EV Write-Off in Canada: Class 54 First-Year CCA and Cost Limit

How much of an electric car can I write off in the first year under Class 54?

A qualifying electric car is a Class 54 asset, with an ordinary CCA rate of 30%. For a vehicle acquired after 2024 and available for use before 2030, the federal first-year maximum is 100% of the net addition to the class (additions less any Class 54 vehicle sold that year), on a cost capped at $61,000 plus sales tax, with no half-year cut (Income Tax Regulations, s. 1100(2)). That is a ceiling, not a requirement: you can claim any amount from zero up to the maximum (Reg. 1100(1); CRA Guide T4002). What you leave unclaimed stays in the class and is claimed later at the ordinary rate on what is left.

Status. The CRA's classes page and Guide T4002 still call this reinstated rate "proposed". The Income Tax Regulations on Justice Laws already contain it, enacted by S.C. 2026, c. 3, s. 103 (in force from the start of 2025). Recheck both on your purchase date.

The last two rows apply to cars acquired before 2025; the CRA pages show them as the existing schedule. Classes 54 and 55 use the same percentages. A tax year that begins in 2029 and ends in 2030, or begins in 2031 and ends in 2032, gets a blend of the two adjoining rows (Reg. 1100(2.011)).

What makes a case not simple:

• A deduction is not a refund. If you are buying to ease a high-income year, the tax saved is roughly your tax rate times the amount claimed, not the price of the car. A full first-year claim on a car that is alone in its class leaves a zero balance, so a later sale can be taxed as recapture: the adjusted sale proceeds above what is left in the class, added back to income.
• The cost counted is capped, so a dearer car is never fully deductible (next section).
• Self-employed owner: only the business-use share is deductible. Corporation: an owner's or employee's personal driving is a taxable benefit to the driver, and how it affects the corporation's deduction depends on the facts.
• A federal purchase incentive under a named program takes the car out of Class 54 and into Class 10 or 10.1, with a lower cost limit. So can an opt-out election or some used-car transfers. A provincial rebate does not remove it but lowers the cost. See the vehicle section below.
• A tax year shorter than 12 months cuts the maximum in proportion to its days out of 365 (Reg. 1100(3)).

Gather the invoice with the sales-tax split, the delivery date, the date of first use, any rebate paperwork, and a logbook with odometer readings.

What is the Class 54 cost limit, and what if the car costs more?

The capital cost counted for CCA is capped at $61,000 plus the federal and provincial sales tax that would be payable on that amount. Cost above the cap is not deductible as CCA in any year (CRA: classes of depreciable property; Reg. 7307(1.1); Income Tax Act, s. 13(7)(i)). Finance confirmed the cap stays the same for new and used vehicles in 2026 (Finance Canada).

The cap applies to a zero-emission passenger vehicle: an "automobile" in Class 54. The Act's definition of automobile leaves out a vehicle acquired mainly as a taxi and some vans and pickups used mainly to carry goods or equipment, so the cap does not apply to those (Income Tax Act, s. 248(1)). Where a pickup or van falls depends on seating and use; see buying a car through your business.

Which vehicles count as zero-emission, and which dates apply?

A zero-emission vehicle is an owned motor vehicle that is fully electric, powered by hydrogen, or a plug-in hybrid with a battery capacity of at least 7 kWh. It must be acquired, and become available for use, after March 18, 2019 and before 2034 (Income Tax Act, s. 248(1); Reg. 1102(26)). The CRA's type-of-vehicle page still shows an end date of before 2028 and calls the extension proposed; the Act reads before 2034. Class 54 is for a car you own. A leased electric car earns no CCA; its lease payments are a separate expense, limited to $1,100 a month before tax for a new lease (CRA: motor vehicle expenses; Finance Canada).

A car can also fail the definition in three ways:

• An election. You opted out of Class 54 (below).
• Federal assistance. Government of Canada assistance has been paid under a prescribed program. The regulation names the federal purchase incentive announced on March 19, 2019 and the Electric Vehicle Affordability Program announced on February 5, 2026 (Reg. 1102(26)). Any government assistance, including a provincial rebate, also generally reduces the capital cost (Income Tax Act, s. 13(7.1)).
• The used-property test. A used car from an unrelated seller can qualify. It fails if someone has already claimed CCA on it and either you or a person you do not deal with at arm's length previously owned it, or you got it on a tax-deferred transfer (Reg. 1104(4.01)). No CRA page works through a car moved in from an owner or a related company; that turns on the facts. See recording a vehicle purchase and loan.

