Yesterday we discussed claiming business expenses. With those expenses, you can claim the full amount in the year the expense happened. While also part of the expenses used to calculate net income (or loss), some items are subject to Capital Cost Allowance rules.

Capital Cost Allowance is a set of rates stating the amount you can claim each year on a depreciable property used for business activities. In the first year, you can only claim based on half the amount paid. This is in place since if you acquired the equipment during the year, there is not a full year of depreciation.

For example, say you bought a desk for $500. This falls under CCA’s Class 8, “Other Property”. Class 8 has a rate of 20%.

• First Year $250 (half of $500) x 20% = $50 expense claim. This leaves a value of $450 next year.
• Second Year $450 x 20% = $90 expense claim. This leaves a value of $360 next year.
• Third Year $360 x 20% = $72 expense claim. This leaves a value of $288 next year.
• You continue depreciating the desk this way until you are at $0

These calculations are done in Area A and Area B on page 4 of the T2125 form.

For a home business, the following four classes would likely be of the most interest to you:

• Computer equipment and systems software Class 50 (55%) (100% from Jan 27, 2009 to Jan 31, 2011 – half year rule does not apply)
• Data Network Equipment – Class 46 (30%)
• Small tools ($500 limit) – Class 12 (100%)
• Other Property (furniture, appliances, fixtures, machinery, and equipment) – Class 8 (20%)

You can find all classes of CCA on the CRA’s website.

As the claimable part is calculated with expenses, this is another case where you can claim expenses that exceed your business income.

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Related Posts:

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