Half-year rule (CCA)
The half-year rule is a capital cost allowance (CCA) rule that reduces the first-year claim on many assets. The CRA says it generally applies to the cost of property that was acquired or became available for use during the year, and subsection 1100(2) of the Income Tax Regulations sets out the first-year adjustment.
Buyers meet this rule after an asset purchase, when equipment or other depreciable property is added to the books and a first-year CCA claim is worked out. The CRA’s folio on capital cost allowance lists it among the restrictions that may limit or delay a deduction, alongside the available-for-use rules and the rules for a short fiscal period.
Where exceptions sit
The folio says the rule does not apply in certain cases, such as the two-year rolling-start rule for property acquired. The CRA also explains that the Accelerated Investment Incentive suspends the half-year rule for eligible property, and that it is a time-limited measure. See the entry on the accelerated investment incentive and the entry on immediate expensing.
What to ask
- When was each asset acquired, and when did it become available for use?
- Which CCA class is it in, and does an exception or incentive apply?
- What does the purchase agreement allocate to each depreciable asset?
See also buying just the equipment and inventory and the entry on capital cost allowance.
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Canada Revenue AgencyGovernmentIncome Tax Folio S3-F4-C1, General Discussion of Capital Cost Allowance
- 02Government of Canada — Justice LawsGovernmentIncome Tax Regulations, section 1100 (capital cost allowance)
- 03Canada Revenue AgencyGovernmentAccelerated investment incentive
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