Capital Cost Allowance (CCA) is

• A. A depreciation method under Canadian tax law allowing accelerated write-off
• B. A tax credit on property
• C. An accounting principle for impairment
• D. A form of inventory valuation

Answer: (B)

Capital Cost Allowance is the tax depreciation mechanism in Canada. It allows a business or property owner to deduct the cost of capital property used to earn income from taxable income, according to prescribed classes and rates set by the tax rules. Because the rates are structured to provide larger deductions in the early years for many asset classes, it’s often described as an accelerated write-off. This is a deduction against income, not a credit against taxes owed, and it applies for tax purposes rather than for accounting impairment or for valuing inventory. In short, CCA is a tax depreciation method that lets you recover capital costs faster through deductions in the tax year.