14.11.2020
Corporate tax
Featuring

As your company grows, it will acquire more and more assets that will contribute to its success. For example, you might buy or lease manufacturing premises, machinery, vehicles, etc.

Did you know that you can deduct the cost of these assets from your income over several years to reduce your tax burden? These deductions are categorized into CCA classes determined by the CRA. They can be claimed when you file your T2 income tax return.

There are a variety of CCA classes that determine the applicable depreciation rate for a company’s assets. Here are the main categories of depreciable property for companies and their applicable rates.

Table of contents:

Class 1 (4%): Buildings acquired after 1987

Class 1 includes most buildings acquired for your incorporated business after 1987 and certain types of additions and renovations made after that year, including electrical wiring, lighting fixtures, plumbing and more.

This rate is subject to change under certain circumstances:

  • For non-residential buildings acquired after 2007 that are primarily used to manufacture or process goods for sale or lease, the rate is increased to 10%.
  • For other non-residential buildings, the rate is increased to 6%.

Class 6 (10%): Wooden buildings, fences and greenhouses

This CCA class includes buildings made of frame, log, stucco on frame, galvanized iron or corrugated metal. The building in question must also meet one of the following conditions:

  • The building was acquired before 1979
  • The building is used to generate income from farming or fishing
  • The building has no footings or other base supports below ground level

Some fences and greenhouses may also be included in Class 6.

Class 8 (20%): Various company assets and equipment

Class 8 is dedicated to assets and equipment purchased for your business that are not included in any other CCA class. This includes:

  • Furniture
  • Appliances
  • Machinery and equipment
  • Photocopiers
  • Telephones
  • Tools that cost over $500
  • Outdoor advertising signs
  • Data network infrastructure equipment and operating software acquired before March 23, 2004

Class 10 (30%): Motor vehicles and computer hardware

This class includes general-purpose electronic data processing equipment (or computer hardware) and systems software for that equipment, as long as they were acquired before March 23, 2004 or after March 22, 2004 and before 2005.

This class may also include business vehicles and some passenger vehicles.

Class 10.1 (30%): Passenger vehicles not included in Class 10

Passenger vehicles included in Class 10.1 are those purchased in the current fiscal period that cost more than $30,000 before GST/HST and PST.

Each vehicle in this class must be indicated separately.

Class 12 (100%): Tools, kitchen utensils, medical and dental equipment

Class 12 includes a variety of equipment such as tools, medical and dental instruments and kitchen utensils that cost less than $500 and were purchased after May 1, 2006.

Class 14 (Variable): Patents, franchises, concessions

Patents, franchises and concessions are also included in the CCA. The amount is determined based on the lowest of the following:

The total capital cost of each asset spread out over its lifespan
The undepreciated capital cost of the asset included in the class at the end of the tax year

Class 16 (40%): Taxis, rental vehicles, arcade games

Class 16 includes several different types of assets:

  • Taxis
  • Vehicles used in a daily car rental business
  • Coin-operated games and pinball machines

In order to be eligible for this CCA class, the assets must have been purchased after February 15, 1984.

Freight trucks and tractors with a gross vehicle weight of over 11,788 kg that were acquired after December 6, 1991 can also be included in this class.

Class 29 (Variable): Eligible machinery and equipment

CCA Class 29 applies to eligible machinery and equipment used to manufacture and process goods for sale or lease in Canada. The assets must have been acquired after March 18, 2007 and before 2016.

The business tax deduction for this class is done using the straight-line method, meaning that 25% should be claimed the first year, 50% the second year and 25% the third. If you do not claim the full amount within three years, any remaining amounts can always be claimed in a later year.

Class 43.1 and 43.2: Electrical vehicle charging stations (EVCSs)

CCA Classes 43.1 and 43.2 include electrical vehicle charging stations (EVCSs). The classes are differentiated by the type of charging station in question.

Class 43.1 (30%)

Charging stations included in Class 43.1 are those that supply between 10 and 90 kilowatts of continuous power. This class is for assets acquired after March 21, 2016 that were not used before March 22, 2016.

Class 43.2 (50%)

Class 43.2 applies to electrical vehicle charging stations that are designed to supply 90 kilowatts or more of continuous power. Like the previous class, this is for assets acquired after March 21, 2016 that were not used before March 22, 2016.

Class 46 (30%): Data network infrastructure equipment

Class 46 complements Class 8 (see above). It includes data network infrastructure equipment and related systems software acquired after March 22, 2004.

Class 50 (55%): Data processing equipment and systems software

This class includes computer equipment, related systems software and ancillary data processing equipment acquired after March 18, 2007.

Take care not to include assets covered by Class 29 or the following:

  • Electronic process control or monitoring equipment
  • Electronic communications control equipment
  • Systems software for the equipment listed above
  • Data handling equipment (except ancillary data processing equipment)

Class 53 (50%): Machinery and equipment acquired between 2015 and 2026

All eligible machinery and equipment acquired after 2015 and before 2026 that is used to manufacture and process goods for sale or lease in Canada can be included in Class 53.

Need help with your business tax returns?

That concludes our overview of CCA classes that could be useful for your business. With a thorough understanding of these classes, you can use them to your advantage when filing your taxes.

Do you need help filing your T2 tax return? T2inc specializes in corporate taxation. Our experienced tax accountants will be happy to guide you through the process.

Get your free quote today.

Filters by categories

Taxation Corporate tax T2inc.ca