Capital Cost Allowance formula.docx - Capital Cost...

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Capital Cost Allowance GeneralFor accounting purposes we depreciate depreciable capital properties such as property, plant and equipment, furniture, and fixtures using various methods (straight line, declining balance,or units of production)For tax purposes, the amortization of depreciable capital properties are done through Capital Cost AllowanceAssets are pooled into different CCA classes which have different CCA rates (for instance building goes into class 1) – please see the CCA Classes Chart Because the accounting amortization and the capital cost allowance are not the same, we needto add back the accounting amortization to accounting income and deduct the capital cost allowance in arriving at net income for tax purposes (division b).Do businesses have to take Capital Cost Allowance (CCA)?There is a formula to calculate the “maximum amount of CCA” to be deducted; however, a taxpayer can choose to deduct anywhere between $0 to the maximum CCACCA is a discretionary expense, a taxpayer can choose to deduct the max CCA or notA situation where taking the max CCA is not advisable is where you have a loss before CCA or with just a portion of the CCA; do not increase a loss with CCA because the Undepreciated

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