When to Claim CCA — and When NOT to — As a Canadian Landlord

Capital Cost Allowance (CCA) lets you deduct depreciation on the building portion of your rental — but it's a deferred tax, not a real one. Claiming it without understanding recapture is one of the most expensive mistakes Canadian landlords make.

Class 1 (the building) — 4% declining balance

Buildings are Class 1. Land is NOT depreciable. The first year is 'half-year rule' — you get 2% in year one, 4% on the declining balance after that. A $400k building generates ~$16,000/yr CCA after year 1.

Class 8 (appliances & furniture) — 20% declining balance

Fridge, stove, washer, dryer, furniture (if you provide it). Replacement appliances usually fit here too. Same half-year rule on first claim.

The recapture trap

When you sell, the CRA 'recaptures' all the CCA you've claimed over the years — as income (taxed at your marginal rate) in the year of sale. If you've claimed $80k of CCA and you sell, you owe tax on $80k of recaptured CCA on top of the capital gain.

When NOT to claim CCA

If your rental is breaking even or you have other rental losses, declaring a small loss WITHOUT CCA is often better than declaring CCA to create a bigger loss. CCA cannot create or increase a rental loss anyway (CRA rule).

The optimal pattern

Most accountants advise claiming CCA only in years where you're in a high marginal tax bracket AND don't expect to sell within 5 years. When you do sell, structure the disposition to spread the recapture (capital-gains reserve over 5 years where eligible).