Capital cost allowance (CCA)

Asset buyers meet CCA because the equipment, vehicles and buildings they acquire generally cannot be deducted all at once. The CRA says you cannot deduct the full cost of depreciable property in the year you acquire it, and instead deduct its cost over several years through CCA.

How it works

• The maximum rate for each class is prescribed in subsection 1100(1) of the Income Tax Regulations
• The CRA’s folio says CCA is, in most cases, calculated on a diminishing balance, as a share of the class’s undepreciated capital cost
• The folio says a taxpayer may in general deduct any amount up to the maximum for the year, and the unclaimed excess stays in the balance for later years

What to ask

Ask which class each purchased asset falls into, since the class sets the rate. From 2017, the CRA’s classes page includes goodwill in Class 14.1. Ask how the price will be allocated across the assets, as the answer on why buyers prefer asset purchases explains. A seller’s CCA recapture is the other side of the same rules.