Bookkeeping Basics · Edmonton
Capital cost allowance explained, class by class.
You can't deduct a $40,000 van in the year you buy it. CRA spreads it out through capital cost allowance. Here's how CCA classes, rates and the half-year rule actually work.
By the Plum team- Updated Oct 2026
- 10 min read
- Capital cost allowance (CCA) is how you deduct long-lasting assets for tax, a bit at a time.
- Each asset goes into a class with its own rate, usually on a declining balance.
- The standard half-year rule halves the claim in the year you buy. Temporary incentives have changed this for many purchases, so check current rules.
- Selling assets can trigger recapture (added to income) or a terminal loss (a deduction).
Buy a laptop, a work van or a new set of salon chairs and you'll quickly learn that you can't write the whole thing off this year. Instead, Canada uses capital cost allowance. This is capital cost allowance explained in plain English: how assets are grouped, what rates apply, how the first-year rule works, and what happens when you sell.
CCA is a tax calculation, not something you do in your bookkeeping software day to day. But understanding it helps you make smarter buying decisions and read your tax return with confidence. Your accountant will prepare the actual claim; this is about knowing what they're doing and why.
1What capital cost allowance is
When you buy something that will last more than a year and help you earn income for several years, CRA treats it as a capital property. The cost isn't deducted as an expense right away. Instead, you claim a portion of it each year as capital cost allowance.
CRA groups assets into numbered classes. Each class has a maximum rate, and most use a declining balance: you claim the rate against whatever's left in the class each year, so the claim gets smaller over time.
Common CCA classes for small businesses
| Class | Rate | Typical assets |
|---|---|---|
| Class 8 | 20% | Furniture, fixtures, most equipment and machinery not in another class |
| Class 10 | 30% | Vans, trucks and most vehicles used in the business |
| Class 10.1 | 30% | Passenger vehicles costing more than CRA's prescribed limit (each in its own class) |
| Class 12 | 100% | Small tools costing less than $500, some software and certain other items |
| Class 13 | Straight-line | Leasehold improvements, spread over the lease term |
| Class 50 | 55% | Computers and their system software |
These are the classes we see most often in Edmonton service businesses and trades. There are many more, and some assets can be tricky to classify. The prescribed limit for Class 10.1 changes from time to time, so check CRA's current figure before buying a car.
2How the calculation works: UCC and the half-year rule
For each class, you track the undepreciated capital cost (UCC): what's left to claim. Each year:
- Start with the opening UCC from last year.
- Add the cost of assets bought this year (net of any GST input tax credits you claimed).
- Subtract proceeds from assets sold (up to their original cost).
- Apply the half-year rule to net additions, under the standard rules.
- Multiply by the class rate to get your maximum CCA.
- Closing UCC equals the balance before CCA, minus the CCA you claim.
3A worked example: a work van and a laptop
Say you're a GST-registered electrician in Edmonton. In year one you buy a work van for $40,000 plus $2,000 GST, and a laptop for $2,000 plus $100 GST. You claim both GST amounts as input tax credits, so the capital cost is $40,000 for the van and $2,000 for the laptop.
The purchase in your books
| Account | Debit | Credit |
|---|---|---|
| Vehicles (fixed asset) | $40,000.00 | |
| Computer equipment (fixed asset) | $2,000.00 | |
| GST/HST payable (input tax credits) | $2,100.00 | |
| Bank / vehicle loan | $44,100.00 | |
| Total | $44,100.00 | $44,100.00 |
Neither asset touches your expenses. If you financed the van, the monthly payments are split between principal and interest, as covered in how to record a loan payment.
The CCA schedule under the standard half-year rule
| Van (Class 10, 30%) | Laptop (Class 50, 55%) | |
|---|---|---|
| Year 1 CCA | $40,000 × 50% × 30% = $6,000 | $2,000 × 50% × 55% = $550 |
| UCC after year 1 | $34,000 | $1,450 |
| Year 2 CCA | $34,000 × 30% = $10,200 | $1,450 × 55% = $797.50 |
| UCC after year 2 | $23,800 | $652.50 |
| Year 3 CCA | $23,800 × 30% = $7,140 | $652.50 × 55% = $358.88 |
| UCC after year 3 | $16,660 | $293.62 |
Notice the declining balance never quite reaches zero. The remaining UCC just keeps getting claimed, or gets dealt with when the asset is sold.
