CCA Classes and Rates: How to Classify Depreciable Property for Your Corporation

Capital Cost Allowance (CCA) is the tax mechanism that lets Canadian corporations deduct the cost of depreciable assets over time. The amount you can claim each year depends on which CCA class applies to the asset.

Each class carries a specific rate — typically between 4% and 100% — that determines how quickly you recover the cost of an asset for tax purposes. A commercial building, a company vehicle, a computer, and a piece of industrial equipment are each treated differently under CRA rules.

This guide covers the most relevant CCA classes for incorporated small businesses, followed by the more specialized categories.

Key takeaway: Misclassifying a depreciable asset can reduce your deductions or trigger adjustments during a CRA review. Getting the classification right from the start protects both your tax savings and your T2 filing.

The Most Common CCA Classes for Canadian Businesses

The classes below cover the capital assets most frequently held by incorporated SMEs. Correctly identifying each asset's class ensures you apply the right rate and avoid errors when calculating your deductions.

In most cases, Capital Cost Allowance (CCA) is calculated using the declining balance method: the deduction is applied each year to the remaining tax value of the asset — that is, the amount still left to depreciate after prior claims. This remaining balance is called the undepreciated capital cost (UCC). Some classes, however, follow different rules. These differences can directly affect the amount you are entitled to claim when you file your T2 corporation income tax return.

These classes are federal from Canada Revenue Agency. In practice, Québec generally follows the same classification framework, though certain provincial rules may differ. For assets in more sensitive categories — buildings, vehicles, energy equipment, and intangibles — it is worth validating the classification against your specific situation.

Class 1 (4%) — Buildings Acquired After 1987

CCA Class 1 applies to most buildings acquired after 1987 that do not fall under another class — including commercial, industrial, and rental properties used to earn business or property income.

The applicable CCA rate is 4%, calculated on the declining balance.

Keep in mind that land is never depreciable. When acquiring real property, you must allocate the purchase price between the land portion (not eligible) and the building portion (eligible).

Class 8 (20%) — Furniture and General Equipment

CCA Class 8 is a broad catch-all category covering tangible assets used in a business that are not specifically included in another class. It encompasses furniture, equipment, and various machinery used in day-to-day commercial operations.

The CCA rate is 20%, applied on a declining balance to the undepreciated capital cost (UCC).

Common examples include:

• Office furniture (desks, chairs, filing cabinets)
• General-purpose computing equipment
• Workshop machinery and tools
• Audiovisual and security systems

In certain situations, a tax election may allow specific assets to be tracked separately for CCA purposes. If you think this may apply to your situation, confirm the correct treatment before filing your return.

Class 10 (30%) — Motor Vehicles (Business Use)

Class 10 covers most motor vehicles used to earn business income, including passenger vehicles, pickup trucks, vans, and other utility vehicles. Passenger vehicles whose cost exceeds the limit set by the CRA each year must instead be included in Class 10.1.

The CCA rate is 30%, declining balance.

When a vehicle is used for both personal and business purposes, only the business-use portion is deductible. A detailed mileage log is essential to support the percentage claimed for commercial use.

Zero-emission vehicles acquired after March 18, 2019, are generally assigned to a separate class (54, 55, or 56) depending on their type.

Class 10.1 (30%) — Passenger Vehicles Above the Prescribed Limit

Class 10.1 applies to passenger vehicles whose capital cost exceeds the annual ceiling set by the CRA. The CCA rate remains 30%, but the depreciable base is capped at the prescribed limit for the year of acquisition.

Key rules for Class 10.1:

• Each vehicle forms its own separate class
• No recaptured depreciation or terminal loss applies on disposal (special rules govern these amounts)
• A mileage log is required if the vehicle is used for mixed personal and business purposes

Always verify the current federal capital cost limit for passenger vehicles on the CRA website or with a tax professional, as this ceiling is updated annually.

Class 12 (100%) — Small Tools and Certain Software

Class 12 allows a 100% CCA deduction for specific assets — primarily tools and instruments acquired on or after May 2, 2006, with a unit cost below $500.

Practical notes:

• Eligible small tools are generally not subject to the half-year rule
• Certain software included in Class 12 may be subject to the half-year rule depending on its type

An asset costing $500 or more is generally classified elsewhere — most often in Class 8.

Class 14 (Variable) — Limited-Life Intangibles Acquired Before 2017

Class 14 applies to certain limited-life intangible assets acquired before January 1, 2017 — such as patents, franchises, licences, and other contractual rights with a fixed term.

