When you buy something durable for your business, a van, a compressor, a laptop, you usually cannot deduct the whole cost in one year. Instead you claim capital cost allowance, or CCA, which is the CRA's name for tax depreciation. Each type of asset sits in a class with its own annual rate, and you write off a percentage of the remaining value every year. In the year you buy an asset, the half-year rule normally lets you claim only half the usual amount.
How CCA works
CCA is declining-balance for most classes. You group assets into the right class, add up the cost, and each year deduct the class rate against the undepreciated balance. Next year you apply the rate to what is left, and so on, so the deduction tapers off over time rather than stopping. You are not forced to claim the full CCA every year; you can claim less or none to save the deduction for a higher-income year, which is a useful planning lever for a trade with lumpy profits.
The classes a tradesperson meets most
- Class 8, 20%. The catch-all for durable tools, equipment, furniture and machinery that does not fit a more specific class. A $5,000 compressor or a set of major power tools usually lands here.
- Class 10, 30%. Most motor vehicles, including passenger vehicles costing $39,000 or less before tax, plus light trucks, cargo vans and work vehicles. All Class 10 vehicles are pooled together in one class.
- Class 10.1, 30%. Passenger vehicles costing more than $39,000 before tax (the 2026 cap, up from $38,000). The cost you can claim CCA on is capped at $39,000, and each such vehicle goes in its own separate class. You cannot claim a terminal loss when you sell a Class 10.1 vehicle.
- Class 50, 55%. Computers, laptops and most systems software. The fast 55% rate reflects how quickly this kit dates.
A small tool or consumable that costs little is usually just expensed in full in the year of purchase rather than capitalised, which is simpler and faster than running it through a class.
The half-year rule
In the year you buy an asset, you can normally claim CCA on only half the addition, as if you had owned it for half the year. So a $10,000 Class 8 tool at 20% would give a $2,000 deduction in a full year, but only $1,000 in the year of purchase because of the half-year rule. From the next year the full balance is in play. The rule stops businesses front-loading a full year of depreciation on something bought in December.
Some incentives can change this. An accelerated investment incentive has at times suspended the half-year rule and boosted the first-year claim on new property, and certain classes such as computers have had temporary full first-year write-offs. These incentives are time-limited and the rules shift, so confirm what is in force for your purchase year with the CRA or a CPA before you bank on a faster write-off.
A worked example
A plumber buys a $30,000 cargo van (Class 10, 30%) and a $4,000 laptop-and-software bundle (Class 50, 55%) in 2026.
- Van: 30% of $30,000 is $9,000, halved to $4,500 in year one under the half-year rule.
- Laptop: 55% of $4,000 is $2,200, halved to $1,100 in year one.
- Year-one CCA: about $5,600, with the balances carrying forward to be written down at the class rates next year.
Common mistakes
- Deducting the full cost of a capital asset. A van or major tool is depreciated through CCA, not expensed in one hit. Only small tools and consumables get the full write-off.
- Forgetting the half-year rule. First-year CCA is usually half the normal amount. Budgeting for a full year overstates the deduction.
- Putting a $45,000 truck in Class 10. Over the $39,000 cap it is Class 10.1, in its own class, with the cost capped and no terminal loss on sale.
- Claiming personal use. CCA and vehicle costs are claimed on the business-use percentage only, backed by a logbook.
- Always claiming the maximum. In a low-profit year, claiming less CCA preserves the deduction for a year when it is worth more.
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