Capital cost allowance (CCA),
Definition of Capital cost allowance (CCA):
A Canadian tax value assessment on capital assets. The allowance is one method of depreciation expense that can be taken each year. There are several asset classifications and multiple rates under each classification.
Capital Cost Allowance (CCA) is an annual deduction in the Canadian income tax code that can be claimed on depreciable assets when figuring taxable income under the umbrella of the Income Tax Act. Claimed as a percentage of the asset's cost for a number of years, the CCA is typically allowed for purchases that are expected to last for several years, such as buildings. However, the deduction is not allowed in full for a single year; rather, the full cost is spread out over a number of years on tax returns. .
CCA status is not granted for all business assets. There is an important list of exclusions that must be considered when calculating whether a business is eligible for CCA. Some exclusions include land, property that was bought without the intent of producing income, and artwork bought after Nov. 12, 1981.
How to use Capital cost allowance (CCA) in a sentence?
- The CCA is allowable when purchases are anticipated to last for years, such as equipment and machinery.
- When figuring taxable income, taxpayers can claim annual deductions on their depreciable assets through the Capital Cost Allowance (CCA).
- Land does not count as a qualified CCA deduction. There are other important exclusions as well. .
- Businesses can claim from zero to the maximum amount of CCA in any given year, and carry over any amount less than the maximum to claim for the next year.
- For certain purchases, the full value can be deducted in the first year instead of having to spread it out over many years.
Meaning of Capital cost allowance (CCA) & Capital cost allowance (CCA) Definition