This guide reflects the rules for the tax year ending December 31, 2025.
It applies to individuals filing their 2025 tax return in 2026.
Capital Cost Allowance (CCA) allows self-employed Canadians to deduct the cost of business assets over time. Instead of deducting the full cost in the year of purchase, you claim a percentage each year based on CRA’s CCA classes.
This guide explains how CCA works, which assets qualify, and how to calculate your deduction.
🧭 1. What Is Capital Cost Allowance (CCA)? #
CCA is the tax system used to depreciate business assets over time.
You must use CCA when you purchase:
- Computers
- Vehicles
- Tools
- Furniture
- Equipment
- Machinery
These assets provide value for multiple years, so CRA requires you to deduct them gradually.
CCA is claimed on Form T2125.
🧱 2. What Assets Qualify for CCA? #
You can claim CCA on assets that:
- Are used for business
- Have a useful life longer than one year
- Are capital in nature (not consumable supplies)
Examples:
- Laptops, monitors, printers
- Cameras and production equipment
- Vehicles used for business
- Office furniture
- Tools and machinery
- Software (certain types)
🧮 3. How CCA Is Calculated #
CCA is calculated using:
\[ \text{Undepreciated Capital Cost (UCC)} \times \text{CCA rate} \]Important rules:
✔ Declining balance method #
You apply the rate to the remaining balance each year.
✔ Half-year rule #
In the year you acquire an asset, you can only claim 50% of the normal CCA.
✔ Business-use percentage #
If an asset is used partly for personal use, you must prorate.
📊 4. Common CCA Classes for Self-Employed Canadians #
| Asset | CCA Class | Rate | Notes |
|---|---|---|---|
| Computers, laptops | Class 50 | 55% | Most common for freelancers |
| Vehicles | Class 10 | 30% | Standard vehicles |
| Passenger vehicles > $36,000 | Class 10.1 | 30% | Luxury vehicle rules apply |
| Tools & equipment | Class 8 | 20% | Furniture also in Class 8 |
| Software (certain types) | Class 12 | 100% | Fully deductible in year of purchase |
| Zero-emission vehicles | Class 54 | 30% | Special rules apply |
🧮 5. Example: CCA on a Laptop (Class 50) #
You buy a laptop for $2,000 in 2025.
Year 1 (2025) #
Half-year rule applies:
\[ 2,000 \times 0.55 \times 0.5 = 550 \]UCC at end of year:
\[ 2,000 - 550 = 1,450 \]Year 2 (2026) #
\[ 1,450 \times 0.55 = 797.50 \]UCC at end of year:
\[ 1,450 - 797.50 = 652.50 \]🚗 6. Example: CCA on a Vehicle (Class 10) #
You buy a vehicle for $30,000 and use it 40% for business.
Year 1 (2025) #
\[ 30,000 \times 0.30 \times 0.5 = 4,500 \]Business portion:
\[ 4,500 \times 0.40 = 1,800 \]You can deduct $1,800 in 2025.
🧾 7. When Should You Claim CCA? #
CCA is optional.
You may choose to:
- Claim the full amount
- Claim a partial amount
- Claim nothing
Why claim less?
- To avoid reducing RRSP room
- To avoid triggering instalments
- To avoid lowering net income for loans or mortgages
📉 8. CCA and Asset Disposals #
If you sell an asset:
- You must reduce the UCC by the proceeds
- You may have a recapture (taxable)
- Or a terminal loss (deductible)
Example:
- UCC: $1,000
- You sell the asset for $1,500
You have a recapture of $500, which is taxable.
❓ 9. Frequently Asked Questions #
Can I claim CCA on used equipment? #
Yes — based on the purchase price.
Can I claim CCA on my home office furniture? #
Yes — if used for business.
Can I claim CCA on a vehicle used partly for personal use? #
Yes — prorate based on business-use percentage.
Do I need receipts? #
Yes — CRA can request them for up to six years.
Where do I report CCA? #
On Form T2125, under the CCA section.
🔗 10. Related Guides #
- Self-Employed Taxes in Canada
- Self-Employment Tax Deductions
- Self-Employment Expenses
- CPP for Self-Employed Canadians
