Capital cost allowance is the tax deduction that lets you write off the cost of business assets over several years instead of all at once, at rates set by asset class.
You cannot deduct the full cost of durable assets, vehicles, equipment, computers, buildings, in the year you buy them. Instead you claim CCA, a percentage of the asset's remaining value each year, at a rate fixed by its class. Class 8 (general equipment) is 20%, Class 10 (vehicles) is 30%, Class 50 (computers) is 55%.
CCA is calculated on a declining balance and is optional: you can claim less than the maximum, or none, in a low-income year to preserve the deduction for a higher-income year. The half-year rule generally limits the first-year claim, though recent immediate-expensing incentives have changed this for many assets.
You buy $10,000 of office furniture (Class 8, 20%). With the half-year rule you claim CCA on $5,000 in year one, so $1,000. In year two you claim 20% of the remaining $9,000 balance, and so on down the declining balance.
Primary source
- Income Tax Act, s. 20(1)(a) Capital cost of property
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HST combines the 5% federal GST with a provincial component in five participating provinces. For 2026 the combined rates are 13% in Ontario, 15% in New Brunswick, Newfoundland and Labrador, and Prince Edward Island, and 14% in Nova Scotia since 1 April 2025. Elsewhere you charge the 5% GST alone, or GST plus a separate provincial tax. The rate follows the province of supply, not where your business sits.
Most enquiries are settled without a phone call in My Account, My Business Account or Represent a Client, where assessments, balances, slips and CRA mail all sit. When you need a person, use the enquiries line for your programme from the contact page on canada.ca, and have your social insurance or business number plus a figure from a recent return ready for identity checks. Written enquiries go to the tax centre named on your notice of assessment.
Net income is the line on the T1 reached after total income is reduced by deductions such as RRSP contributions, union dues, child care costs and support payments. It is not take-home pay, and not the same as taxable income, which subtracts a further set of amounts. Net income matters because benefits and credits are tested against it, so a deduction that lowers it can increase the Canada child benefit, the GST/HST credit and other income-tested amounts.
Most goods and services sold in Canada are taxable and carry GST or HST at the rate for the province of supply. Two other categories exist. Zero-rated supplies, such as basic groceries, prescription drugs, medical devices and exports, are taxed at nil while the seller still claims input tax credits. Exempt supplies, such as most residential rent, health care and many financial services, carry no tax and give no input tax credit.
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Reviewed and fact-checked by Udit Gupta
Ex Big 4 — Ernst & Young, Deloitte · International & cross-border tax specialist · CPA Canada (In-Depth Tax Program) · Chartered accountant, ICAI & MIA
Udit Gupta has over 15 years of experience helping corporations and business owners with corporate structuring, corporate tax filing, bookkeeping, payroll, GST/HST, cross-border tax and CRA representation. Big 4 trained at Ernst & Young and Deloitte, and qualified as a chartered accountant in India and again in Malaysia, he founded his accounting practice in 2014 to serve entrepreneurs, startups and non-resident business owners across Canada. View full member bio.
The Institute of Chartered Accountants of India — member 521458 · Malaysian Institute of Accountants — member CA 44667 · Ex Big 4: Ernst & Young, Deloitte · CPA Canada (In-Depth Tax Program), completed 19 Dec 2023 · In-Depth GST/HST Part I, 12 Jul 2022 · Part II, 5 Jul 2023
Editorial policy. Every page is researched against primary sources — the Income Tax Act, CRA publications and CPA Canada guidance — and every rate or threshold is stated with the tax year it applies to.
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