This page shows how to work out capital cost allowance (CCA) by hand. It is an explainer with worked examples, not an interactive calculator: the schedules below are calculated from the CRA’s rates and first-year rules, and you can follow the same steps with your own figures. It is part of WealthNorth’s guide to real estate taxes; the rental-specific rules (the land split, the limit on rental losses, separate classes for buildings) are in CCA on rental property, and how the balance carries from year to year and what happens on a sale is in undepreciated capital cost.
Rates and rules come from the CRA’s classes of depreciable property page and Guide T4036 (T4036(E) Rev. 25), unless another source is named. The first-year rules below come from sections 1100 and 1104 of the Income Tax Regulations, as amended by the Budget 2025 Implementation Act, No. 1 (S.C. 2026, c. 3, royal assent March 26, 2026). T4036 and the CRA’s CCA pages were written before that law passed and still describe the reaccelerated incentive, the end of the accelerated incentive for property acquired after 2024 and the enhanced Class 50 deduction as proposed changes.
Common CCA classes and rates
| Class | Rate | What goes in it (CRA examples) |
|---|---|---|
| 1 | 4% | Most buildings acquired after 1987, with their wiring, plumbing, heating and other parts |
| 1 (separate-class election) | 6% or 10% | Eligible non-residential buildings acquired after March 18, 2007; the higher rate is for manufacturing and processing buildings |
| 3 | 5% | Most buildings acquired before 1988 (or Class 6) |
| 6 | 10% | Some frame, log, stucco-on-frame and metal buildings; certain greenhouses and fences |
| 8 | 20% | Furniture, appliances, tools costing $500 or more, fixtures, machinery and other equipment |
| 10 | 30% | Motor vehicles, and passenger vehicles that don’t meet the Class 10.1 conditions |
| 10.1 | 30% | Passenger vehicles costing more than the yearly ceiling (below), each in its own class |
| 12 | 100% | Tools, kitchen utensils and similar items costing less than $500; china, cutlery, linen and uniforms; software that isn’t systems software |
| 14.1 | 5% | Goodwill and other property the CRA lists for this class, at this rate when acquired after 2016 |
| 50 | 55% | Computer hardware and systems software acquired after March 18, 2007 |
| 54 | 30% | Zero-emission vehicles that would otherwise be in Class 10 or 10.1 |
The CRA lists most other classes and rates on its CCA classes page. A rental building is usually Class 1; see CCA on rental property.
The calculation, step by step
For most classes the CCA is on a declining balance:
- Start with the class’s undepreciated capital cost (UCC) at the beginning of the year.
- Add the cost of property added to the class, and subtract the proceeds of property disposed of (for each, the lesser of the proceeds minus selling expenses and its capital cost).
- Adjust for the year’s additions under the first-year rules below.
- Multiply by the class rate. That is the most you can claim; any amount from zero up to it is allowed.
- Subtract the CCA you claim from the balance in step 2 to get next year’s opening UCC.
If a business’s tax year is shorter than 12 months, the CRA’s accelerated investment incentive page says the maximum CCA must generally be prorated.
First-year rules
| Rule | Applies to | Effect in the first year |
|---|---|---|
| Half-year rule | Additions that don’t qualify for the incentives below (property a non-arm’s length person owned and claimed CCA on doesn’t qualify, but T4036 exempts it from the half-year rule too when the seller owned it continuously from at least 364 days before the end of your fiscal period) | CCA on 50% of the net addition |
| Accelerated investment incentive | Acquired after November 20, 2018 and before 2025, and available for use before 2028 | Half-year rule suspended; up to three times the normal first-year deduction, reduced to two times for property available for use in 2024 to 2027 |
| Reaccelerated investment incentive | Acquired after 2024 and available for use before 2034 | Half-year rule suspended; for most classes, the addition is increased by a factor of 1/2 before the rate is applied, so the factor applies to property available for use before 2030; it is reduced in a four-year phase-out after 2029 and ends for property available for use after 2033 |
| Enhanced Class 50 deduction | Class 50 property acquired after April 15, 2024 and available for use before 2027 | 100% of the cost in the first year (the 55% rate on the cost increased by a factor of 9/11) |
| Most Class 12 small tools | Class 12 tools costing less than $500 | No half-year rule: deductible in full in the year of purchase |
The half-year rule applies to property that doesn’t qualify for the accelerated investment incentive. The half-year rule doesn't apply to accelerated investment incentive property: property acquired after November 20, 2018 and before 2025 that becomes available for use before 2028. Its first-year claim can be up to three times the normal first-year claim, reduced to two times for property that becomes available for use in 2024 to 2027. The half-year rule doesn't apply to reaccelerated investment incentive property either: property acquired after 2024 that becomes available for use before 2034, with the enhanced first-year claim phased out over four years for property that becomes available for use after 2029. Property on which CCA or a terminal loss was claimed before you acquired it qualifies for the accelerated investment incentive only if neither you nor a person you don't deal with at arm's length owned it before and it wasn't transferred to you on a tax-deferred rollover; otherwise the half-year rule can still apply to it.