The deduction is not based on a fixed rate but is generally spread over the legal life of the right. That said, the annual deduction can never exceed the UCC remaining at the end of the fiscal year.

Since 2017, these assets are typically included in Class 14.1. Class 14 now applies only to older assets still on the books from before the transition.

Class 14.1 (5%) — Eligible Capital Property and Goodwill (Since 2017)

Class 14.1 covers most intangible assets acquired on or after January 1, 2017, and used to earn business income — including purchased goodwill, certain trademarks, franchises, and operating rights.

The CCA rate is 5%, declining balance. The half-year rule generally applies.

Only acquired intangibles are eligible. Costs incurred to internally generate or develop goodwill generally do not qualify for CCA.

For certain assets transitioned into Class 14.1 under the 2017 reform, an additional transitional deduction may be available for taxation years ending before 2027. This is not a new permanent rate, but a transitional mechanism provided under the regulations.

Class 43 (30%) — Manufacturing and Processing Machinery

Class 43 covers certain machinery and equipment used primarily in Canada to manufacture or process goods for sale or lease — excluding assets that fall under the transitional classes (such as Class 29 or 53, depending on the acquisition period).

The CCA rate is 30%, declining balance.

To qualify for Class 43, the asset must be used primarily for manufacturing or processing activities — not for administrative, distribution, or service functions.

Classes 43.1 (30%) and 43.2 (50%) — Clean Energy Generation and Conservation Equipment

These classes apply to certain assets used to generate or conserve energy from eligible sources — including solar, wind, small hydro, biomass, and qualifying cogeneration systems. Eligibility depends on specific technical criteria and the date the property becomes available for use.

• Class 43.1: 30%, declining balance
• Class 43.2: 50%, declining balance — applicable to certain assets acquired after February 22, 2005, and before 2025

Assets that rely on fossil fuels are generally excluded when they become available for use after 2024. For full technical details, refer to the CRA's Classes 43.1 and 43.2 Technical Guide.

Note: the 50% rate for Class 43.2 applied to assets acquired before 2025. Assets acquired after that date may no longer qualify at this enhanced rate — verify current eligibility with a tax professional.

Class 50 (55%) — Computer Hardware (Current Rule)

CCA Class 50 applies to general-purpose electronic data processing equipment, associated systems software, and ancillary data processing equipment acquired after March 18, 2007.

The CCA rate is 55%, declining balance.

The following assets are excluded from Class 50:

• Property already included in Class 29 or 52
• Equipment used primarily to control or monitor an electronic process
• Equipment used primarily to control electronic communications
• Systems software associated with any of the excluded equipment above
• Data processing equipment that is not ancillary to general-purpose electronic data processing hardware

These exclusions draw a clear line between general-purpose computing equipment and specialized industrial or telecommunications hardware, which belong in other prescribed classes.

Note: If your corporation recently purchased computers, servers, or related hardware, Class 50 is the standard applicable class — giving you a 55% first-year deduction on the declining balance.

Classes 54 (30%), 55 (40%), and 56 (30%) — Zero-Emission Vehicles and Equipment

These CCA classes apply to zero-emission vehicles and certain zero-emission equipment acquired after March 18, 2019 (or after March 1, 2020, for certain property), depending on asset type. For eligible assets, they replace the standard classes that would otherwise apply — such as Class 10, 10.1, or 16.

A vehicle generally qualifies as zero-emission if it is fully electric or hydrogen-powered. Non-plug-in hybrids do not qualify. Certain plug-in hybrids may qualify only if they meet the regulatory definition of a zero-emission vehicle (specific technical conditions apply).

• Class 54 (30%) — equivalent to Classes 10 and 10.1; applies to passenger vehicles and light-duty zero-emission vehicles.
• Class 55 (40%) — equivalent to Class 16; applies to certain heavy or specialized zero-emission vehicles.
• Class 56 (30%) — no direct equivalent; covers zero-emission automotive equipment not included in Class 54 or 55, including certain off-road property.

For a zero-emission passenger vehicle in Class 54, the eligible capital cost is subject to a prescribed ceiling — verify the current limit on the CRA website or with a tax professional.

Enhanced first-year deduction: An accelerated CCA deduction may apply in the first year if the property becomes available for use before 2028, with the bonus phasing down gradually by year. In this context, the half-year rule does not apply. This incentive is temporary and decreases in steps based on the year the property first becomes available for use.

As with other business vehicles, only the business-use portion is deductible when the vehicle is used for mixed personal and commercial purposes.

