Capital cost allowance (CCA) is a tax deduction that allows businesses to gradually write off the cost of depreciable assets like equipment or building over time to reduce their taxable income.
For example, a construction company purchases a $120,000 excavator. Under CCA Class 10, it can deduct 30% of the declining balance each year, writing off $36,000 in year one and $25,200 in year two, significantly reducing taxable income while the asset depreciates.
Why it matters: It allows businesses to reduce taxable income by claiming depreciation on assets, directly improving after-tax cash flow.
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