When to Claim Capital Cost Allowance
Capital cost allowance is a tax deduction you claim over a span of several years for your depreciable property’s cost. This property is a long-term asset that becomes obsolete over time, such as furniture, buildings, or equipment, that you utilize in your professional or business activities. It is illegal to deduct the total cost of depreciable property when you compute your professional or net business income for the year that you bought the property.
Instead, you are able to deduct the total cost of these business properties over the lifetime of the equipment as a capital expense. Keep in mind the differences between current and capital expenses. Unlike capital expenses, current expenses refer to short-term, ordinary maintenance expenses, while capital expenses add considerable value in relation to property.