Corporate Immediate Expensing and CCA Write-Off Calculator
Equipment, a vehicle or computers bought by an Ontario corporation are written off through capital cost allowance rather than deducted outright, and the first year is governed by the half-year rule, the accelerated investment incentive or the immediate expensing measure. Work out the class, the rate, the year one and year two deduction, the closing UCC and the corporate tax the write-off actually saves.
corporate tax saved in year one
—
—
—
—
The Capital Cost, Net of Recoverable HST
| Item | Basis | Amount |
|---|
The UCC and CCA Schedule
| Year | Opening UCC | CCA Claimed | Closing UCC | Tax Saved |
|---|
This Treatment Against the Half-Year Rule Alone
| Feature | As Calculated | Half-Year Rule Only |
|---|
Points That Decide This
What to Do Next
—
Disclaimer: Capital cost allowance is deducted under paragraph 20(1)(a) of the Income Tax Act at the rates prescribed by subsection 1100(1) of the Income Tax Regulations for each class in Schedule II, and is reported on Schedule 8 of the T2 return. Subsection 1100(2) of the Regulations restricts the first-year deduction on net additions, which is the half-year rule, and the accelerated investment incentive and the immediate expensing measure for designated immediate expensing property operate as modifications to that subsection with eligibility and phase-out keyed to the date the property becomes available for use under subsection 13(27). The immediate expensing limit is shared among associated eligible persons or partnerships and is prorated for a short taxation year, and the calculator takes the limit available to this corporation as an input rather than assuming it. Because the enhancement factors and the availability of these measures change with the in-service date, please confirm the factor and the limit that apply to the corporation rather than relying on the defaults shown here. The capital cost of depreciable property is reduced by input tax credits recovered under section 169 of the Excise Tax Act by operation of subsection 248(16) of the Income Tax Act, which is why the HST question changes the answer. A passenger vehicle costing more than the amount prescribed by subsection 7307(1) of the Regulations falls into Class 10.1 by paragraph 13(7)(g), is placed in a separate class under subsection 1101(1af), and is subject neither to recapture under subsection 13(1) nor to a terminal loss under subsection 20(16) on disposition. This calculator does not compute recapture, terminal losses, the proration required by subsection 1100(3) for a short taxation year, the separate-class election in subsection 1101(5q), the leasing property restrictions in subsections 1100(11) to (20), or any provincial variation outside Ontario. Class 13 is modelled as a straight-line write-off over the lease term entered, which approximates rather than reproduces the calculation in Schedule III. Rates, prescribed amounts, thresholds and the corporate tax rate used here are defaults that should be replaced with the figures that apply to the corporation’s own taxation year. This page is general information, not tax advice.
Why the Corporation Cannot Simply Deduct What It Paid
An asset with a lasting benefit is capital, and paragraph 18(1)(b) of the Income Tax Act denies a deduction for it outright. What the corporation gets instead is capital cost allowance, a deduction taken over a number of years at a rate fixed by the class the asset falls into.
That distinction is the whole of the arithmetic on this page. A repair is deducted in the year it is incurred. A machine, a van, a set of laptops or a leasehold fit-out is added to a class, and the class gives back a percentage of the balance each year until the balance is gone or the asset is sold.
Capital cost allowance is permissive, not mandatory. The corporation may claim any amount up to the maximum for the class, or nothing at all. In a loss year it is usually better to claim nothing and leave the undepreciated capital cost intact, because a deduction taken against no income is a deduction wasted while the balance itself never expires.
The CCA Classes Canada Uses, and the Rates That Go With Them
Everything turns on the class. Two assets of the same price bought on the same day can produce very different deductions because one sits in a class written off at fifty-five per cent and the other in a class written off at four.
