Canada Revenue Agency
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How to calculate your annual allowance
Complete the following chart to calculate your annual allowance and the balance in your cumulative eligible capital (CEC) account at the end of your fiscal period.
| Calculating your annual allowance and CEC account balance at the end of your fiscal period | ||
| Balance in the account at the start of your fiscal period | $__________ 1 | |
| Eligible capital expenditures you made or incurred in your fiscal period __________ × 75% |
$__________ 2 | |
| Line 1 plus line 2 | $__________ 3 | |
| All the amounts you received or are entitled to receive from the sale of eligible capital property in your fiscal period | $__________ 4 | |
| All the amounts that became receivable in your fiscal period from the sale of eligible capital properties before June 18, 1987 | $__________ 5 | |
| Line 4 plus line 5 | $__________ 6 | |
| Line 6 × 75% | $__________ 7 | |
| CEC account balance Line 3 minus line 7 |
$__________ 8 | |
| Annual allowance 7% × line 8 |
$__________ 9 | |
| CEC account balance at the end of your fiscal period Line 8 minus line 9 |
$_________ 10 | |
Note
An eligible capital expenditure is reduced by the amount of any assistance received or receivable from a government for the expenditure. Also, an amount forgiven (or entitled to be forgiven) on government debt reduces your CEC account. Special conditions may apply to non-arm's length transactions.
You can deduct an annual allowance if there is a positive balance (line 8) in your CEC account at the end of your fiscal period. You do not have to claim the full amount of the maximum annual allowance for a given year. You can deduct any amount you want, up to the maximum allowable of 7%. If your fiscal period is less than 365 days, you have to prorate your claim. Base your claim on the number of days in your fiscal period compared to 365 days.
If there is a negative balance in your CEC account, see Sale of eligible capital property – Sole proprietor and Sale of eligible capital property – Partnership.
The following is an example of how to calculate the maximum annual allowance and account balance.
Example
John started a business on January 1, 2011. John's business has a December 31 year-end. During 2011, he bought a franchise for $16,000. He calculates his maximum annual allowance of $840 for 2011 as follows:
John's CEC account
| Balance at the start of John's 2011 fiscal period |
$ 0 | 1 | |
| John's eligible capital expenditure: franchise cost for the 2011 fiscal period | $ 16,000 × 75% | $ 12,000 | 2 |
| Line 1 plus line 2 | $ 12,000 | 3 | |
| John has not sold any eligible capital property during the 2011 fiscal period. Therefore, he will not have any amounts on lines 4 to 8. | |||
| John's maximum annual allowance on eligible capital property is 7% × line 3 | $ 840 | 9 | |
| Balance at the end of 2011 (line 3 minus line 9) | $ 11,160 | 10 | |
Forms and publications
- Guide T4002, Business and Professional Income
- Interpretation Bulletin IT-123R6, Transactions Involving Eligible Capital Property
