What CCA class applies to a commercial rental property in Canada?
A commercial rental building acquired after March 18, 2007 that is used at least 90% for non-residential purposes is Class 1 at an accelerated 6% CCA rate under Regulation Sch II Class 1(a.1). A commercial building acquired before that date, or a mixed-use building not meeting the 90% test, is Class 1 at the standard 4% rate. Land itself is never depreciable.
Class 1(a.1) mechanics. The building must be non-residential (industrial, office, retail, warehouse). Manufacturing/processing buildings can access an even higher 10% rate under Class 1(a.2). To claim the accelerated rate the owner must make a separate class election on the T2’s CCA schedule for that specific building.
Example: an Ontario RealtyCo buys a warehouse for $2,400,000 including $400,000 of land value. Building portion: $2,000,000. Class 1(a.1) at 6%. First-year CCA (subject to Accelerated Investment Incentive rules): $180,000 (1.5 x 6% x $2M in the year of acquisition under AII 2024-2027 phase, then falling). Subsequent-year CCA: 6% declining balance. Land is not depreciable and sits on the balance sheet at $400,000 permanently.
Separate class election. Class 1(a.1) requires each building to be placed in its own separate class election (Regulation 1101(5b.1)) to preserve the higher rate on that specific building and to isolate recapture calculations on eventual sale. Without the election, the building drops into the general 4% Class 1.
Note: Purpose-built rental residential construction is Class 1 at 4% base but has additional 2024+ AII enhancements. Refer to Regulation Sch. II Class 1(q) for the current provisions applicable to purpose-built rentals.
Source: canada.ca â CCA classes
— Bader A. Chowdry, CPA, CA, LPA — Insight Accounting CPA
Disclaimer: Bader A. Chowdry, CPA, CA, LPA is a Licensed Public Accountant regulated by CPA Ontario. Insight Accounting CPA Professional Corporation is a Chartered Professional Accountant firm. This content is general information only and does not constitute professional advice for your specific facts. Confirm current rules and figures with your own advisor before acting.