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Specialized and Sector-Specific CCA Classes

The classes below apply to more specific situations or particular industries — construction, agriculture, advanced manufacturing, energy, and specialized technologies. They generally involve more technical assets, older property, or transitional tax programs.

Class 3 (5%) — Certain Buildings Acquired Before 1988

Class 3 may apply to a building acquired before 1988 that cannot be included in Class 6 — specifically where:

• the acquisition resulted from a written agreement entered into before June 18, 1987, or
• the building was under construction on June 18, 1987.

The CCA rate is 5%, declining balance.

In certain cases, additions or alterations made after 1987 may remain in Class 3 only up to a prescribed limit under federal rules. Beyond that threshold, the excess is generally transferred to Class 1. It is worth confirming the correct classification at the time any construction work is carried out.

Class 6 (10%) — Certain Lightweight-Structure Buildings

Class 6 applies to certain buildings constructed with lightweight materials — such as wood or corrugated metal — when specific conditions are met. A building may qualify if it:

• was acquired before 1979,
• is used primarily to earn farming or fishing income, or
• has no footings or other base support below ground level.

The CCA rate is 10%, declining balance.

The applicable class may change depending on the nature and extent of any renovations carried out after acquisition.

Class 13 (Variable) — Leasehold Interests

Class 13 covers leasehold interests — amounts invested by a tenant to fit out or improve a leased property.

The deduction is generally calculated on a straight-line basis over the lease term, including reasonably anticipated renewals.

In practical terms: if a commercial lease runs for 10 years, the cost of leasehold improvements can typically be spread over that period. If the lease ends earlier than expected and an undepreciated balance remains, specific CRA rules govern how the remaining amount is treated.

Class 16 (40%) — Specialized Vehicles and Equipment

Class 16 applies to a narrow set of vehicles and equipment under tightly defined conditions:

• Taxis acquired after May 25, 1976
• Vehicles acquired after November 12, 1981, and used in a daily car rental business
• Trucks or tractors used for hauling freight, acquired after December 6, 1991, with a gross vehicle weight rating exceeding 11,788 kg
• Certain coin-operated amusement devices acquired after February 15, 1984

The CCA rate is 40%, declining balance.

Standard commercial vehicles do not belong in this class — they are generally included in Class 10 or Class 10.1, depending on the situation.

Class 17 (8%) — Certain Outdoor Structures and Specialized Equipment

Class 17 covers certain permanent outdoor infrastructure as well as non-electronic transmission equipment (for example, telephone, telegraph, or non-electronic data switching equipment).

It includes:

• Private roads, access roads, and parking areas
• Sidewalks, runways, and similar paved surfaces
• Above-ground storage areas
• Certain non-electronic communications equipment

The CCA rate is 8%, declining balance.

This class is most relevant for businesses that have invested in permanent ground-level infrastructure or in specialized installations that fall outside the more recent technology-focused classes.

Class 29 (Variable) — Certain Manufacturing and Processing Equipment (Transitional)

Class 29 applied to certain machinery and equipment used in a Canadian manufacturing or processing business, acquired during a specific period set out in tax legislation — after March 18, 2007, and before 2016 — under an accelerated depreciation program.

The deduction followed a specific three-year schedule: 25% in year one, 50% in year two, and 25% in year three.

No new acquisitions can be added to this class today. It applies only to eligible assets acquired during the covered period that are still on the books.

Class 38 (30%) — Powered Mobile Equipment for Construction

Class 38 covers most motorized mobile equipment acquired after 1987 and used for excavating, moving, placing, or compacting earth, rock, concrete, or asphalt. It is primarily relevant to businesses operating in construction, civil engineering, or public works.

The CCA rate is 30%, declining balance.

Standard road vehicles are not included in this class — they generally fall under Class 10 or 10.1. Assets already assigned to another specific class are also excluded.

Class 44 (25%) — Patents and Patent Licences (Acquired After April 26, 1993)

Class 44 covers patents and licences to use a patent — whether for a fixed or indefinite term — acquired after April 26, 1993.

The CCA rate is 25%, declining balance.

A taxpayer may elect not to include a patent or licence in Class 44. This election must be documented in the tax return for the year of acquisition and results in the asset being treated under another applicable class.

Class 45 (45%) — Computer Hardware and Systems Software (Specific Period)

Class 45 applied to electronic data processing equipment and related systems software, including ancillary equipment, acquired after March 22, 2004, and before March 19, 2007.

The CCA rate was 45%, declining balance.

This class is now relevant only for assets acquired during that window that are still on the books.

Class 46 (30%) — Data Network Infrastructure

Class 46 covers data network infrastructure equipment and related systems software acquired after March 22, 2004.

