Employees are generally prohibited from claiming Capital Cost Allowance. To qualify for such CCA claims, the employee must use the automobile, aircraft or musical instrument for employment duties. The restrictions pose problems when an employee must use his or her own computer or home office equipment. As an alternative, the employee and employer should seek other solutions, such as a leasing arrangement, where a deduction may be available under paragraph 8(1)(f).
Businesses may deduct CCA for capital assets that are used primarily to generate business income. However, there are certain intangible assets (e.g. goodwill, patents, etc.) are not eligible for CCA but are entitled be amortized into a pool known as Cumulative Eligible Capital at a 7% declining-balance rate. For more information, refer to ITA: 20(1)(a),(b).
Author: Natalie Leung