Solved: For how long CCA could be claimed

Why sign in to the Community?

  • Submit a question
  • Check your notifications
or and start working on your taxes
EnglishEN

Pick a language

Français English
Announcements
For information related to Covid-19 and how to get help if you lost your job, please see The Covid-19 Tax Info Center
cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
New Member

For how long CCA could be claimed

Hello, 

Please, advise for how long I could claim CCA. E.g., If I bought a computer that would be class 50 for $3,000. In the accounting straight-line depreciation it could be 3 years ($1,000 per year) with a $0 residual. For CCA however it would be 1/2 x 55% x $3,000 for the first year, then 55% for the second one. Could it go beyond the 3 years in the accounting strait-line approach? If yes then for how long as theoretically it would never be zero. Could the accounting approach be 3 years but for the CCA I could claim the expenses for e.g. 5 years?

What CCA would be in the last year? Is it again 1/2 year rule?

Thanks

1 Best answer

Accepted Solutions
Highlighted
New Member

For how long CCA could be claimed

You will have to stop when it reaches zero value for tax purpose.

View solution in original post

6 Replies
Highlighted
New Member

For how long CCA could be claimed

You will have to stop when it reaches zero value for tax purpose.

View solution in original post

Highlighted
New Member

For how long CCA could be claimed

Thank you for your response, Sally7. So, having computer for $3,000 the CCA in 5th year would be $109 and the remaining value would be $89. Should I write it down to expenses then or continue to claim CCA for further years?
As I mentioned before in Quickbooks I use 3 years strait-line as $1000 per year.
As Delphision suggested I could use the declining method instead of the strait-line in Quickbooks as well that could be similar with CCA. I did before. But, I'd like to have it different (CCA and accounting) and find out if the number of years of the depreciation in Quickbooks and the CCA number of years for the computer could be different . So, it seems as it could be and theoretically CCA could last forever till reached 0 or some negligent amount. Please, comment.
Highlighted
New Member

For how long CCA could be claimed

It is true that for income tax purpose you can only use the declining balance, it is a tax rule.  It is a good choice to decide on the declining balance for accounting purpose in Quickbooks, for consistency.
To answer your first question about the remaining value left at the end, you need to continue the depreciation, and when you reach the last year, there will be a negative amount.  As we cannot have a negative value, the software will change this to zero 0.  With the straight line you are suppose to be using a salvage value.
This is the link to the guide for business tax return, which also include CCA: http://www.cra-arc.gc.ca/E/pub/tg/t4002/t4002-13e.pdf It is from Canada Revenue.
To answer your second question, both, depreciation and CCA, approach are very different and the number of years could very well vary.  With the straight line method you expense the same amount every year, and it is going to zero value much faster.  With the declining balance, it is 55% of the value that is left, therefore it is never the same amount that you expense every year.
Example: with declining balance, you expense your car that you use for business, the rate is 30%, on tax return.  You bought your car $10,000; calculation for first year 10,000 x 30% x 1/2 (half year rule) = $1,500.  The value of your car is $10,000 minus 1,500= $8,500.  Second year: undepreciated value: $8,500 x 30% = $2,550.  Value year 2 $8,500 - 2,550.  You see that it can take more time with declining balance.
Highlighted
New Member

For how long CCA could be claimed

Due to the rapid obsolescence of computer equipment, I find it likely that it would probably be written off in the fourth year, and probably replaced around that time.
Highlighted
New Member

For how long CCA could be claimed

You would not normally use a straight line depreciation for this type of equipment. Using the 55%  depreciation is likely to end in close to the same time period as well.

Highlighted
New Member

For how long CCA could be claimed

Thank you so much for the detailed explanation.