Project 06Taxation

CCA vs. Book
DepreciationA capital cost allowance schedule beside the book depreciation schedule, with the temporary differences and deferred tax that fall out of the gap between them.

The same asset is written off twice: once for the shareholders, on whatever pattern reflects how it is used up, and once for the Canada Revenue Agency, at the rate the Income Tax Regulations prescribe for its class. The two never agree, and the difference is not an error; it is a timing difference the balance sheet has to carry as deferred tax. Enter an asset register and this page builds both schedules year by year, applies the half-year rule, the Accelerated Investment Incentive or immediate expensing to each addition, handles disposals with recapture and terminal loss, and rolls the deferred tax liability forward with the journal entries.

See the deferred tax Edit the register The tax

Inputs: Asset register: class, acquisition month, cost, first-year rule, book method, useful life, residual value, disposal month and proceeds (sample included; edit in place or import a CSV); tax rate, optional rate change
Book side: Straight-line or declining balance per asset, prorated by month; gains and losses on disposal
Tax side: UCC continuity by class: half-year rule, AII, enhanced and immediate first-year allowances, straight-line classes 13 and 14, recapture, terminal loss, capital gains
Outputs: Book and tax schedules, Schedule 8 style continuity, temporary difference and deferred tax roll-forward, journal entries, Schedule 1 reconciliation lines, charts, CSV exports
Sample data: Huron Ridge Printing Co. (fictional), eight assets acquired 2019–2025, schedule to 2026
Privacy: Static page, no server. Everything is computed in your browser; nothing is sent anywhere.

RegisterStep 01

Huron Ridge Printing Co.

Sample data · all figures invented

One row per depreciable asset. The CCA class fixes the tax rate; the first-year rule says how the year of acquisition is treated for tax; the book columns say how the company depreciates it in its own statements. Land is not depreciable for either purpose and is left off the register.

Company

Schedule through

Tax rate (%)

Rate changes in (year, optional)

to (%)

Asset register · every cell is editable

Class 13 and 14 use the life column as the term for straight-line CCA. A declining-balance book method needs a DB rate.

BookStep 02

Depreciation for the financial statements

Each asset is written down over its own useful life to its own residual value, from the month it is acquired to the month before it is sold. On disposal the difference between proceeds and carrying amount is a gain or loss in profit. None of this has anything to do with tax.

Depreciation expense by asset

TaxStep 03

Capital cost allowance by class

Tax does not track assets; it tracks pools. Every asset in a class joins one undepreciated capital cost balance, additions go in at cost, disposals come out at the lesser of cost and proceeds, and the class rate is applied to what is left after the first-year adjustment. A pool that goes negative produces recapture; a pool with a balance but no assets produces a terminal loss.

Show the continuity for

The year chosen here is also the year shown in the deferred tax section below.

UCC continuity · · the Schedule 8 columns

CCA claimed by class and year · maximum claim

Deferred taxStep 04

The gap, and what it costs

Carrying amount less undepreciated capital cost is the taxable temporary difference: profit the shareholders have already seen but the CRA has not yet taxed, because the deductions ran ahead of the depreciation. Multiplied by the tax rate it is the deferred tax liability, and its movement each year is the deferred component of income tax expense.

Year shown

Or click a year in either chart or in the year-by-year table. The same year drives the UCC continuity above and the entries below.

Carrying amount and UCC

The shaded gap is the temporary difference

Book charge and tax deduction by year

Net of gains, recapture and terminal losses

Temporary difference and deferred tax · year by year

Reading the result · written from the numbers

The taxWhy it works this way

Two write-offs of one asset

Accounting depreciation allocates the cost of an asset over the periods it benefits, on whatever pattern management judges faithful, straight-line for a building, declining balance for a van that loses most of its value early, units of production for a press. Paragraph 20(1)(a) of the Income Tax Act replaces all of that judgement with a schedule: property is sorted into classes, each class has a prescribed rate, and the deduction is the rate applied to the pool's undepreciated capital cost. Depreciation is not deductible; capital cost allowance is. The company adds its book depreciation back on Schedule 1 of the T2 and deducts CCA instead.

Pools, not assets

The tax side tracks one balance per class, not one per asset. Additions join the pool at capital cost; a disposal removes the lesser of cost and proceeds; CCA is taken on the pool. That is why the delivery vehicle's sale in the sample produces no tax gain or loss of its own: the $20,000 simply reduces the class 10 pool and the van that remains keeps attracting CCA on a smaller balance. Only when a pool is driven below zero, or is left with a balance and no assets, does tax recognize anything, as recapture under subsection 13(1), fully included in income, or a terminal loss under subsection 20(16), fully deductible. Proceeds above original cost are a capital gain, only half of which is taxable, and the pool is reduced by cost.

