What is the capital cost allowance (CCA) on accelerated investment incentive properties?

by TurboTax• Updated 9 months ago

What are CCA and UCC?

A business asset that loses value over time through usage (i.e. depreciates), can be partly expensed each year, over the asset’s useful life. According to the CRA's rules, when expensed this way on a tax return, it's called Capital Cost Allowance, or CCA.

UCC is undepreciated capital cost, which is the unclaimed part of the cost of all of the properties in a CCA class, still available to be claimed.

What is the Accelerated Investment Incentive?

The Accelerated Investment Incentive (A.I.I.) is a set of temporary CCA rules that provides businesses with a CCA trade-off: a much bigger CCA deduction in the first year of the use of a new asset, in exchange for lower CCA deductions every year after that.

The A.I.I. applies to most types of assets that get CCA. However, zero-emissions vehicles (ZEV) are excluded from the A.I.I. rules because there are special CCA rules specific to ZEV.

This incentive is only available for applicable asset purchases made after November 20, 2018, and available for use before 2028. A.I.I. phase-out will begin in 2024 and will be over after 2027. For details on the A.I.I. see Accelerated Investment Incentive.

Notes on CCA:

Claiming CCA in a year is optional; it can be anything from zero up to the maximum-allowed.
An asset’s purchase should be recorded on the CCA schedule of the return for that year so it is available for CCA claim, even if CCA isn’t being claimed in that particular year.

There's another temporary Government incentive program for CCA called the Immediate Expensing Incentive. Some new properties that might otherwise be eligible for faster CCA under the A.I.I. might instead be eligible for full 100% write-off in the year of acquisition under the IEI. For more information scroll down to Immediate Expensing Incentive at the CRA’s How much CCA you can claim.