The CCA rate is 30%, declining balance.

Similar assets acquired before March 23, 2004, are generally classified under Class 8.

Class 52 (100%) — Eligible Computer Equipment (Temporary Measure)

Class 52 applied to certain computer equipment acquired after January 27, 2009, and before February 2011. It allowed a 100% deduction of the eligible cost in the first year, with no half-year rule.

To qualify, the property had to:

• be located in Canada,
• not have been previously used or acquired for use before being acquired by the taxpayer,
• be used in carrying on a business in Canada or earning income from property situated in Canada, or be acquired for lease to a user carrying on business in Canada.

Class 52 now applies only to assets that met these conditions at the time of acquisition and are still on the books.

Class 53 (50%) — Manufacturing and Processing Machinery (Specific Period)

Class 53 covers certain eligible machinery and equipment acquired after 2015 and before 2026, used primarily in Canada to manufacture or process goods for sale or lease. It applies to assets that would otherwise fall under Class 29, but benefit from an enhanced rate during the period set out in the legislation.

The CCA rate is 50%, declining balance.

To qualify, the equipment must be new and used primarily in Canada for eligible manufacturing or processing activities.

Note: As of 2026, no new acquisitions can be added to Class 53. This class now applies only to eligible assets acquired before January 1, 2026, that are still on the books. Equipment acquired from 2026 onward would generally fall under Class 43 (30%) instead.

Class 58 (20%) — Carbon Dioxide Utilization Equipment

Class 58 applies to certain equipment used exclusively to operate or utilize carbon dioxide (CO₂) in an industrial process.

The CCA rate is 20%, declining balance.

The equipment must be dedicated strictly to CO₂ utilization within an industrial operation to be eligible.

Class 59 (100%) — Exploration for Permanent Carbon Storage

Class 59 covers certain intangible property acquired after 2021 to assess the feasibility of permanently storing captured carbon in Canada. It includes rights or expenditures incurred to determine the existence, location, extent, or quality of a suitable geological formation.

The CCA rate is 100%, allowing a full deduction in the year the property becomes eligible.

Eligible costs may include amounts related to environmental studies or consultations required prior to site development.

Class 60 (30%) — Drilling for Permanent Carbon Storage

Class 60 applies to certain intangible property acquired after 2021 to drill, convert, or complete a well in Canada for the purpose of enabling the permanent storage of captured carbon.

The CCA rate is 30%, declining balance.

These expenditures must be directly related to establishing the infrastructure required for permanent carbon storage.

Choosing the Right CCA Class to Maximize Your Deductions

Classifying a depreciable asset is not simply a technical formality. It shapes your current deductions, your future UCC balance, and your overall tax planning.

Before claiming CCA, you need to identify the applicable class based on the nature of the asset, its primary use, its date of acquisition, and the specific rules set out in the Income Tax Act. The distinction is not always straightforward: the same asset may appear eligible for more than one class depending on the context.

An incorrect classification can reduce your deductions or trigger adjustments during a CRA audit. On the other hand, rigorous classification lets you optimize your tax savings while keeping your T2 return fully compliant.

When in doubt, confirm before you file. At T2inc.ca, we help incorporated small businesses across Canada with the tax classification of their depreciable assets and the preparation of their T2 corporation income tax return and Schedule 8 every year.

Frequently Asked Questions About CCA Classes

Which CCA class applies to a newly acquired asset?

The correct class depends on the nature of the asset, its business use, and sometimes its acquisition date. Always refer to the CRA's class descriptions — or consult a CPA — to confirm the classification before recording the asset on your books.

Can a CCA class be changed after a return has been filed?

Yes, but doing so typically requires an accounting adjustment and strong supporting documentation. A retroactive change may be accepted by tax authorities in cases of genuine initial error, but it must be clearly justified and consistent with the economic reality of the transaction.

What if an asset seems to qualify for more than one class?

Analyse the asset's technical specifications, its primary function, and the eligibility criteria of each class under consideration. When uncertain, rely on CRA guidance or ask a tax professional to validate the classification before filing.

Is it mandatory to claim CCA every year?

No. CCA is an optional deduction. You may choose not to claim it in a given year if you do not need to reduce your taxable income at that time. This can be a useful strategic tool for long-term tax planning.

How can you avoid a CCA misclassification?

The best approach is to document every asset purchase thoroughly, refer to the CRA and Revenu Québec guides, and validate your classifications with a professional. A misclassification can result in a disallowed deduction, penalties, or adjustments during a tax audit.