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Accounting encyclopedia · Corporate tax

Recapture

Recapture, or recapture of capital cost allowance, is income that arises when you sell depreciable property for more than the undepreciated capital cost left in its class. The capital cost allowance you claimed earlier was, in effect, too generous, so the excess is added to your income for the year rather than treated as a capital gain.

Sora Accounting & Tax · General information · Editorial policy
Updated · 3 min read

How a sale above tax value becomes recapture

A step-by-step view of how claiming CCA and then selling property above its remaining tax value creates income to add back.

Visual labels: CCA lowers class balance; Sell for more than balance; Balance turns negative; Added to income.

How recapture arises

When you claim capital cost allowance (CCA) on equipment, a vehicle or a building, you reduce the remaining tax value of its class, called the undepreciated capital cost (UCC). If you later sell property from that class, the proceeds reduce the UCC. When that balance would drop below zero, the negative amount is a recapture. The CRA describes it as a negative UCC balance at the end of the year, and it is added to income.

In practice, recapture can follow a sale for more than the UCC of the class at the start of the period plus any additions made during it. It is not limited to sales: the CRA notes it can also occur when you receive a government grant or claim an investment tax credit on the property.

An illustrative example

These figures are illustrative only. Suppose a class holds one machine that cost $20,000. After several years of CCA, the UCC of the class is $10,000. You sell the machine for $15,000 and buy nothing new that year. The UCC of the class falls to negative $5,000, so you report $5,000 of recapture as business income.

You have no capital gain in this case, because you sold for less than the original cost. The $5,000 is income, not a capital gain. If you sold for more than the original cost, the excess over cost would be a capital gain and the rest would still be recapture. A class with several assets also behaves differently, because one sale reduces a shared balance rather than a single asset’s balance.

Related rules and ways to postpone it

Recapture has a counterpart. If you sell the last property in a class and a balance remains, you may have a terminal loss instead. Neither result is a capital gain or loss, and depreciable property cannot produce a capital loss at all, although it can produce a capital gain when sold for more than its cost.

In some cases you can postpone recapture. The CRA lists replacing sold, stolen, destroyed or expropriated property with similar property within specified time limits, and transferring property to a corporation, a partnership or a child. Those rules have conditions, so treat them as questions to raise rather than assumptions.

What to discuss with your accountant

Before you sell, trade in or scrap business property, tell your accountant the class, the expected proceeds and whether you plan to replace it. Timing around your fiscal year-end can change when the income lands.

Bring your CCA schedules, purchase invoices, the sale agreement and details of any grants or credits. If the property was also used personally, only the business portion is part of the calculation. Ask whether a replacement or transfer rule might apply before the sale closes.

Sources & editorial notes

Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.

Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.