Corporate tax

The more your business grows, the more assets your company will have that will contribute to its success. For example, you could purchase buildings for manufacturing, machinery, vehicles, and more.

But did you know that you can deduct the cost of these assets from your income over several years, reducing your tax burden? In fact, this annual deduction is called the capital cost allowance (CCA) and can be claimed when you file your T2 income tax return.

There are several CCA classes that govern the depreciation rate applicable to each asset of a corporation.

Here are the main classes of depreciable property for companies and their applicable rates.

Class 1: Buildings acquired after 1987

Depreciation rate: 4%

Class 1 includes most buildings acquired for your incorporated business after 1987 and some added parts or renovations done 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 used to manufacture or process goods for sale or lease, the rate is increased to 10%.
  • For any other buildings used for non-residential purposes, the rate is increased to 6%.

Class 6: Wooden buildings, fences and greenhouses

Depreciation rate: 10%

This class includes buildings made of frame, log, stucco on frame, galvanized iron, or corrugated metal. One of the following conditions also has to apply:

  • The building was acquired before 1979 
  • The building is used to generate farming or fishing income
  • The building has no footing or foundation support below ground level

Some fences or greenhouses may also be included in class 6.

Class 8: A company’s various assets

Depreciation rate: 20%

Class 8 includes assets and equipment purchased for your business not included in other classes. This includes, among other things:

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

Class 10: Motor vehicles and computer hardware

Depreciation rate: 30%

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

You can also include motor vehicles and some passenger vehicle.

Class 10.1: Passenger vehicles excluded from class 10

Depreciation rate: 30%

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 must be indicated separately in this class.

Class 12: Tools, kitchen utensils, medical and dental equipment

Depreciation rate: 100%

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

Class 13: Lease interest

Depreciation rate: Variable

You may be eligible for a capital cost allowance on your lease interest but the maximum deduction rate depends on the type and terms of the lease.

Class 16: Taxis, short-term leased automobiles, coin-operated video games

Depreciation rate: 40%

Class 16 includes different types of property:

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

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

Freight trucks and tractors with a gross vehicle weight over 11,788 kg purchased after December 6, 1991 may also be included in this class.

Class 17: Parking lots and similar areas

Depreciation rate: 8%

Class 17 includes parking lots and similar surfaces such as roads, sidewalks, runways, storage areas, etc.

Class 43.1 and 43.2: Electrical vehicle charging stations

CCA classes 43.1 and 43.2 includes electrical vehicle charging stations. There are two categories based on the type of charging station.

Class 43.1

Depreciation rate: 30%

Charging stations included in class 43.1 are those that supply between 10 and 90 kilowatts of continuous power. It also includes property acquired for use after March 21, 2016 that was not used before March 22, 2016.

Class 43.2

Depreciation rate: 50%

Charging stations set up to supply 90 kilowatts or more of continuous power are included in class 43.2. As in the previous class, property acquired for use after March 21, 2016 that was not used before March 22, 2016 can be included in this category.

Class 46: Data network infrastructure equipment

Depreciation rate: 30%

Class 46 is complementary to class 8 (see above) and includes data network infrastructure equipment and related systems software acquired after March 22, 2004.

Class 50: Computer hardware and operating software

Depreciation rate: 55%

Computer equipment, operating software for this equipment and ancillary information processing equipment acquired after March 18, 2007 are included in this class.

Make sure not to include property included in class 29 nor the following items:

  • Electronic process control or monitor equipment
  • Electronic communications control equipment
  • Systems software for equipment referred to above
  • Data handling equipment (except equipment ancillary to computer equipment)

Class 53: Machinery and equipment acquired between 2015 and 2026

Depreciation rate: 50%

Machinery acquired after 2015 (but before 2026) used in Canada for the manufacturing or processing of goods for sale or lease can be included in class 53.

Need assistance with your business tax returns?

You now have a better idea of the different CCA classes. This knowledge will help you get better tax benefits when you file your income tax returns.

Do you need assistance with the filing of your T2 income tax return? At T2inc, corporate tax and accounting are part of our expertise. Our experienced tax accountants can help you throughout the entire process.

Get a free quote today.

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