29 What is the purpose of the half-year rule?

David Ren

The half-year rule reduces the amount of CCA (tax depreciation) that can be claimed in the year that you purchase an asset.

Income Tax Regulation subparagraph 1100(1)(b)(i) states “If the capital cost of the property was incurred in the taxation year and after November 12, 1981, (B) if the property is not an accelerated investment incentive property and is not described in any of subparagraphs (b)(iii) to (v) of the description of R in subsection (2), 50 per cent of the amount for the year calculated in accordance with Schedule III.”

Effectively it says ‘we are going to pretend you bought the asset halfway through the year and therefore you are only going to be able to claim CCA on half of the purchase amount this year…don’t worry you can claim the remaining CCA in future years.’

How the half-year rule works

The half-year rule temporarily cuts the cost of an asset purchased during the year in half.  This lower amount is then used to calculate CCA for the year.

For example, say I bought a $25,000 car during the year for my new car-rental business.  I checked on the CCA “classes list” and determined the new car would be recorded in CCA class 10 which has a 30% CCA rate.  I add the $25,000 car to my class 10 pool but then must reduce this amount by $12,500 for the half-year rule.  In the 1st year I can claim $3,750 in CCA ($12,500 X 30%).

I then add the $12,500 back to my UCC balance and will be able to claim $6,375 CCA on the remaining balance in the following year (($25,000 cost – $3,750 1st year CCA) X 30% CCA rate).  CCA on the full remaining amount in the next year as follows:

Original purchase

Capital Cost Allowance

Accumulated CCA



1st year

$25,000*50%* 30%=$3,750



2nd year




You can find the appropriate CCA class and rates for a given asset in the “Classes list” in the FITAC under “tax rates and tools”

Why do we use the half-year rule?

The half-year rule allows taxpayers to claim CCA regardless of the actual purchase date of the asset.  Without this rule, taxpayers would have an incentive to buy assets at the end of the year and claim CCA for the whole year. In addition, half-year rule creates convenience to both taxpayers and CRA, because this method makes the calculating process of CCA a lot easier, as the actual purchase date of the property does not matter.

Interactive content (Author: David Ren, March 2019)

Interactive content (Author: Diane Macutay, June 2019)

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