Farming income - Capital Cost Allowance (CCA)

What’s in this article?

  • What is this?
  • Am I eligible?
  • Where do I claim it?
  • Where can I learn more?

 

What is this?

Capital Cost Allowance (CCA) is a deduction that you can claim over a period of several years for the cost of depreciable property that you bought to use in your business. If you have bought depreciable property, such as equipment, furniture, machinery, or a building for your farming business during the year, you cannot deduct the full cost of the property from your farming income for the year. However, since depreciable property may become obsolete over time, you can claim the cost incurred over a period of several years.

Canada Revenue Agency (CRA) says…

You can usually claim CCA on a property only when it becomes available for use.

Available for use – generally, the earlier of:

  • the time the property is first used by the claimant to earn income; and
  • the time the property is delivered or is made available to the claimant and is capable of producing a saleable product or service.

You do not have to claim the maximum amount of CCA in any given year. You can claim any amount you like, from zero to the maximum allowed for the year. If you do not have to pay income tax for the year, you may not want to claim CCA. Claiming CCA reduces the balance of the class by the amount of CCA claimed. As a result the available CCA for future years will be reduced.

In the year you acquire a depreciable property, you can usually claim CCA only on one-half of your net additions to a class.

The amount of CCA you can claim depends on the type of depreciable property and when you bought it. Depreciable property is grouped into classes and a specific rate of depreciation applies to each class. Click this link for more information on each class.

Note: If the fiscal period of your farming business was less than 365 days this year, then you will have to prorate your CCA claim.

 

Am I eligible?

You can claim CCA on depreciable property that you bought for use in your farming business on your T2042: Statement of farming activities form.

Note: Even if you are not claiming CCA for the tax year, we recommend that you enter details of any new depreciable property bought in the year on this form.

 

Where do I claim it?

 Follow these steps in H&R Block’s tax software to file your 2015 taxes:

  1. Click the PREPARE tab.
  2. Click the YOUR YEAR IN REVIEW icon. You will find yourself here:
  3. Click the checkbox labelled I worked for myself and select the province or territory of your self-employment.
  4. Scroll to the bottom of the page and click Continue.
  5. Click the EMPLOYMENT icon. You will find yourself here:
  6. Under the BUSINESS AND SELF-EMPLOYMENT section, click the checkbox labelled Statement of farming activities (T2042).
  7. Scroll to the bottom of the page and click Continue.

When you arrive at the page for Farming income, enter your CCA information in Area A - Calculation of capital cost allowance (CCA) of the form.

 

Where can I learn more?