What is Depreciation (CCA)?

Depreciation is the accounting recognition that long-lived assets (equipment, vehicles, buildings) lose value over time and that this loss should be allocated against the periods that benefit from the asset.

In Canadian tax, depreciation is called Capital Cost Allowance (CCA). CRA assigns each asset class a specific rate.

Common CCA classes

• Class 8 (general equipment): 20% declining balance
• Class 10 (vehicles under $30K): 30% declining balance
• Class 10.1 (passenger vehicles over $30K): 30%, capped at $34K cost base
• Class 12 (small tools, software): 100% (full deduction first year)
• Class 50 (computers): 55% declining balance
• Class 53 (manufacturing equipment): 50% declining balance + accelerated investment incentive
• Class 1 (buildings): 4% declining balance

Half-year rule

Most CCA classes apply only 50% of the normal rate in the year an asset is acquired (the "half-year rule"). Worth planning around — buying late in the fiscal year doesn't double-up.

Accelerated Investment Incentive

For eligible property acquired after 2018 and put in use before 2028, the half-year rule is suspended and an additional first-year deduction applies. Manufacturing equipment, clean tech, and zero-emission vehicles get particularly favourable treatment.

Where leakage happens

• Defaulting to general classes when specific accelerated classes apply
• Missing the AII for eligible recent acquisitions
• Tracking insufficient detail to support CRA review on disposition

Related terms