Capital Cost Allowance Classes and CCA Rates: How to Classify Your Corporation's Assets

Your corporation buys a pickup truck. The invoice is paid this year, but the tax rules won't let you deduct the full price at once. Because the truck will serve the business for years, its cost is deducted a little at a time, over several years. That spread-out deduction is called capital cost allowance (CCA).

Not every asset is deducted at the same pace. To set that pace, the rules sort assets into CCA classes, and each class has its own CCA rate, the percentage your corporation can deduct each year. A pickup truck is deducted at 30%, for example, and a building at 4%.

This article covers the CCA classes a small business in Canada runs into most often and their rates, then shows where each of your purchases belongs, with the rules that apply in 2026.

What is capital cost allowance (CCA)?

In Canada, capital cost allowance (CCA) is the amount a corporation can deduct from its income each year for the cost of a long-lasting asset used to earn that income. Instead of expensing the purchase all at once, the tax rules spread the deduction over several years, at a rate set by regulation.

CCA stands for capital cost allowance. The Canada Revenue Agency (CRA) uses the abbreviation on all its forms, and it's the one you'll see on your T2 tax form.

The dividing line runs between what is used up within the year and what lasts. Rent or fuel count among your tax-deductible business expenses in the year they're incurred, while a desk or a vehicle serves for years, and its cost is deducted at the same pace.

How is capital cost allowance different from accounting depreciation?

Your financial statements already include depreciation, for which your accountant estimates each asset's useful life and picks a method, often the same amount every year. The tax rules ignore that calculation. On the return, accounting depreciation is added back to income, and CCA is deducted in its place.

The CCA rate doesn't depend on your business or on how fast the asset actually wears out, and it's the same for every corporation that owns an asset of the same class. CCA is tax depreciation, in other words, and the two figures rarely match. That gap is one of the differences between accounting and taxation, and it's normal.

Which assets are depreciable property?

Depreciable property is a long-lasting asset your corporation acquired to earn income. What accounting calls a capital asset becomes, for tax purposes, depreciable property that is assigned a class. Furniture, computer equipment, vehicles and buildings all qualify, as do some intangible assets such as goodwill bought along with a business.

Land is the exception, because it doesn't wear out and the rules never allow it to be depreciated. Leased equipment isn't depreciable property either, since your corporation doesn't own it. The lease payments are generally deducted as an expense, with no CCA, so the choice to buy or lease business equipment changes how the cost is deducted.

How do CCA classes work?

A CCA class groups assets of the same kind and gives them one rate. Rather than tracking every chair and every desk, the rules treat all of your corporation's furniture as a single pool, Class 8, depreciated at 20% a year. The capital cost allowance classes are set out in federal regulations, and the CRA publishes the list. It's long, but a small business only ever uses a handful.

In most classes, the rate applies to what is left to deduct, not to the purchase price. This is the declining-balance method. The remaining amount, the undepreciated capital cost (UCC), shrinks as your corporation claims CCA, so the deduction is larger in the early years and then tapers off.

The year of purchase follows its own rule. Under a federal law that received Royal Assent on March 26, 2026, most assets acquired after 2024 and available for use before 2030 qualify for an enhanced first-year allowance, the reinstated Accelerated Investment Incentive. It's calculated as if the asset had cost one and a half times its price, which gives $3,000 in the first year on $10,000 of furniture at 20%.

Without that enhancement, the half-year rule counts only half the cost in the year of purchase, and the same deduction drops to $1,000. The half-year rule now applies only to assets that don't qualify for the enhancement.

The calculation is done class by class on Schedule 8 of the T2 return, where your corporation lists the year's purchases and the CCA it claims. The asset also has to be in service, because CCA starts in the tax year the asset becomes available for use, generally the year your corporation starts using it. If the tax year is shorter than 12 months, which is common in a corporation's first year, CCA is generally prorated by the number of days.

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What are the CCA rates for each class?

Capital cost allowance rates run from 4% for a building to 100% for small tools. This table of CCA classes and rates brings together the ones a small business meets most often, with the first-year deduction for an asset bought and available for use in 2026.

These depreciation rates are the ones the CRA publishes for each CCA class, current as of August 31, 2026. The last column assumes an asset that qualifies for the enhanced allowance, which generally rules out an asset previously owned by your corporation or by someone it doesn't deal with at arm's length, such as its controlling shareholder.

