Capital Cost Allowance

Capital Cost Allowance (CCA) is the means by which Canadian businesses may claim depreciation expense for calculating taxable income under the Income Tax Act (Canada). Similar allowances are in effect for calculating taxable income for provincial purposes.

Capital property eligible for CCA excludes:

CCA is calculated on undepreciated capital cost ("UCC"), which is generally defined as:

Where the UCC for a class is negative, a recapture of depreciation is deemed to take place, thus adding to taxable income and bringing the balance of UCC back to zero. Where UCC for a class is positive, but all assets with respect to that class have been disposed of, a terminal loss is deemed to take place, thus deducting from taxable income and bringing the balance of UCC back to zero.

CCA itself is generally calculated using the following items:

For assets subject to the full-year rule:

${\displaystyle CCA=tdUCC}$

For assets subject to the half-year rule:

${\displaystyle CCA=tdUCC-{\frac {1}{2}}td\left(a-b-c\right)}$

Under the Income Tax Act:

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