Capital cost allowance (CCA) is the income-tax equivalent of depreciation. Instead of writing off depreciable property over its accounting useful life, the Income Tax Act sorts property into prescribed classes, each with its own rate, and allows a deduction calculated on that class. Common classes include buildings, equipment and furniture, vehicles, intangibles and goodwill, and computer hardware, each with a distinct rate.
CCA is generally optional and is claimed on a declining-balance basis for most classes, with a half-year rule limiting the deduction in the year of acquisition. The capital cost allowance claimed reduces the undepreciated capital cost of the class, which in turn drives future deductions and the recapture or terminal loss recognized on a later disposition. Accurate class tracking is central to computing both ongoing deductions and the tax outcome of selling depreciable property.