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Capital Cost Allowance Rates

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Business -> Capital cost allowance (CCA) rates

There are many classes of capital cost allowance (CCA). Lists of many of the classes, as well as information on calculating capital cost allowance, can be found in the following Canada Revenue Agency guides and bulletin:

	T2 Corporation Income Tax Guide (T4012) - for information on changes to the CCA rates from Budget 2007, see page 34, or search for the phrase "CCA rates and classes".
	Business and Professional Income Guide (T4002) for unincorporated businesses has CCA rates as well as a table which explains how to determine if a cost is an expense or should be capitalized.
	Rental Income Tax Guide (T4036) lists some of the classes which are more likely to be used by someone with a rental property.
	Farming Income Guide (T4003)
	IT-128R - Capital Cost Allowance - Depreciable Property. This bulletin also contains detailed information on capitalizing a cost versus expensing it.

The Income Tax Regulations contain the classes and rates for capital cost allowance, at

	Part XI Capital Cost Allowances
	Schedule II and Schedule III to VI Capital Cost Allowance Rates

The Income Tax Act and Regulations can be accessed from the Canada Department of Justice.

Recent CCA changes:

Budget 2010: Accelerated CCA for Clean Energy Generation

Accelerated CCA for Clean Energy Generation

Budget 2010 proposes to expand Class 43.2 to include:

heat recovery equipment used in a broader range of applications; and

distribution equipment used in district energy systems that rely primary on ground source heat pumps, active solar systems or heat recovery equipment.

Class 43.2 provides accelerated capital cost allowance at a rate of 50% per year on a declining balance basis. Class 43.1 also provides accelerated CCA, at the rate of 30% per year, for assets acquired before February 23, 2005. A higher efficiency standard is required for Class 43.2 than for Class 43.1 Systems that only meet the lower efficiency standard are eligible for Class 43.1.

These measures will apply to eligible assets acquired on or after March 4, 2010 that have not been used or acquired for use before that date.

Distribution Equipment of a District Energy System

Budget 2010 proposes to broaden Class 43.1 and Class 43.2 to include certain specified distribution equipment which is part of a district energy system used by the taxpayer to provide district heating or cooling through the use of thermal energy.

Canadian Renewable and Conservation Expenses - Principal-Business Corporations

Budget 2010 proposes that the definition "principal-business corporation" be amended to clarify that flow-through share eligibility extends to corporations the principal business of which is one, or any combination, of:

producing fuel;

generating energy; or

distributing energy

using Class 43.1 or Class 43.2 property.

For more information on the Budget 2010 website, see Tax Measures: Accelerated CCA for Clean Energy Generation.

The 2009 Federal Budget included the following provisions:

	The 50% straight-line accelerated CCA rate for investment in manufacturing or processing machinery and equipment will be extended to 2010 and 2011.
	Businesses will be allowed 100% CCA for computers (Class 52) in the first year that CCA deductions are available. This is a temporary two-year measure.

The 2008 Federal Budget included the following provisions:

	Manufacturing and processing sector - accelerated CCA treatment for investment in machinery and equipment will be extended for three years. The 50% straight-line accelerated CCA will be extended for one year, and the accelerated treatment will then be provided on a declining basis over a period of 2 years.
	CCA rates to be increased for carbon dioxide pipelines.
	Accelerated CCA for clean- energy generation equipment to be expanded to include additional applications involving ground source heat pump and waste-to-energy systems.

The budget provisions relating to capital cost allowance can be found in the Department of Finance web page Tax Measures: Supplementary Information.

The 2007 Federal Budget included the following increased capital cost allowance (CCA) rates for purchases on or after March 19, 2007:

computer equipment increased from 45% to 55% (new CCA class 50)

buildings used for manufacturing or processing increased from 4% to 10%

other non-residential buildings increased from 4% to 6%

natural gas distribution lines increased from 4% to 6%

liquefied natural gas facilities increased from 4% to 8%

accelerated CCA for manufacturing and processing equipment purchased before 2009

50% straight-line CCA, which results in CCA of 25% in year of purchase, 50% in year 2, and remaining 25% in year 3.

accelerated CCA for clean energy generation extended for

wave and tidal energy equipment

active solar equipment

small photovoltaic and fixed-location fuel cell systems

biogas production equipment

pulp and paper waste fuels

biomass drying and other fuel upgrading equipment

waste-fuelled thermal energy systems

Revised: July 19, 2010

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