| Class | Rate | Typical Property | Method |
|---|---|---|---|
| Class 1 | 4% | Buildings acquired after 1987 | Declining balance |
| Class 1 enhanced | 6% or 10% | Eligible non-residential, and manufacturing or processing use | Declining balance |
| Class 8 | 20% | Furniture, fixtures, equipment, machinery not elsewhere listed | Declining balance |
| Class 10 | 30% | Vehicles at or under the passenger vehicle cost limit | Declining balance |
| Class 10.1 | 30% | Passenger vehicles above the prescribed limit, one class each | Declining balance |
| Class 12 | 100% | Tools, utensils, dies, application software under the threshold | Declining balance |
| Class 13 | Term based | Leasehold improvements | Straight line over the lease |
| Class 14.1 | 5% | Goodwill, licences and other former eligible capital property | Declining balance |
| Class 43 | 30% | Manufacturing and processing equipment | Declining balance |
| Class 50 | 55% | Computer hardware and systems software | Declining balance |
| Class 53 | 50% | Machinery and equipment used in manufacturing or processing | Declining balance |
The Class 8 against Class 10 question comes up constantly, and the answer is not a matter of preference. A motor vehicle belongs in Class 10 or, above the prescribed cost limit, in Class 10.1. A trailer, a forklift or a piece of yard equipment that is not a motor vehicle is ordinarily Class 8. Shelving, desks, tills and general equipment are Class 8 as well, which is why the twenty per cent rate ends up carrying most of a small corporation’s asset base.
Computers are the exception worth knowing. General-purpose electronic data processing equipment and its systems software sit in Class 50 at fifty-five per cent, so a set of laptops is written off in a handful of years while a fit-out at twenty per cent takes well over a decade. Application software bought separately is usually Class 12 and comes off far faster still.
The Half-Year Rule, and What It Actually Restricts
Subsection 1100(2) of the Regulations restricts the first-year deduction on net additions to a class to half the amount that would otherwise be allowed. The restriction is not a rate change. The rate stays the same, and it is applied to a base reduced by half the net addition.
Two points inside that sentence do real work. The rule bites on net additions, so additions in a year are reduced by the proceeds of any disposition from the same class before the restriction is worked out, and a class with more disposals than purchases escapes it entirely. And the rule applies only in the year the property first becomes available for use, which is not always the year it was paid for.
An asset that has not become available for use gives no deduction at all. Subsection 13(27) sets out when that happens, and equipment delivered in December but not commissioned until February belongs to the following year. Invoicing the purchase before the year end does not move the deduction, which is the single most common reason a claimed write-off is denied on review.
Immediate Expensing and the Accelerated Investment Incentive
Two measures have overridden the half-year rule in recent years, and both are time-limited in ways that make the in-service date more important than the purchase date.
The accelerated investment incentive suspends the half-year rule and allows an enhanced first-year deduction on eligible property, worked out as a multiple of the normal first-year amount. The enhancement was set at its full level for property becoming available for use within one window and reduced within a later one, on a published phase-out schedule, before the ordinary half-year rule returns. The calculator takes that enhancement as an editable input for exactly this reason.
The immediate expensing measure goes further. For a Canadian-controlled private corporation, designated immediate expensing property that becomes available for use within the eligible period may be written off in full in the first year, up to an annual limit of one and a half million dollars that is shared among associated eligible persons and prorated for a short taxation year. Most classes qualify. The long-lived ones do not, being property in classes 1 to 6, which covers buildings, and in classes 14.1, 17, 47, 49 and 51.
Please confirm the enhancement factor and the immediate expensing limit against the current rules before you file. Both measures have eligibility and phase-out tied to the date the property became available for use, and both have been amended more than once. This calculator deliberately drives them from inputs you can change rather than hardcoding a year’s percentage, because a figure that was right for one in-service date is wrong for another. Where the corporation is claiming either measure, the in-service date should be documented at the time, not reconstructed later.
Where immediate expensing applies and the cost is inside the limit, the effect is that a purchase and a deduction happen in the same year, and the corporation’s corporate tax filing position for that year changes materially. Where the cost exceeds the limit, the excess falls back into the ordinary class and takes the enhanced or half-year treatment on the balance.
HST, Input Tax Credits and the Capital Cost
The capital cost of the asset is not always what the supplier invoiced. Where the corporation is registered and claims an input tax credit on the purchase, the credit reduces the capital cost, so the CCA is computed on the price net of recoverable HST.
Where the corporation is not registered, or the purchase relates to exempt supplies so that no credit is available, the tax stays in the cost and is written off with the asset. On a thirteen per cent rate that difference is thirteen per cent of the entire deduction, which is why the calculator asks the question before anything else.
Partial recovery is common and easy to get wrong. A corporation with both taxable and exempt activity recovers only the portion attributable to commercial use, and only that portion comes out of the capital cost. The share recoverable is an input here so that the two sides stay consistent, because claiming a full credit and also depreciating the full gross cost is a double deduction that a review will find.