A car that fails the definition is an ordinary passenger vehicle in Class 10 or 10.1, so the $61,000 limit and the zero-emission first-year percentages no longer apply; the opt-out table below shows the difference. Weigh any federal rebate against that loss.

CCA starts only when the car is available for use. That is usually the earliest of the date you first use it to earn income and the date it is delivered and capable of providing the service, and no later than the start of the second tax year after the year you buy it (Income Tax Act, s. 13(27); CRA Guide T4002). For year-end timing, see buying equipment before year-end.

Class 54 or Class 55: which fits a rideshare driver or taxi business?

Most owners use Class 54, which holds zero-emission vehicles that would otherwise be in Class 10 or 10.1. Class 55, at 40%, holds those that would otherwise be in Class 16: taxis, vehicles used in a daily car rental business and freight trucks rated above 11,788 kg (CRA: classes of depreciable property). Class 55 has its own factors but reaches the same first-year percentages as Class 54 (Reg. 1100(2)). The class matters mainly for the cost limit above: the cap does not apply to a car acquired mainly as a taxi.

None of the CRA or regulation pages read for this guide says whether a rideshare or delivery car counts as a taxi. That turns on the facts of the work. For the driver's other costs, see rideshare and delivery driver expenses.

Can I opt out of Class 54, and why would I?

Yes. Elect on the return for the year you acquire the car, by that return's filing due date. The CRA's classes page names no form or box for it and says there is no late or amended election. The car then goes into its usual class (Class 10 or 10.1 for a passenger car, Class 16 for a taxi) and gets none of the zero-emission first-year percentages (Reg. 1103(2j); CRA: classes of depreciable property).

The CRA gives no reasons. The rules show one difference that can matter, the treatment of a later sale:

You do not need to opt out to claim less in year one, because the claim can be any amount up to the maximum. For the rest of the class rules, see capital cost allowance.

Is the EV write-off a saving or only timing?

Often timing. Total CCA over the car's life cannot exceed its capped cost, and a sale can claw back what was claimed. What the earlier deduction is worth depends on the tax rates in the years involved and on whether the car is sold.

• A full first-year claim on a car that is the only property in the class leaves a class balance of zero. When the car is sold, the proceeds come off the balance, and a negative balance is recapture, which is added to income. For an arm's-length sale of a car bought above the cap, the proceeds counted against the class are scaled by the capped cost over the actual cost, with adjustments for government assistance (Income Tax Act, s. 13(7)(i); CRA Guide T4002; Income Tax Act, s. 13(1)). How a sale is figured is in selling a business asset.
• The Class 10.1 exception from recapture (s. 13(2)) does not reach Class 54, because the Act's definition of a passenger vehicle leaves out a zero-emission vehicle (s. 248(1)).
• A claim larger than the year's income produces a business loss, which carries to other years under the loss rules in business losses.

Does personal use cut the deduction, and who should own the car?

For a self-employed owner, yes: only the business-use share is deductible. The CRA's usual measure is business kilometres divided by total kilometres, and it recommends an accurate logbook of business trips as proof (CRA: personal use of property; CRA: motor vehicle expenses). A self-employed owner enters the CCA on line 9936 of Form T2125; a corporation reports it on Schedule 8 of its T2 return (CRA: Schedule 8). See the CRA vehicle logbook.

When a corporation owns the car and an owner or employee drives it personally, the driver has a taxable benefit, and the corporation's own deduction depends on how that use is treated. The benefit starts from the car's full cost including sales tax, which is not limited to the Class 54 cap (CRA: automobile provided by the employer). The calculation, and whether the corporation, the owner or a work-kilometre allowance for a personally owned car fits best, are covered in buying a car through your business.

Can I recover the GST/HST on an electric car?

Only a GST/HST registrant can, and for a passenger car only on the capped cost. The recovery is an input tax credit (ITC): GST/HST paid on a business purchase, claimed back. A taxi or a qualifying work van or pickup is not a passenger vehicle for this purpose: a registrant who buys one for use mainly in its commercial activities generally gets a full credit (Excise Tax Act, s. 199(2)). It depends on who buys and how much the car is used in commercial activities, in short use in your business rather than personal use (CRA: ITC eligibility percentage).