The 100% first-year rate, known as immediate expensing, comes with dates too. In Classes 46 and 50, it applies to an asset acquired after April 15, 2024, and available for use before 2027, while Classes 43 and 54 keep it until the end of 2029, after which it steps down.

Which CCA class do your corporation's assets belong in?

An asset's CCA class depends first on what it is, and sometimes on its price or purchase date. Here is where the assets a small business buys most often belong, with the 2026 thresholds.

Behind each line there's a rule, and often a trap. Here they are, by type of asset.

Classes 1, 3 and 6: buildings and land

A building lasts a long time, and its rate shows it. Most buildings acquired after 1987 are depreciated at 4% in Class 1, the lowest rate on the list.

Land has no class at all. When your corporation buys a property, the price is split between the two. On a $500,000 purchase with $150,000 for the land, only the $350,000 for the building is depreciated.

A non-residential building can move up to 6%, or to 10% if 90% or more of it is used for manufacturing, provided nobody used it before March 19, 2007. An older building bought from another owner therefore stays at 4%. To get the 6% or 10% rate, the building also has to be placed in a separate class, through an election the CRA asks you to attach to the return for the tax year of purchase.

Two other building classes still turn up. Class 3, at 5%, holds most buildings acquired before 1988. Class 6, at 10%, covers certain frame, log, stucco-on-frame or metal buildings, for instance one used in farming or fishing or built without footings below ground, along with certain fences and greenhouses. Parking lots, paving and sidewalks go in Class 17, at 8%.

Class 8 (20%): furniture, equipment and signs

This is the default class, where any tangible asset not covered by another class ends up, at 20%. Office furniture, photocopiers and telephone equipment belong here. So does a sign or an outdoor advertising display, as well as any tool costing $500 or more. For a $5,000 sign installed in 2026, the first-year deduction comes to $1,500.

A mistake we often see in files is a computer or a server recorded here. It belongs in Class 50, and the gap is costly. On a $10,000 server bought in 2026, Class 8 gives a $3,000 deduction in the first year. Class 50 gives the full $10,000.

Classes 10, 10.1, 16 and 54: vehicles

For a car, the price decides the class. At $39,000 or less, it joins work trucks in Class 10, at 30%.

Above that price, a passenger vehicle goes into Class 10.1. The rate is still 30%, but it applies only to the first $39,000 before tax for a purchase made in 2026 ($38,000 in 2025). A car bought for $60,000 is therefore depreciated as if it had cost $39,000, and it forms a class of its own.

Selling a Class 10.1 car is another exception. For other assets, selling for more than the balance left to deduct adds an amount to income (recapture), and selling for less can subtract one (a terminal loss). None of that applies to Class 10.1. Your corporation generally deducts half the usual CCA in the year of sale.

An electric or hydrogen vehicle goes into Class 54, as does a plug-in hybrid with a battery of at least 7 kWh. Acquired after 2024 and available for use before 2030, it is deducted in full in the first year, up to $61,000 before tax for a passenger vehicle. A vehicle that received a federal purchase incentive is excluded from Class 54, however, and is classified as an ordinary vehicle.

Class 16, at 40%, covers taxis, vehicles used in a daily car-rental business and freight trucks rated above 11,788 kg.

Your corporation deducts capital cost allowance on a vehicle it owns, even if you also use it for personal trips. That use is handled separately, through the taxable benefit of a company car, which is added to your personal income. If the vehicle is in your name rather than the corporation's, the rule changes. Your corporation can't claim CCA on it, but it can pay you an allowance for the kilometres driven for the business.

Classes 50 and 12: computers and software

Computer equipment has its own class, Class 50, at 55%. It covers computers and their peripherals, servers included, and the systems software follows the machine. For an asset acquired after April 15, 2024, and available for use before 2027, the deduction reaches 100% in the first year. A $2,000 laptop bought and used in 2026 is therefore deducted in full that year.

Application software belongs in Class 12 instead, at 100%, the same class as tools costing less than $500. A subscription, on the other hand, isn't a purchase. What your corporation pays each month for an office suite or online accounting software is generally a current-year expense, with no CCA class.

Class 13: leasehold improvements

Does your corporation rent its premises and pay for renovations itself? Those leasehold improvements have their own class, Class 13, which follows the lease term instead of a rate.

The cost is spread evenly over the years of the lease, including the first renewal period. The period used can't be shorter than 5 years or longer than 40. Work costing $50,000 done at the start of a 5-year lease, with a 5-year renewal option, gives an annual amount of $5,000.