T4036 lists different factors for some classes (zero-emission vehicles in Classes 54 to 56, Class 43.1 clean energy equipment, Class 53 manufacturing equipment, Classes 44, 46 and 50). The CRA notes that a larger first-year claim doesn’t change the total you can deduct over a property’s life; it leaves smaller claims later.
Proposed: the Productivity Mega Deduction. In a backgrounder, the Department of Finance proposed permanent immediate expensing for most depreciable property acquired on or after September 15, 2026, excluding buildings in Classes 1 and 3, Classes 14 and 14.1, Class 51, certain vehicles in Classes 10 and 10.1 and some other property, with rules limiting how individuals, and partnerships with individual members, can use it to create a loss or make one larger. It is a proposal; check its status before relying on it.
Worked example: furniture and appliances (Class 8)
$10,000 of furniture and appliances bought from an unrelated seller after 2024 and before September 15, 2026, and put to use the same year, so the reaccelerated incentive applies. The maximum is claimed each year, rounded to the dollar.
| Year | Base for CCA | CCA at 20% | UCC at end of year |
|---|---|---|---|
| 1 | $15,000 ($10,000 × 1.5) | $3,000 | $7,000 |
| 2 | $7,000 | $1,400 | $5,600 |
| 3 | $5,600 | $1,120 | $4,480 |
| 4 | $4,480 | $896 | $3,584 |
| 5 | $3,584 | $717 | $2,867 |
Under the half-year rule, the year-1 base would be $5,000 and the claim $1,000.
Worked example: a passenger vehicle (Class 10.1)
For passenger vehicles acquired in 2026, the Department of Finance set the Class 10.1 ceiling at $39,000 before tax (news release), up from $38,000. A passenger vehicle that costs more than the ceiling before tax goes in Class 10.1, each vehicle in its own class, and its capital cost is limited to the ceiling plus the GST/HST or PST on it. For zero-emission passenger vehicles in Class 54 acquired in 2026, the ceiling is $61,000 before tax, unchanged from the ceiling Guide T4036 gives for vehicles acquired after December 31, 2022.
A passenger vehicle bought in Ontario in 2026 for $45,000 before tax.
| Item | Amount |
|---|---|
| Price before tax | $45,000 |
| Ceiling for the year | $39,000 |
| HST at 13% on the ceiling | $5,070 |
| Capital cost for CCA (Class 10.1) | $44,070 |
CCA is then calculated on that capital cost at 30%, under the first-year rules above, and only the business or rental share of the vehicle’s use is deductible. For a vehicle used for a rental property, the CRA adds its own conditions: Vehicle costs for a rental are deductible only in limited cases: with one rental property, only if it is in the general area where you live and you do repairs or maintenance yourself and drive tools and materials there (driving to collect rent is a personal expense); with two or more rental properties at two or more different sites away from your home, also to collect rent, supervise repairs and manage the properties. Other travel to a rental follows the same conditions.
T4036 notes that the recapture and terminal-loss rules don’t apply to Class 10.1 vehicles (other than immediate-expensing property); instead, in the year you sell one you owned at the end of the previous year, you can claim half of the CCA that would otherwise be allowed.
Worked example: a computer (Class 50)
A $3,000 computer bought for a business after April 15, 2024 and put to use before 2027 qualifies for the enhanced first-year deduction: $3,000 × 100% = $3,000 in the first year, leaving no balance. Without the enhancement, the regular rate is 55%.
CCA on a rental property
The same calculation applies to a rental, with two rental-specific rules from Guide T4036. Capital cost allowance (CCA) is optional and is worked out after combining the net income or loss of all your rental properties: it can bring that net rental income down to zero, but it can't create or increase a rental loss. A rental property acquired after 1971 with a capital cost of $50,000 or more goes in a separate class, so its recapture or terminal loss is worked out on that property alone. The details, and a five-year schedule for a Class 1 building, are in CCA on rental property; whether claiming CCA on a rental pays off, given recapture on a sale, is covered in should you claim CCA on a rental property. Expenses deducted before CCA are in rental property expenses you can deduct.
Records to keep
| Record | Why it matters |
|---|---|
| Purchase invoices and agreements | Capital cost, and the land and building split for a property |
| The date each property became available for use | Which first-year rule applies, and when CCA can start |
| Who you bought from | Property bought from a non-arm’s length person may not qualify for the accelerated first-year rules |
| A yearly schedule for each class | Opening UCC, additions, dispositions and CCA claimed |
| Sale documents | Proceeds and selling costs, to work out recapture or a terminal loss |
Related guides
Sources
The figures and rules on this page come from these sources, last checked against them between September 24, 2026 and October 1, 2026. How we check facts.
- Canada Revenue Agency: Rental Income
- Canada Revenue Agency: Classes of depreciable property
- Canada Revenue Agency: Accelerated investment incentive
- Canada Revenue Agency: GST/HST calculator (and rates)
- Department of Finance Canada: Government of Canada introduces new Productivity Mega Deduction to boost Canada’s…
- Department of Finance Canada: Government Announces the 2026 Automobile Deduction Limits and Expense Benefit Rates for…
- Justice Laws (Canada): Budget 2025 Implementation Act, No. 1
- Justice Laws (Canada): Income Tax Regulations
- Justice Laws (Canada): Income Tax Regulations