How to Claim Equipment in Canada (2026 Guide)

Quick answer

Equipment in Canada is depreciable property claimed through capital cost allowance by class: most machinery and furniture at 20% in Class 8, computers at 55% in Class 50, small tools under $500 at 100% in Class 12. The half-year rule normally halves the first-year claim, but the accelerated investment incentive suspends it for property available for use through 2027. Selling equipment can trigger recapture or a terminal loss. Input tax credits on equipment are all-or-nothing at more than 50% commercial use.

Is equipment tax deductible in Canada?

Yes, over time through capital cost allowance, after you have decided it is capital at all. The CRA’s four tests settle that: a capital expense gives a lasting benefit or advantage whereas a current expense recurs after a short period; an improvement beyond the original condition is capital whereas a repair that restores it is current; replacing a separate asset within a property is capital, as with buying a new compressor, whereas repairing part of the asset is current; and a cost that is considerable relative to the property points to capital. Buying equipment is capital. Fixing it is current.

Each asset goes into a class with a prescribed rate. Class 8 at 20% on a declining balance holds the bulk of business equipment: machinery, furniture, appliances, fixtures, and tools costing $500 or more. Class 50 at 55% holds general-purpose computer hardware and systems software acquired after March 18, 2007. Class 12 at 100% holds tools, instruments, and utensils under $500, which also escape the half-year rule. Class 10 at 30% holds vehicles and older hardware. Vehicles carry their own cost ceilings and are covered separately.

The half-year rule normally limits the first year’s claim to half the net additions to the class. The accelerated investment incentive, introduced in 2018, overrode that. For eligible property available for use before 2024 it also multiplied the first-year base by 1.5; for property available for use from 2024 through 2027 it suspends the half-year rule only, so you claim the full class rate in year one. The 2024 Fall Economic Statement proposed restoring the full incentive for property acquired on or after January 1, 2025 and available for use before 2030, and Budget 2025 repeated the intention, but the CRA continues to list the measure as a proposed change. File on the suspension that is enacted and watch for the enhancement.

Disposals matter. The lesser of proceeds and original cost comes out of the class. A negative class balance is recapture, added to income; a positive balance left after the last asset in the class goes is a terminal loss, which is deductible.

How much can you claim?

Worked example: a Nova Scotia cabinet shop buys a $36,000 CNC router and $5,000 of dust extraction (Class 8), a $3,500 design workstation (Class 50), and $1,800 of hand tools each under $500 (Class 12) in 2026, all for the business. With the half-year rule suspended, year-one CCA is 20% of $41,000, $8,200; 55% of $3,500, $1,925; and 100% of $1,800. Total $11,925, worth about $1,610 at Nova Scotia’s combined small business rate for a corporation, or more for a sole proprietor at a 35% marginal rate. Had the proposed 1.5-times enhancement been enacted for the year, the Class 8 claim would have been $12,300 instead.

Personal use restricts the claim to the business portion, and CCA is optional each year, so a business in a loss position can defer it.

GST/HST on equipment

Equipment is capital personal property, and the input tax credit rule is different from current expenses. If the equipment is used more than 50% in commercial activities the registrant claims the full credit at the province’s GST or HST rate; at 50% or less there is no credit. Passenger vehicles and aircraft used by individuals or partnerships are the exception and follow a percentage. Equipment imported from outside Canada is charged GST at the border, with the provincial part self-assessed where applicable. The Canadian GST/HST guide covers capital property, and the HST calculator splits inclusive prices.

Record-keeping requirements

Maintain a CCA schedule or fixed asset register listing each asset, its class, the date it became available for use, its cost, business-use percentage, and disposal proceeds. The available-for-use date fixes the year of the claim and whether the incentive applies, and the schedule is what produces recapture or terminal loss figures. Keep invoices and the schedule for six years after the last year the asset affects a return. The Canadian record-keeping guide covers electronic records.

How to claim, step by step

1. Apply the CRA’s four tests to confirm the purchase is capital rather than a repair.
2. Assign the class from the CRA’s class list and record the available-for-use date and business-use percentage.
3. Calculate year-one CCA at the full class rate for property available for use in 2024 through 2027, or half if the incentive does not apply.
4. Enter the schedule in Area A of the T2125 or Schedule 8 of the T2; claim less than the maximum if it suits the year.
5. Claim the input tax credit in full where commercial use exceeds 50%.
6. On disposal, remove the lesser of proceeds and cost from the class and report recapture or terminal loss.

Common mistakes

• Expensing a $4,000 machine as a repair because it replaced an old one.
• Claiming a 1.5-times first-year amount on 2026 purchases on the strength of a proposal that is not yet law.
• Putting computers in Class 8 at 20% instead of Class 50 at 55%.
• Prorating the input tax credit on equipment used 60% for business instead of claiming the full amount.
• Missing recapture when a fully depreciated asset is sold.

Software that helps

• Dext captures equipment invoices on arrival so cost and date are evidenced before the ledger entry.
• ExpenseFlow reads equipment invoices with frontier vision AI, codes each line to an expense or fixed asset account using the $500 Class 12 line, explains the call under the line, lowers its confidence so a reviewer decides when the invoice does not settle it, and syncs the approved bill to QuickBooks or Xero with the document attached.
• QuickBooks and Xero both offer fixed asset registers that track class, available-for-use date, and disposals.

FAQ

See the answered questions above for the capital test, CCA classes, the half-year rule, disposals, and input tax credits.