Yes, small business owners in Canada can deduct the declining value of business assets through a tax deduction called Capital Cost Allowance (CCA). Instead of deducting the full cost of an asset in the year you buy it, CCA lets you spread that deduction across multiple years using fixed CRA-approved rates. This means if you purchase equipment, vehicles, or machinery for your business, you can claim a portion of the cost on your tax return each year, which reduces your taxable income and lowers your tax bill. Capital Cost Allowance is the CRA's term for depreciation deductions on business assets. When you buy something for your business that will last more than one year (called a capital asset), you can't simply deduct the entire purchase price in year one. Instead, the CRA groups assets into "classes" and assigns each class a maximum depreciation rate. You apply this rate to the remaining value of the asset each year. For example, if you buy computer equipment for $5,000, the CRA class 50 applies a 55% depreciation rate. In year one, you can deduct $2,750. In year two, you deduct 55% of the remaining $2,250, and so on.
Yes, this CCA rule may apply to you. Vehicles for business use fall into Class 10 with a 30% depreciation rate. However, you can only claim CCA on the portion used for business (not personal use), and you must prorate for the portion of the year it was owned. Keep detailed records of business vs. personal mileage.
CCA spreads the deduction of a capital asset over multiple years, while some business expenses (like office supplies under $500) can be deducted fully in the year purchased. The CRA determines which assets must use CCA and which can be immediately expensed based on asset class and purpose.
No. CCA is optional, meaning you can claim any amount up to the maximum allowable rate. This flexibility lets you claim less CCA in profitable years and more in lower-income years to manage your tax liability strategically.
When you sell an asset, the sale price is subtracted from the CCA pool. If the pool balance goes negative, you claim "recapture" as income. If the pool has a remaining positive balance when all assets in that class are sold, you can claim a "terminal loss."
No. Land itself is not eligible for CCA because land doesn't depreciate. However, if you own a building used for business, the building structure (not the land) may qualify for Class 1 CCA at 4% per year.