The first year

The default is the half-year rule in Regulation 1100(2): only half of the year's net additions to a class attract CCA in the year of acquisition, whatever the purchase date. The Accelerated Investment Incentive, announced in November 2018, suspended that rule and did the opposite for most property available for use before 2024: CCA on one and a half times the net additions, so a $10,000 class 8 asset attracted $3,000 in its first year instead of $1,000. Manufacturing and processing machinery in class 53, clean-energy equipment in classes 43.1 and 43.2 and zero-emission vehicles were expensed in full. For property available for use in 2024 and 2025 the enhancement fell away and only the suspension of the half-year rule remained, with the full-expensing classes stepping down to 75%; for 2026 and 2027 the legislated rate is 55%. Budget 2024 separately provided 100% first-year CCA for computers and network equipment in classes 44, 46 and 50 acquired on or after April 16, 2024 and available for use before 2027, which is why the replacement workstations in the sample are expensed. Canadian-controlled private corporations also had a temporary immediate-expensing limit of $1.5 million a year for property acquired from April 19, 2021 to the end of 2023.

Budget 2025, tabled November 4, 2025, proposed to bring back the full Accelerated Investment Incentive and the full expensing measures for property acquired on or after that date and available for use before 2030, with a phase-out through 2033. The calculator does not assume any of this: the first-year rule is set per asset, so a schedule can follow whichever rules are in force, and the sample uses the rules as they stood for each asset's acquisition date. Anyone using it for a real file should confirm the current legislation.

Why the difference is a liability

When CCA runs ahead of depreciation, taxable income is lower than accounting income and cash tax is lower than the expense the income statement should show at the statutory rate. The company has, in effect, borrowed the difference from the CRA, and it repays it in later years when depreciation continues but the pool has little CCA left to give. IAS 12 and ASPE Section 3465 both measure that borrowing on the balance sheet: the taxable temporary difference is carrying amount less tax base, here net book value less UCC, and the deferred tax liability is that difference at the rate expected to apply when it reverses. The year's deferred tax expense is simply the change in the liability. The press in the sample shows the mechanics at full scale: expensed in one year for tax, depreciated over fifteen for the books, it creates a $203,000 difference in 2022 that the rest of its fifteen-year life slowly unwinds.

Total tax is unchanged, only its timing

The Schedule 1 lines for a year, depreciation added back, gains deducted, CCA and terminal losses deducted, recapture and taxable capital gains added, sum to a net adjustment to taxable income. At a constant rate, that adjustment times the rate is exactly the year's deferred tax expense, with the opposite sign. Current tax goes down by what deferred tax goes up. The panel above shows both, which is the check a reviewer runs on a tax provision: if the two do not offset, something other than timing is going on.

Rate changes

Because the liability is measured at the rate expected on reversal, an enacted or substantively enacted change in the corporate rate remeasures the whole opening balance at once, and the adjustment goes through deferred tax expense in the year the change is enacted, which the calculator simplifies to the year the new rate takes effect. The optional rate change above shows the effect: with roughly $280,000 of difference outstanding at the end of 2025, a one-point change in the rate moves the liability, and the year's expense, by about $2,800 before anything about the assets has changed.

ASPE and the choice not to bother

Private companies reporting under ASPE may elect the taxes payable method under Section 3465 and record only the current tax bill, leaving the timing difference to the notes. It is simpler, and for a company whose readers are its bank and its owners it is often accepted, but it means income tax expense no longer bears any relation to accounting income in the year. IFRS gives no such choice. Either way the schedules on this page have to exist, because the T2 needs the UCC continuity regardless.

What this calculator does not do

It assumes a December year end and full taxation years, so no short-year proration of CCA. It does not apply the available-for-use rules, the passenger vehicle cost limit in class 10.1, the separate-class elections beyond the two building rates, or the additional allowance for purpose-built rental housing. It takes the maximum CCA every year, although the claim is discretionary and a company with losses might claim less. And it works a single jurisdiction at one combined rate, where a real provision handles federal and provincial rates, the small business deduction and, for larger companies, more than one province.

How it's builtNotes

One self-contained HTML file, no libraries. Amounts are integer cents and every rate application is rounded at the same point in the same direction as the Python reference model the logic was written in first, so the browser's schedules match the reference to the cent, including the textbook cases the model asserts: the half-year rule on a $10,000 class 8 asset, the same asset under the AII, recapture, terminal loss, a capital gain on disposal, and month-prorated straight-line depreciation. The two charts are hand-drawn SVG with hover tooltips.

Stack: HTML, CSS, vanilla JavaScript, inline SVG
Dependencies: None (fonts from Google Fonts)
Data handling: Entirely client-side; nothing leaves the page
Law: Income Tax Act ss. 13(1), 20(1)(a), 20(16); Income Tax Regulations Part XI and Schedule II; IAS 12 Income Taxes; ASPE Section 3465 Income Taxes
Sample: Huron Ridge Printing Co., a fictional company. Assets, dates, costs and proceeds are invented.