CCA on Rental Property
CCA classes for rental buildings, the land split, the loss restriction, the 2025+ reaccelerated rate and recapture on sale.
The short version
- Capital cost allowance (CCA) is the tax depreciation on a rental building and the things in it. Most rental buildings are class 1, at 4% a year on the declining balance; appliances and furniture are class 8, at 20%.
- Land is never depreciable. Split the purchase price between land and building, and claim CCA only on the building.
- CCA on rental property can reduce your net rental income to zero, but it can't create or increase a rental loss.
- For a building acquired in 2025 or later and available for use before 2030, the reaccelerated investment incentive allows 6% in the first year instead of 2%. New purpose-built rentals of 4 or more units can qualify for a 10% rate.
- CCA is optional and comes back when you sell: if the building sells for more than its remaining tax value, the CCA is added to income as recapture, fully taxable.
CCA on Rental Property
Depreciation on a rental is the most misunderstood deduction a landlord has. It's real money now, and it's also a loan from CRA that you repay, in full, when you sell a property that went up in value. That doesn't make it a bad deal. It makes it a decision. Here's how it works and how to decide.
The Classes Landlords Use
| Class | Rate | What goes in it |
|---|---|---|
| 1 | 4% | Most buildings acquired after 1987, including houses, condos and apartment buildings |
| 1 (eligible new purpose-built rental) | 10% | New buildings with at least 4 private apartment units (or 10 private rooms), 90% rented long-term, construction started after April 15, 2024 and before 2031, available for use before 2036 |
| 3 or 6 | 5% or 10% | Some older buildings (acquired before 1988) and certain frame structures |
| 8 | 20% | Appliances, furniture, equipment you provide to tenants |
| 10 | 30% | A vehicle used for the rental, in the limited cases where vehicle costs are allowed |
| 13 | Over the lease | Leasehold improvements, if you lease the property you rent out |
Each rental property that costs $50,000 or more goes in its own class 1, so you track each building separately. Renovations and additions to a building are added to its class.
Splitting Land and Building
The purchase price covers land and building, and only the building can be depreciated. Common ways to split it: the ratio on your municipal property tax assessment, an appraisal, or an insurance replacement value. Use a reasonable method and keep the evidence. Closing costs such as legal fees and land transfer tax are split the same way and added to each part's cost.
Should I claim CCA on my rental this year?
Enter the purchase price and year, the land split, your net rental income and your other income. The assistant works out the maximum CCA, what it saves now, and what it will cost in recapture when you sell.
How Much Can You Claim? An Example
| Condo bought and rented out in 2026 for $500,000 | Amount |
|---|---|
| Building share (70% from the assessment) | $350,000 |
| Normal first-year CCA (4% x 1/2) | $7,000 |
| Reaccelerated first-year CCA (4% x 1.5) | $21,000 |
| Net rental income before CCA | $7,500 |
| CCA you can actually claim | $7,500 (the loss restriction caps it) |
| Balance carried forward | $342,500 |
In most rentals with a mortgage, the restriction is what limits CCA, not the rate. The restriction is applied to all your rental properties combined: net income from one rental can absorb CCA from another.
Should You Claim It?
| Points toward claiming | Points toward skipping |
|---|---|
| Your marginal rate is high now | Your income is low this year, so the deduction saves little |
| You expect to hold the property for many years (the deferral is worth more) | You expect to sell soon at a gain, when the CCA comes straight back |
| You expect your income to be lower in the year you sell | You expect to be in a higher bracket when you sell |
| The property is a pure rental | It's part of your own home: CCA can cost you the principal residence exemption on that part |
You can skip CCA in any year and claim it later; the balance stays in the class. You can also claim part of the maximum.
Sold a rental? Get the exact numbers for your return
The rental sale SmartFile works out recaptured CCA and the capital gain, estimates the tax, and prints the T776 and Schedule 3 lines.
When You Sell: Recapture or Terminal Loss
When you sell, the lower of the building's sale price and its original cost comes out of the class.
- Recapture: if that takes the class below zero, the negative amount is added to your income, fully taxable. Claimed $60,000 of CCA over the years and sold the building for more than you paid? That $60,000 comes back as income in the year of sale.
- Terminal loss: if the building sells for less than the remaining balance, the shortfall is fully deductible.
- Capital gain: anything above the original cost is a capital gain, half taxable.
The full sale calculation is on capital gains on rental property, and the rental property sale calculator runs it. A sale in a year with low other income softens recapture, since it's taxed at your marginal rate.
Where CCA Goes
CCA is calculated in Area A of form T776, with purchases and sales in Areas B to F, and the claim on line 9936. The general rules for every class, including the reaccelerated incentive, are on capital cost allowance explained. Upgrades that become part of the building, such as a new roof, are added to class 1 rather than deducted; see repairs vs improvements.
CCA and Your Own Home
If you rent out part of the home you live in, don't claim CCA on it unless you've decided you don't need the principal residence exemption on that part. Claiming CCA is one of the three things that usually make a rented part of a home lose the exemption. See the principal residence exemption.
Other rental deductions are on rental property expenses, and Return Check flags CCA claims that create a rental loss before you file.
Rental CCA Questions
What is the CCA rate for a rental property in Canada?
Most rental buildings acquired after 1987 are class 1, at 4% a year on the declining balance. Appliances and furniture are class 8 at 20%. Eligible new purpose-built rentals can qualify for 10%.
Can CCA create a rental loss?
No. CCA on rental property can reduce net rental income to zero but cannot create or increase a loss, calculated across all your rental properties combined.
Do I have to claim CCA on my rental property?
No. CCA is optional. You can claim any amount up to the maximum, or none, and the unclaimed balance carries forward.
What happens to CCA when I sell my rental property?
If the building sells for more than its remaining tax value, the CCA you claimed is added back to income as recapture. If it sells for less, the difference is a terminal loss you can deduct.
Can I claim CCA on the land?
No. Land is not depreciable. You must split the purchase price between land and building.
Sources: CRA, Guide T4036 Rental Income (CCA classes, rental property restriction, accelerated CCA for purpose-built rentals, reaccelerated investment incentive property); Completing form T776. Checked October 2026. The reaccelerated incentive and the 10% purpose-built rental rate come from recent legislation that CRA's guide still described as proposed when we checked. Class 3 and 6 rules for older buildings are summarized.
Last reviewed October 4, 2026 against CRA and Government of Canada sources. How we check our facts.