Recapture is previously claimed capital cost allowance added back to income when an asset is sold for more than its remaining tax value, reversing excess depreciation.
When you sell a depreciable asset for more than the undepreciated capital cost left in its class, it means you deducted more CCA over the years than the asset actually depreciated. The excess is recaptured, added back to your income in the year of sale, and taxed as ordinary income (not as a capital gain).
Recapture is a frequent surprise on the sale of equipment, vehicles or a building, and on winding up a business, because it can turn a quiet year into a taxable one. Planning the timing of asset sales, or offsetting them with new purchases in the same class, can manage the impact.
A class has $5,000 of UCC left, but you sell the asset for $8,000. The $3,000 excess is recapture, added to your income and taxed at your regular rate in the year of sale.
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