One more wrinkle: if the van is also used personally, only the business-use percentage of the CCA is deductible. That's where a vehicle log comes in; see our vehicle log guide.
4Why you might claim less than the maximum
Because CCA is optional, you don't have to use it in a year when you don't need it. If your income is low this year and you expect it to be higher next year, holding back CCA leaves more UCC to claim later, when the deduction saves more tax. For sole proprietors it can also matter for how your income interacts with credits and benefits. It's a decision to make with your accountant each year, not something to set and forget.
5Selling an asset: recapture and terminal loss
When you sell an asset, you subtract the lesser of the sale price and the original cost from the class's UCC.
- Recapture: if that pushes the UCC below zero, the negative amount is added to your income. Say you sell the van early in year 3 for $30,000 when its UCC is $23,800, and it's the only asset in the class. UCC becomes negative $6,200, and $6,200 of recapture is added to your income.
- Terminal loss: if you sell the last asset in a class and UCC is still positive, the remaining balance can generally be deducted. Class 10.1 vehicles are an exception and don't get a terminal loss.
- Capital gains: if you sell for more than the original cost, the excess over cost is a capital gain, not recapture.
6Where CCA shows up
- Sole proprietors calculate CCA on the T2125, in the capital cost allowance section, and deduct it from business income.
- Corporations claim CCA on the T2 using Schedule 8, and add back the accounting depreciation from their financial statements. Our post on depreciation vs CCA shows how the two sit side by side.
7CCA and QuickBooks Online
QuickBooks Online doesn't calculate CCA. What your books need to do is make the calculation easy and accurate:
- Record each asset purchase to a fixed asset account, not an expense account.
- Split out the GST so the asset is recorded at its cost net of input tax credits.
- Attach the purchase invoice, with the date the asset was put into use.
- Record disposals (sales, trade-ins, write-offs) with the proceeds.
- Maintain a simple fixed asset list: description, date, cost, CCA class, business-use percentage.
8Common CCA mistakes
1. Expensing assets
Booking a $3,000 laptop to Office supplies deducts it all at once. That's not how CCA works, and it's a common adjustment at year end.
2. Forgetting the GST
If you claimed the input tax credit, the capital cost is the pre-GST price. Including GST in the asset's cost means claiming it twice.
3. Wrong class
A $45,000 car isn't Class 10 if it's over the passenger vehicle limit. Classification affects your rate and what happens when you sell.
4. Ignoring trade-ins
Trading in an old vehicle is a sale. The trade-in value is proceeds of disposition and has to come off the UCC.
9Before you buy a big asset
Plum keeps fixed asset records clean and ready for CCA for businesses across Edmonton, St. Albert, Sherwood Park and Leduc, and works with a partner CPA on year-end returns. If you're planning a big purchase, book a call first and we'll make sure it's recorded properly from day one.
10Questions people ask
What is capital cost allowance?
Capital cost allowance (CCA) is the tax deduction CRA allows for the cost of long-lasting business assets like vehicles, equipment, computers and furniture. Instead of deducting the full cost in the year you buy, you claim a percentage each year based on the asset's CCA class.
What is the half-year rule for CCA?
Under the standard half-year rule, you can only claim CCA on half of your net additions to a class in the year you buy them. It reflects that most assets aren't owned for the full first year. Temporary incentives have changed this for many assets in recent years, so check what applies to your purchase year.
Do I have to claim the maximum CCA every year?
No. CCA is optional. You can claim anything from zero up to the maximum. Claiming less leaves more undepreciated capital cost to claim in future years, which can make sense in a low-income year.
What is CCA recapture?
Recapture happens when you sell assets in a class for more than the class's remaining undepreciated capital cost (up to the original cost). The excess is added back to your income, because you claimed more CCA than the asset actually lost in value.
Is CCA the same as depreciation?
No. Depreciation (or amortization) is the accounting estimate in your financial statements. CCA is the tax deduction calculated using CRA's classes and rates. Most businesses have both, and they rarely match.
Want this off your plate?
Flat-fee bookkeeping for Edmonton small businesses. Month to month, no surprises.
Book a free 15-min callThis article is general information for Alberta businesses and isn't tax or legal advice. Rules and thresholds change, so confirm your situation with your accountant or CRA.