Equipment Purchases for Freelancers: Deduct Now or Claim CCA?

This is general information, not professional tax advice. For official guidance, see the CRA's capital cost allowance pages or talk to a tax professional.

You bought a new laptop for client work. Or a desk, a camera, a set of power tools. It's clearly a business expense — but if you put the full price on your T2125 as a single deduction this year, there's a good chance you've done it wrong. The CRA splits business spending into two buckets: things you deduct right away, and things you deduct gradually over several years. Knowing which bucket a purchase lands in is most of the battle.

Current expense or capital expense?

A current expense is something whose benefit gets used up within the year: office supplies, software subscriptions, your phone bill, a repair that puts equipment back the way it was. You deduct these in full, in the year you pay them.

A capital expense is something that gives you a benefit that usually lasts for several years — buying equipment, furniture, a vehicle, or improving something you already own. The CRA's own guidance adds that renovations or work that extend the useful life of a property, or improve it beyond its original condition, are usually capital. Replacing a cracked laptop screen is a repair; buying a new laptop is a capital purchase.

Capital purchases aren't deducted as a lump sum. Instead, you claim capital cost allowance (CCA) — a yearly depreciation deduction on line 9936 of the T2125, calculated in Area A of the form.

How CCA works, in plain terms

Every piece of depreciable property belongs to a class, and every class has a rate. Each year, you can deduct up to that rate multiplied by what's left of the cost — the "undepreciated" balance. This is the declining balance method: the deduction is biggest in the early years and shrinks as the balance goes down.

A few classes cover most of what freelancers actually buy:

• Class 50 (55%) — computer hardware and its systems software: laptops, desktops, monitors, and similar equipment.
• Class 8 (20%) — the catch-all for equipment not in another class: furniture, appliances, machinery, and tools costing $500 or more each.
• Class 12 (100%) — tools, kitchen utensils, and medical or dental instruments that cost less than $500 each, plus application software (anything that isn't systems software).
• Class 10 / 10.1 (30%) — motor vehicles and passenger vehicles. Vehicles come with their own cost limits and rules; we cover those in Vehicle Deductions for Canadian Freelancers.

Class 12 is the one that surprises people in a good way. Small tools under $500 are, per the CRA, generally not subject to the half-year rule and are fully deductible in the year you buy them. That $180 drill or $350 set of lenses doesn't need a multi-year schedule. Note that software in Class 12 is subject to the half-year rule, so it's not an exact twin of the small-tools treatment.

The half-year rule — and why the first year keeps changing

The CRA's baseline rule is that in the year you acquire a property, you can usually claim CCA on only half of your net additions to a class. That's the half-year rule. Under it, a $2,000 laptop in Class 50 would give you $550 in year one (55% of half the cost), then 55% of the remaining balance each year after.

That baseline has been overridden for a lot of recent purchases. The federal Accelerated Investment Incentive, which applies to many classes, suspended the half-year rule and boosted the first-year deduction for eligible property that becomes available for use before 2028, on a phase-out schedule. And in September 2026, the federal government proposed a new "Productivity Mega Deduction" that would allow immediate expensing of a broad range of depreciable property acquired on or after September 15, 2026. At the time of writing, that is a proposal, not law, and the details of how it applies to self-employed individuals weren't spelled out in the announcement.

The practical takeaway: the first-year number for a purchase depends on when you bought it and which rules were in force that year. Don't reuse last year's math. Check the CRA's CCA pages or the current T4002 guide for the year you're filing, or let your tax software or accountant apply the rules.

Things that trip people up

You don't have to claim the maximum. The CRA lets you claim any amount of CCA from zero up to the maximum for the year. In a low-income year, it can make sense to claim less and save the undepreciated balance for later years when your tax rate is higher.

Mixed use means a partial claim. If your laptop is also the family Netflix machine, you can only claim CCA on the business share. The same logic as any mixed-use expense applies; see Business-Use Percentage: How to Calculate It.

It has to be available for use. You can usually claim CCA only once the property is ready to be used in your business, not when you place the order.

Selling it later matters. When you sell or dispose of equipment, the proceeds come off the class balance, which can trigger recaptured CCA (added back to income) or a terminal loss. That's a reason to keep the original purchase receipt long after you've stopped thinking about it.

What to keep

For every capital purchase, keep the receipt or invoice showing what you bought, the date, and the full cost including taxes paid. CCA claims can run for years, and the CRA's general rule is to keep records for six years from the end of the tax year they relate to — so a laptop you're still depreciating in 2030 needs its 2026 receipt to still exist. More on that in How Long Do You Need to Keep Receipts for the CRA?

A simple habit helps: when you buy anything over a few hundred dollars that you'll use for more than a year, flag it as equipment right away, separate from your regular supplies. At tax time, those are the rows you (or your accountant) move into the CCA schedule instead of the expense lines.

This is general information, not professional tax advice. CCA first-year rules have changed repeatedly in recent years and proposed changes may not yet be law. Always confirm current rules on canada.ca or with a qualified tax professional before filing.