Rental property · Capital cost allowance
CCA lowers your tax every year. Then it is recaptured, all at once, in the year you sell.
Three rules that frame CCA
- Land is not depreciable. The CRA: "Generally, land is not a depreciable property. Therefore, you cannot claim CCA on its cost." On a plex, only the building portion depreciates.
- The half-year rule. "In the year you acquire rental property, you can usually claim CCA only on one-half of your net additions to a class." The CRA also calls it the 50% rule.
- No loss through CCA. "You cannot use CCA to create or increase a rental loss."
Splitting the purchase price
Where a purchase includes land and a building, only the building cost enters the class. Related fees, such as legal and accounting fees, must be split between the two. That split is a number you want done properly in year one, because it follows the property for as long as you own it.
Recapture, at sale
The CRA: "If the amount in column 7 is negative, you have a recapture of CCA." It happens when the proceeds from the sale of depreciable rental property exceed the undepreciated capital cost of the class plus the capital cost of additions.
Recapture goes on line 9947 and is taxed as income, not as a capital gain. That is the part that surprises people: a capital gain is half taxable, recapture is fully included.
Terminal loss
The mirror image exists. Where no property remains in the class at the end of the fiscal period and an undeducted amount is left, that is a terminal loss, reported on line 9948. Unlike CCA, a terminal loss can create a rental loss.
Should you claim CCA at all?
It is a trade-off, not a default. Claiming defers tax now and repatriates it at sale. Not claiming keeps the file clean. The answer depends on your marginal rate today, the one you expect at sale, and how long you intend to hold. It is a question for your accountant before the first return, not after five years of them.
Where this actually lands: at purchase, not after
These rules have one thing in common. They are not discovered while managing a building, they are discovered while buying one. A lease carrying a void clause, a deposit that was never lawful, a dwelling occupied by a succession, a subdivision project the law has suspended: each of those is sold along with the building.
That is why we read the leases, the building's tax position and the history of notices before making an offer on a plex, never after acceptance.
Three habits before buying a rental property
- Ask for every lease and its schedules, not just the rent roll. The clauses hide in the schedules.
- Have the tax modelled before the offer, including the seller's CCA position and what you intend to do with your own.
- Check what the law still permits for your plan. Repossession, eviction and conversion rules have changed and keep changing.
Related
Frequently asked
What rate applies to a rental building?
Class 1, depreciable at 4% a year according to the CRA.
Can I claim CCA on the land?
No. The CRA treats land as non-depreciable property.
What is recapture of CCA?
The previously claimed CCA brought back into income at sale, when proceeds exceed the class UCC plus capital cost. It is reported on line 9947.
Sources: the official English version of the Civil Code of Quebec (legisquebec.gouv.qc.ca), the Administrative Housing Tribunal (tal.gouv.qc.ca), Canada Revenue Agency guide T4036 Rental Income and Revenu Quebec, consulted 11 September 2026. This page informs; it is neither legal nor tax advice. For a specific situation, consult a notary, a lawyer or an accountant.
Published by the Loaa & Manseur team, number one team at RE/MAX Platine in 2024 and 2025. Tell us about your project.