An addition to the leased building falls outside that rule and is treated as a building, most often in Class 1.

Classes 14.1 and 14: goodwill, franchises and other intangibles

When your corporation decides to purchase a company's assets rather than its shares, part of the price often pays for its customer base and reputation. That goodwill goes into Class 14.1, at 5%, along with trademarks and franchises with an unlimited life. Only what is purchased can be depreciated, because the reputation your corporation builds on its own has no cost to record.

Incorporation expenses also go through this class for the portion above $3,000, while the first $3,000 is deducted in the year the expenses are incurred.

A franchise or licence granted for a limited period follows a different rule. It goes into Class 14, and its cost is spread over the life of the right.

Classes 43 and 53: manufacturing and processing equipment

Machinery used mainly to manufacture or process goods for sale or lease has its own classes. Machines acquired since 2026 no longer go into Class 53, at 50%, which is limited to equipment acquired from 2016 to 2025. They go into Class 43, at 30%, generally with a 100% deduction in the first year, provided they become available for use before 2030.

What counts is what the machine does. One that makes goods for sale or lease belongs in Class 43, while equipment used to deliver a service, in a repair shop for example, generally stays in Class 8.

Which capital cost allowance classes apply to specific industries?

Some classes concern only a few trades. If your corporation works in construction, clean energy or technology, one of them may apply to what you buy.

A grant received for a piece of equipment can also reduce the cost on which CCA is calculated, as can certain federal tax credits claimed for its purchase. Remember to mention them along with your purchase invoices.

Other classes no longer take new purchases of the assets shown below and mostly serve to depreciate assets already recorded. Your corporation may still carry one on its Schedule 8 if it owns an older building or equipment bought years ago.

Are CCA classes the same in Quebec?

Yes, for the most part. Revenu Québec uses the same class numbers and the same rates as the CRA, and it also applies the enhanced allowance to assets acquired after 2024. A few differences remain, which its Capital Cost Allowance Guide lets you spot, and they're enough to make the two calculations diverge.

• A new heavy truck used to haul freight is depreciated at 60% in Quebec, in Class 18, compared with 40% federally.
• Quebec has a Class 8.1, at 33 1/3%, for works of art by Canadian artists.
• The election to depreciate certain equipment separately, such as a photocopier, has a $400 threshold in Quebec, compared with $1,000 federally.

A corporation with an establishment in Quebec therefore does the calculation twice, on Schedule 8 for the CRA and on form CO-130.A for Revenu Québec, filed with its CO-17 return. The balance of each class can differ from the federal balance.

Why does asset classification matter on your T2 return?

A wrong class doesn't distort just one year. The wrong rate gives the wrong deduction, and the resulting balance carries forward to the next tax year. The error repeats until someone corrects it, and it resurfaces the day the asset is sold.

Classification also turns on details the invoice doesn't always show. The price of a car relative to the limit, or the share of land in the price of a property, changes the class and therefore the deduction.

At T2inc.ca, we classify your assets as we prepare your return. Among the corporate tax documents to gather, we mainly need your purchase and sale invoices for equipment and, for a first file with us, the previous year's Schedule 8.

Every return is reviewed by an experienced tax accountant. You can file your T2 return online with our team and get your price with no obligation.

This information is provided for educational purposes and does not constitute personalized tax advice. Every situation is different. Consult a CPA about your specific case.

Frequently asked questions about CCA classes

What CCA class is land?

None. Land isn't depreciable property, and no class covers it. When your corporation buys a property, only the part of the price paid for the building goes into Class 1. The land stays at its cost, with no annual deduction.

What CCA class is a website?

No CCA class covers a website as such, so it's classified component by component. Hosting and routine updates are generally current-year expenses. Application software developed for the site, such as an online ordering module, generally goes into Class 12, at 100%. Other lasting costs are classified case by case, generally in Class 14.1, at 5%.

Do I have to claim capital cost allowance every year?

No, CCA is optional. Your corporation can claim less than the maximum, or nothing at all, in a year when its income is low. What it doesn't claim stays in the class balance and is deducted later.

Can I change the CCA class of an asset after filing my T2 return?

Yes, generally by requesting a reassessment of the T2 return, for the years the CRA can still reassess. For a Canadian-controlled private corporation, that period is generally three years after the original notice of assessment for the year. The CCA for that year and the balance for the following years then have to be recalculated, since each tax year starts from the last. It's better to correct early, before the gap carries into several returns.