33 What are some common CCA classes and what is their tax treatment?
Sheila Lai and Denise Baeta Abrunhosa
The following chart shows some of the common CCA classes and their tax rates. Note that most of these assets would be eligible for the new Accelerated Investment Incentive:
|
Class |
Depreciate property |
Rate |
|
1 |
Most buildings acquired after 1987. Note the rules around buildings are complex and the CCA class (and rates) is dependent on the type of building, how it is used and when it is purchased. |
4% (varies) |
|
8 |
Furniture, fixtures and miscellaneous capital property. This is a bit of a dumping ground for assets that can’t find another CCA class. |
20% |
|
10 |
Most automobiles and other automotive equipment (if not in class 10.1 or 16) |
30% |
|
10.1 |
Passenger vehicles that cost more than the prescribed amount ($30,000 prior to 2022; $34,000 in 2022; $36,000 in 2023). Some unique rules related to class 10.1:
|
30% |
|
12 |
Property such as tools, medical or dental instruments, and kitchen utensils that cost less than $500. Basically small, inexpensive items that, for simplicity sake, are expensed (through CCA) really quickly. |
100% |
|
16 |
Taxis and vehicles you use in a daily car rental business. There is a higher depreciation rate here than for class 10 or 10.1 due to the higher usage by taxi companies and car rental businesses. |
40% |
|
43.1 and 43.2 |
Clean energy equipment has a CCA rate of 30% (43.1) or 50% (43.2) depending on when the equipment was acquired. Under the temporary full expensing rules, new equipment in this class purchased after November 20, 2018 will be expensed 100% in the year of acquisition. This temporary rule will be phased out starting in 2024. Note, these assets are not eligible for the Accelerated Investment Incentive. |
30% 50% 100% |
|
50 |
Computer hardware and systems software for that equipment, including ancillary data processing equipment that is acquired after March 18, 2007. |
55% |
|
53 |
Machinery and equipment that is acquired after 2015 and before 2026 to be used in Canada primarily in the manufacturing or processing of goods for sale or lease. Under the temporary full expensing rules, new equipment in this class purchased after November 20, 2018 will be expensed 100% in the year of acquisition. This temporary rule will be phased out starting in 2024. Note, these assets are not eligible for the Accelerated Investment Incentive. |
50% |
You can find a great CCA list (by item and by class) in the FITAC by first going to “Tax rates and tools” and then “Capital cost allowance”
In general, Leasehold Improvements, if the costs are borne directly by the landlord, are capitalized to the building, usually Class 1. However, when a tenant makes a capital improvement to a leased property, these leasehold improvements will be allocated to Class 13. Class 13 CCA is calculated as follows:
As per Schedule III, the maximum deduction is the lesser of;
- 1/5 of the capital cost of the improvement or;
- The capital cost of the lease improvement/lease term (including the first renewal option, up to 40 years)
Accelerated Inventive Investment (AII) replaced the half-year for any leasehold improvements after November 2018.
Example:
Friendship Marketing leased the building on January 1, 2018, with a lease term of 10 years, and an option to renew for an additional 2 successive 5-year periods. Friendship Marketing spent $50,000 renovating the premises in 2018. In 2021, they required further changes to incorporate the growing team and spent another $30,000 renovating the space. They have a December 31st year-end. Calculate the maximum amount of Class 13 CCA that they can deduct for 2021 and 2022:
CCA for 2021
| 2018 | Lesser of
● ⅕ x $50,000 = $10,000 ● ($50,000/(10yrs+5 yrs)) = $3,333 |
$3,333 |
| 2021 | Lesser of
● ⅕ x $30,000 x 1.5 = $9,000 ● ($30,000 / (7 yrs + 5 yrs)) x 1.5= $3,750 |
$3,750 |
| Total CCA for 2021 | $7,083 |
CCA for 2022
| 2018 | Lesser of
● ⅕ x $50,000 = $10,000 ● ($50,000/(10yrs+5 yrs)) = $3,333 |
$3,333 |
| 2021 | Lesser of
● ⅕ x $30,000 = $6,000 ● ($30,000 /12 yrs) = $2,500 |
$2,500 |
| Total CCA for 2022 | $5,833 |
Interactive content (Author: Angel Mo, January 2020)
Interactive content (Author: Aelyssa Bhatti, January 2020)
Reference and Resources:
January 2020
