Buying Business Equipment and Claiming CCA

Buy a $45,000 truck or a $12,000 piece of shop equipment for your business and you usually can't deduct the whole cost that year. You claim it bit by bit as capital cost allowance (CCA), and how fast depends on what you bought and when it was ready to use.

Capital or current expense

A current expense is deducted in full the year you pay it. A capital expense goes into a CCA class. CRA looks at a few things to tell them apart.

• Lasting benefit. Putting vinyl siding on a wooden building is capital. Painting it is current.
• Repair or improvement. Fixing wooden steps is current. Replacing them with concrete steps improves the property beyond its original condition, so it's capital.
• Separate asset. A compressor for your shop is a separate asset and capital. Rewiring the building replaces a part of it and is usually current.

Land isn't depreciable property. If you buy a building, only the building part goes into a CCA class.

How CCA works

Your capital cost is generally the purchase price plus fees tied to buying it, such as legal and installation costs. Most classes use the declining balance method. Each year you apply the class rate to whatever balance is left (the undepreciated capital cost).

• You can usually start claiming once the property is available for use, for example when you first use it to earn income.
• In the year you buy something, the normal rule lets you claim CCA on only half of your net additions to the class. This is the half-year rule. Most new purchases right now get around it, as explained below.
• You don't have to claim the maximum. Anything from zero up is allowed, and whatever you don't claim stays in the class for later years. That can make sense in a year you owe no tax.

Common classes and rates

For a passenger vehicle acquired on or after January 1, 2026, the Class 10.1 limit is $39,000 before tax (it was $38,000 for 2025). If the vehicle costs more, your capital cost is capped at the limit plus the GST and PST on that limit. Most small tools in Class 12 aren't subject to the half-year rule, so they're fully deductible in the year you buy them. Software in Class 12 is subject to it.

Faster write-offs for 2026 purchases

Most property you acquire now qualifies for what the Income Tax Regulations call the reaccelerated investment incentive. It covers eligible property acquired after 2024 that becomes available for use before 2034. If it's put in use before 2030, the half-year rule doesn't apply and half the cost again is added for the first-year calculation. For property that would normally fall under the half-year rule, that works out to three times the normal first-year claim.

Take a $10,000 Class 8 machine bought and put to work in 2026. Normally the first-year CCA would be $1,000 (20% of half the cost). With the incentive it's $3,000 (20% of $15,000). The total you deduct over the asset's life doesn't change. You just get more of it sooner. The boost gets smaller for property put in use from 2030 to 2033. Used property can qualify, but generally not if you or someone you don't deal with at arm's length owned it before.

Computers and systems software (Class 50), data network equipment (Class 46) and patents (Class 44) do even better for now. If you acquired them after 2024 and they're available for use before 2027, the first-year deduction covers the full cost. A laptop bought and put to business use in 2026 can be written off completely that year.

Some CRA web pages still call both of these proposed changes, but they're now in the Income Tax Regulations (current to September 21, 2026), and the CRA's T4002 guide for 2025 already asks for these additions.

The temporary immediate expensing rule from 2021 (up to $1.5 million a year) doesn't help with a 2026 purchase. It only covered property available for use before 2025 for individuals, or before 2024 for corporations.

The September 2026 proposal

On September 15, 2026, Finance Canada announced the Productivity Mega Deduction. It's a proposal and not law yet. It would give permanent immediate expensing (a full write-off in the year the asset becomes available for use) for most depreciable property acquired on or after September 15, 2026. Buildings in Classes 1 and 3, franchises, licences and goodwill, and certain vehicles in Classes 10 and 10.1 would be left out and would keep an enhanced first-year deduction. Used property would qualify only if neither you nor a non-arm's-length person owned it before.

If you buy something this fall, keep the invoice and note the date you bought it and the date you first put it to use. Those dates decide which rules apply.

When you sell it

If you sell for more than what's left in the class, the difference is generally added back to income as recapture. If the class ends up empty but a balance is still there, you can usually deduct it as a terminal loss.

How we help

"Is this the year to buy the equipment?" is one of the questions we sit down with clients on, and capital purchases are part of our consulting work. The CCA claim itself goes on your self-employed tax return or your corporate tax return, and year-end bookkeeping prep is part of our bookkeeping service.