Blog · September 10, 2026 · Updated September 30, 2026

Capital cost allowance for a vehicle in Canada

How a vehicle's purchase price turns into a yearly deduction on Form T2125, the $39,000 line that sets the class, and what changes for an electric one.

A self-employed electrician in Kingston, Ontario buys a new service SUV in February 2026, $46,000 before tax, and puts 22,000 km on it by December, 15,400 of them driving to panel upgrades and rewiring jobs around Kingston and Belleville. Gas, insurance and repairs on that SUV get prorated at the 70 percent business share and deducted the same year they’re paid. The $46,000 itself does not work that way. A vehicle is capital property: its cost can’t be deducted in the year it’s bought, only depreciated through capital cost allowance and claimed a slice at a time on a separate line of the same form. Worked through below, the first year’s slice for this SUV is $44,070 (the 2026 ceiling plus HST) × 30% × 50% × 70% = $4,627 of deduction.

Two lines, one form

Form T2125 keeps CCA apart from everything else the SUV costs. Line 9281 holds gas, insurance, licensing, maintenance, loan interest and leasing charges, prorated by business use and deducted in full each year. CCA goes on line 9936, calculated first in Area A of the form, “to calculate your current-year deduction for CCA, and any recaptured CCA and terminal losses.” The two lines exist because they answer different questions: line 9281 is what the vehicle cost to run this year, line 9936 is how much of its purchase price this year’s business use has used up.

The line that decides the class

Most vehicles used for business fall into Class 10, a 30 percent declining-balance class: the guide’s own rule is to “include passenger vehicles in Class 10 unless they meet the Class 10.1 conditions.” Class 10.1 exists for the ones that cost more than a set ceiling, and the ceiling moves with the vehicle’s purchase year. The Department of Finance set it at $39,000 for a passenger vehicle bought in 2026, up from $38,000 in 2025. At $46,000 before tax, the electrician’s SUV clears that line, so it goes in Class 10.1, and the 2026 ceiling, not the sticker price, becomes the number CCA gets calculated on.

Class 10.1 comes with rules Class 10 doesn’t have. Class 10 pools every vehicle in it together, so selling one for more than its share of the pool’s remaining balance can trigger recaptured income, and a pool that ends the year with nothing left in it produces a terminal loss. Class 10.1 skips both: every vehicle is kept in its own class rather than pooled with others, “list each Class 10.1 vehicle separately,” and the guide states plainly that “the rules for recapture of CCA and terminal loss do not apply to passenger vehicles in Class 10.1.” Trading the SUV in five years from now neither adds an unexpected recapture to that year’s income nor produces a deductible loss. The class just closes, whatever the vehicle sells for.

Running the numbers

The capital cost for CCA is the $39,000 ceiling plus Ontario’s 13 percent HST, $44,070, not the $46,000 actually paid. CCA uses the declining-balance method, where “you apply the CCA rate to the capital cost” and the balance left over “declines each year that you claim CCA.” In the year of purchase, the guide’s half-year rule caps the claim at half of that: “you can usually claim CCA on half of your net additions.” So the year-one base is $44,070 × 30% × 50%, or $6,611, and at 70 percent business use the deductible CCA is $4,627. Next year there’s no half-year restriction and the 30 percent applies to what’s left of the $44,070 after the first claim.

The 70 percent is the figure every other line depends on, and it can be kept without typing. Odie starts and ends each trip by itself, asks Work or Personal from the lock screen, takes a client or project tag on work trips, and computes the business-use percentage from logged kilometres against dated odometer readings. Here is how Odie keeps a self-employed mileage log.

What changes for an electric one

Buy a zero-emission SUV at the same $46,000 instead, and it falls in Class 54, built for zero-emission vehicles that would otherwise land in Class 10 or 10.1, at the same 30 percent rate but a $61,000 ceiling. Below that ceiling, the full purchase price counts: capital cost is $46,000 × 1.13, or $51,980, against the $44,070 the gas SUV was capped at. Everything else, the half-year rule, the 70 percent proration, the no-recapture treatment, works the same way.

Odie doesn’t calculate CCA. What it keeps is the record CCA depends on: every trip’s date and distance, the odometer readings at the start and end of the year, and a business-use percentage pulled from the year’s trips rather than a guess made in April. The mileage log template has the same columns; Odie fills them in as you drive. The sample CRA year report (PDF) shows what Odie Pro builds from that log: monthly business and personal kilometres, the trip log and the odometer bounds. An employee paid per kilometre is in a different regime altogether; the allowance and the deduction are compared side by side.

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Sources

• CRA: Calculating motor vehicle expenses (T2125)
• CRA: Form T2125, Statement of Business or Professional Activities
• CRA: T4002 guide, Business expenses (Chapter 5, Motor vehicle expenses)
• CRA: T4002 guide, Capital cost allowance (Chapter 4)
• Department of Finance Canada: 2026 automobile deduction limits

Every figure above is checked against the sources listed. How we check our facts. Not tax advice; your accountant knows your situation. Spotted an error? Tell us.