Business cannot write off the cost of capital assets, such as computers, furniture and etc, immediately upon purchase. The cost has to be spread over several years. For tax purposes, this write-off, which is referred to as Capital cost allowance (CCA), is subject to strict rules and limitations.
Assets are grouped into classes. Revenue Canada specifies the maximum rates allowed for each asset class, called Capital cost allowance rates. The capital cost allowance rate is applied to the undepreciated balance in the asset class at the end of the year to arrive the maximum capital cost allowance that can be claimed for that year.
Some typical Revenue Canada rates and classes are:
| Rates | Class | |
| Automobiles | 30% | 10 |
| Computer hardware | 45% | 45 |
| Computer software | 100% | 12 |
| Furniture and fixtures | 20% | 8 |
Only one-half of the normal allowance can be claimed in the fiscal period the asset is acquired (there are some exceptions) where the fiscal period is less than 365 days the amount that would otherwise be claimed has to be pro-rated, based on the number of days in that period.
On disposition of assets, a terminal loss could result should the proceeds be less than any remaining undepreciated capital cost (UCC). A recapture may occur should the proceeds be more than any remaining undepreciated capital cost (UCC).