The table covers a zero-emission passenger car, not every Class 54 or 55 vehicle. A claimed credit counts as government assistance and reduces the capital cost, so the same tax does not also raise the CCA base (Income Tax Act, s. 248(16)). For a sole proprietor whose credit comes from the CCA claimed, the CCA is figured on the cost including the tax, and the credit then reduces the next year's opening class balance, not this year's base (s. 248(17); Excise Tax Act, s. 202(4)). Tax you cannot recover stays in the cost, but the capped total still applies. Check provincial sales tax and Quebec's QST separately. For the return steps, see filing GST/HST and claiming input tax credits.

What do the 2026 proposals change for the first-year rate?

The latest proposal does not say whether it changes anything for Class 54 or 55. On September 15, 2026, Finance proposed the Productivity Mega Deduction: permanent immediate expensing for most capital property acquired on or after that date. It is a proposal, not law. The announcement excludes certain Class 10 and 10.1 vehicles and does not mention Class 54 or 55 by name. It names zero-emission vehicles only when describing the earlier Budget 2025 deduction. It says property outside the new deduction keeps its existing enhanced first-year deduction (Finance Canada).

Because the enacted rule already gives the full first-year maximum before 2030, a change could matter mainly from 2030, when the enacted rates step down. Claim on the rule in force on your purchase date, not on a proposal.

Example

Canadian dollars, illustrative, federal rules only. Sales tax is noted in each case.

A corporation buys a C$70,000 car in December

An Ontario corporation registered for GST/HST buys an electric car for C$70,000 plus 13% HST, which is C$9,100. It takes delivery and starts using the car that month, more than half in its commercial activities. The credit covers only the capped cost: 13% of C$61,000 is C$7,930. The capital cost is C$61,000, because the C$9,000 of price above the cap is never deductible.

The car was acquired after 2024 and is available for use before 2030, so the first-year maximum is 100%: C$61,000. The corporation may claim less. With no other Class 54 property and no Class 54 car sold that year, a full claim leaves a class balance of zero, so a later sale would add recapture to income.

At an illustrative combined tax rate of 25%, a C$61,000 claim lowers that year's tax by about C$15,250; at 12%, by about C$7,320. The car costs about C$71,170 after the C$7,930 credit, so the claim lowers the cost; it does not pay for it.

A rideshare driver buys a C$45,000 car

A self-employed Toronto driver buys an electric car for C$45,000 plus 13% HST of C$5,850, so C$50,850 with tax. It is acquired after 2024 and in use before 2030, for a full tax year, with no rebate. This assumes Class 54; whether a rideshare car counts as a taxi (Class 55) is not settled in the sources, though the first-year percentage is the same in both. The logbook shows 40,000 business kilometres out of 50,000, so business use is 80%. The cost is under the cap (C$68,930 with HST), so it is the capital cost, and the first-year maximum is 100%. Only the business share is deductible: 80% of C$50,850 is C$40,680. The personal share is never deductible.

A ride-sharing driver must register for GST/HST (CRA: taxi and ride-sharing drivers). At 80% use the credit is partial, worked out from the CCA claimed: C$40,680 x 13/113 = C$4,680. That credit reduces the next year's opening class balance; it does not reduce this year's CCA.

An owner also drives the corporation's car personally

An Alberta corporation registered for GST buys an electric car for C$55,000 and pays C$2,750 GST. The owner-manager drives it 30% for personal trips, so the car is used 70% in commercial activities. It is acquired after 2024, in use before 2030 and under the cap. The GST is recoverable, so the capital cost is C$55,000 and the first-year maximum is 100%: C$55,000.

The owner-manager's 30% personal use is a taxable benefit to the owner, and whether it is an employment benefit or a shareholder benefit also affects the corporation's deduction. Both are worked out in buying a car through your business.

Different for you?

• You are buying through a corporation, or as a contractor, to ease a high-income year: the class, the first-year rate, who owns the car, the sales-tax position and a later sale all depend on your dates and facts, and the opt-out election cannot be filed late. Settle them before you buy with corporate tax help if a corporation buys, or individual tax help if you are self-employed.
• You contract through your own corporation: a personal services business has limited deductions, which can change whether the car is deductible at all. Read personal services business first.
• The corporation will own the car and you will drive it personally: see buying a car through your business.
• You drive for a rideshare or delivery app: see rideshare and delivery driver expenses.
• The car was bought in an earlier year and never recorded or claimed, or your books are behind: see recording a vehicle purchase and loan and catching up on overdue books, then get bookkeeping help.
• You plan to sell the car soon: see selling a business asset.
• Your corporation is in Quebec or Alberta: these provinces have no corporation tax collection agreement with the CRA (CRA: corporation tax rates). Their provincial corporate returns, and how they treat this deduction, are not covered here.