Passenger Vehicles and the Class 10.1 Ceiling
A passenger vehicle costing more than the amount prescribed by subsection 7307(1) of the Regulations goes into Class 10.1, and the capital cost for CCA purposes is capped at that prescribed amount regardless of what the corporation paid. The input tax credit is capped on the same basis.
Class 10.1 behaves differently from every other class in three respects. Each vehicle goes into a separate class of its own, so the balances never mingle. There is no recapture on disposition, and there is no terminal loss either, so a vehicle sold above or below its undepreciated capital cost produces neither an income inclusion nor a deduction. And a half-year style deduction is available in the year of disposal rather than nothing at all.
The prescribed ceiling has been raised several times and is set by the year of acquisition, so it is an input on this page rather than a constant. If the question is whether the vehicle should sit in the corporation at all, the corporate vehicle calculator weighs the write-off against the standby charge and operating benefit that come with it.
The Closing UCC, a Sale, and How Much to Claim
The closing undepreciated capital cost is the opening balance plus additions, less the CCA claimed and less the proceeds of any disposition, capped at the original capital cost of the property disposed of. It carries forward indefinitely and is the starting point for the following year.
That balance is where the consequences of a sale show up. Proceeds that reduce the class below zero produce recapture, which is included in income in full under subsection 13(1). A class emptied of all its property while a positive balance remains produces a terminal loss under subsection 20(16), deductible in that year. Neither is calculated here, and both are easy to trigger without noticing when a class is cleared out.
| Situation | Effect on the Class | Tax Result |
|---|---|---|
| Asset bought and available for use | Addition, first-year rule applies | Deduction begins |
| Asset bought, not yet available for use | No addition this year | No deduction |
| Asset sold, balance stays positive | Reduced by the lesser of proceeds and cost | Lower future CCA |
| Asset sold, balance goes negative | Recapture | Income inclusion |
| Class emptied, positive balance left | Terminal loss | Deduction in that year |
| Class 10.1 vehicle sold | Separate class closed | Neither recapture nor terminal loss |
The maximum is rarely the only sensible answer. Where taxable income is already below the small business limit, an extra dollar of CCA saves tax at the small business rate rather than the general rate, and the same dollar of undepreciated capital cost left in the class may be worth more in a later year when income is higher.
Immediate expensing sharpens that choice rather than removing it. Writing an asset off in full in a year of modest income can push the corporation into a loss, which then has to be carried back or forward rather than used, while the same cost spread over several years might have absorbed income at a better rate each time. Please weigh the claim against the corporation’s expected position for the next two or three years before it is settled. Our tax planning work usually starts with exactly this question, and the capital cost allowance guide covers the classes in more detail than a calculator can.
What This Calculator Does Not Cover
- Recapture and terminal loss on disposition, including the income inclusion under subsection 13(1) and the deduction under subsection 20(16)
- Short taxation years, where subsection 1100(3) prorates CCA by the number of days in the year and the immediate expensing limit is prorated as well
- The available-for-use rules in subsection 13(27) and following, which decide the year the addition is recognised at all
- The separate-class election for certain property, which changes the result where an asset is expected to be sold at a loss
- Leasing property and specified leasing property restrictions, which cap CCA on property leased out
- Non-arm’s-length acquisitions, where the capital cost is restricted by the transferor’s cost and history under subsection 13(7)
- Rental property restrictions, which prevent CCA from creating or increasing a rental loss
- Quebec and other provincial differences, including additional deductions and separate provincial incentive regimes
- Investment tax credits and government assistance, which reduce the capital cost and are not modelled here
The write-off is worth having, but only if the class, the date and the first-year rule are right. Our corporate tax return filing service prepares Schedule 8, settles the class for each addition and documents the in-service date while the evidence still exists.
Frequently Asked Questions
CCA classes, the half-year rule and immediate expensing for corporations.
Related Calculators and Guides
More tools for corporate asset purchases, T2 filing and planning.
Get the Class and the In-Service Date Right the First Time
Send us the invoices for the year and we will settle the class for each addition, apply the first-year rule that actually reaches your in-service dates, and prepare Schedule 8 with the balances carried forward properly.