, subject to the half-year rule. Under proposed changes, new Class 50 additions acquired after 15 April 2024 and available for use before 2027 are eligible for a 100% enhanced first-year deduction.

What is the difference between Class 8 and Class 12 for tools?

Cost. A tool costing less than $500, acquired on or after 2 May 2006, goes to Class 12 and is deducted at 100%, and most small tools in Class 12 are not subject to the half-year rule. A tool costing $500 or more goes to Class 8 at 20% declining balance.

Does the half-year rule still apply?

For most eligible property acquired after 20 November 2018 and available for use before 2028, the accelerated investment incentive suspends it. The rule still applies to property that does not qualify for the incentive, including certain non-arm's-length acquisitions and property that was previously owned by the taxpayer or a related person.

Do I have to claim the maximum CCA every year?

No. CCA is permissive - you may claim any amount between nil and the maximum. Anything you do not claim stays in the undepreciated capital cost of the class and remains available in later years. Claiming nil in a loss year is often the better choice.

Is land depreciable?

No. Land is not depreciable property and never goes into a CCA class. When you buy real property you must split the purchase price between land and building, and only the building portion is added to Class 1, 3 or 6 depending on its construction and acquisition date.

What happens when I sell an asset for more than its depreciated value?

You subtract the lesser of the proceeds and the original capital cost from the class pool. If that drives the pool below zero, the negative balance is recaptured into income for the year. The exception is Class 10.1 passenger vehicles, which are exempt from both recapture and terminal loss.

Sources cited in this article

CRA - Classes of depreciable property
The class-by-class rates and definitions quoted throughout, including the $500 tool threshold, the $1,000 separate-class election, the Class 1 additional allowances, and the proposed 100% first-year deduction for Classes 44, 46 and 50.
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
CRA - Accelerated investment incentive
The two elements of the incentive, the 2024 to 2027 phase-out to two times the normal first-year deduction, and the worked Class 10 example reproduced above.
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
CRA - Basic information about capital cost allowance
That CCA is a permissive deduction, and the mechanics of undepreciated capital cost, recapture and terminal loss.
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
CRA - Calculate your capital cost allowance claim
The continuity schedule and the order of calculation for additions, dispositions and the first-year adjustment.
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
Income Tax Regulations, C.R.C., c. 945 - Schedule II
The consolidated text of Schedule II, which is the legal source of every class definition. Part XI of the Regulations sets the rates.
https://laws-lois.justice.gc.ca/eng/regulations/c.r.c.,_c._945/page-19.html
Income Tax Act - section 20
Paragraph 20(1)(a), the provision that authorises capital cost allowance at all, and subsection 20(16), which creates the terminal loss.
https://laws-lois.justice.gc.ca/eng/acts/i-3.3/section-20.html
CRA - Income Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance
CRA's detailed interpretive position, including the available-for-use rules and the separate class elections.
https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-3-property-investments-savings-plans/series-3-property-investments-savings-plans-folio-4-capital-cost-allowance/income-tax-folio-s3-f4-c1-general-discussion-capital-cost-allowance.html
CRA - Current or capital expenses
The prior question to all of this: whether a cost is deducted in full as a current expense or capitalised into a CCA class at all.
https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/sole-proprietorships-partnerships/business-expenses/current-capital-expenses.html

All sources verified 2026-08-12. Spotted a link that has moved? Email support@mapleexpense.com and we will correct it.