(Posted March 2026)
In recent years, the Government of Canada introduced temporary Capital Cost Allowance (CCA) measures to accelerate deductions and encourage business investment. These measures continue to be examinable on the CFE because they affect first-year CCA calculations and require candidates to pay close attention to “available for use” dates.
This blog summarizes the key CCA measures in effect as of December 31, 2025, and highlights announced changes that candidates may have heard about but do not yet apply.
Accelerated Investment Incentive (AcII)
The AcII provided an increased first-year CCA deduction for eligible property acquired after November 20, 2018, and available for use before 2023. Under the general AcII, the enhancement is achieved by:
- Applying the prescribed CCA rate to 150% of net additions, and
- Suspending the half-year rule.
AcII Phase-Out (2024 to 2027)
General Phase-Out Rule
A phase-out applies for eligible property that becomes available for use after 2023 and before 2028. For eligible property made available for use between 2024 and 2027:
- If the property would normally be subject to the half-year rule, the enhanced first-year allowance is generally reduced to 200% of the normal first-year CCA deduction (i.e., the half-year rule is effectively suspended), or
- If the property would not normally be subject to the half-year rule, the enhanced first-year allowance is generally 150% of the normal first-year CCA deduction.
Certain types of property (discussed below) have a specific phase-out schedule and do not follow the general phase-out rule. After 2027, the AcII enhancement is scheduled to end under the current rules.
Manufacturing and Processing Equipment (Classes 53 and 43)
Manufacturing and Processing equipment is eligible for:
- A 75% first-year allowance for property made available for use in 2024 or 2025,
- A 55% first-year allowance for property made available for use in 2026 or 2027, and
- No enhanced allowance after 2027 (the normal CCA rate of 30% of Class 43 and the half year-rule will apply, resulting in a first-year allowance of 15%).
Note: After 2025, eligible Manufacturing and Processing property is added to Class 43, not Class 53.
Clean Energy Equipment (Class 43.1)
Specified clean energy equipment is eligible for:
- A 75% first-year allowance for property available for use in 2024 or 2025,
- A 55% first-year allowance for property available for use in 2026 or 2027, and
- No enhanced allowance after 2027 (the normal CCA rate of 30% of Class 43.1 and the half year-rule will apply, resulting in a first-year allowance of 15%).
Zero-Emission Vehicles (Classes 54 and 55)
Zero-Emission Vehicles (ZEVs) are either added to Class 54 (if they would have otherwise been added to Class 10 or 10.1) or Class 55 (if they would have otherwise been added to Class 16) and have their own enhanced first-year allowances. Class 54 has a capital cost limitation of $68,000 (plus GST/HST and/or PST, if applicable).
ZEVs are eligible for an enhanced first-year allowance of:
- A 75% first-year allowance for property available for use in 2024 or 2025,
- A 55% first-year allowance for property available for use in 2026 or 2027, and
- No enhanced allowance after 2027 (the normal CCA rate of 30% of Class 54, or 40% for Class 55, and the half year-rule will apply, resulting in a first-year allowance of 15% or 20%, respectively).
Announced / Proposed Changes (Not Yet Applicable)
In the 2025 Federal Budget, the Government of Canada proposed several new CCA-related measures and confirmed that it intends to proceed with some CCA-related measures announced by the previous government. The measures include:
- Full expensing of Manufacturing and Processing buildings (i.e., Class 1 property that would have qualified for the enhanced 10% rate) acquired on or after Budget Day (November 4, 2025) and used before 2030, with phase-out rules after 2029 and before 2034.
- Accelerated CCA for productivity-enhancing assets and purpose-built rental housing.
- Extension of the AcII and IEI measures (beyond the phase-out periods discussed above).
These measures are not part of the tax law enacted as at December 31, 2025, so they should not be applied for the 2026 CFEs.
Case Writing Tips
To achieve sufficient depth and breadth on CCA calculations, consider the following:
- If the CCA classes for the additions are not provided to you, use the case facts and apply technical knowledge to determine which CCA class the acquired property should be added to, paying extra attention to new CCA classes that may apply (e.g., Class 54 instead of Class 10 or 10.1). You can find information about CCA classes on the examination reference schedule.
- Pay attention to the dates in the case. The CCA rate that applies is based on the date that the eligible property becomes available for use, not the taxation year-end date. If the taxpayer has a non-December 31 year-end, the date that the eligible became available for use will impact the CCA rate used.
- Clearly distinguish the CCA rules that are currently applicable from those that are no longer applicable or are not yet applicable. The examinable technical knowledge must be applied (e.g., tax law enacted as at December 31, 2025 for the 2026 CFEs).
- Remember that the “regular” CCA rules and rates still apply (e.g., when the enhanced CCA deduction no longer applies).
- Address as many of the CCA classes as you can in the time you have allocated to the required, starting with the ones you know.
- Don’t forget to consider the other CCA rules (e.g., enhanced rates for Class 1, limits for Class 10.1, etc.) and opening UCC balances.