CCA class 13: cost over the lease plus one renewal, 5 to 40 years

How is the class 13 claim calculated?

Class 13 is straight line, not declining balance, and the CRA lists its rate as "Varies" because the maximum depends on the leasehold and the lease terms canada.ca. Regulation 1100(1)(b) sends the calculation to Schedule III laws-lois.justice.gc.ca. Schedule III works cost by cost: each year's spending on a particular lease is its own layer, and each layer gets the lesser of 1/5 of its cost and its cost divided by the number of 12 month periods (40 at most) from the start of the tax year the cost was incurred to the day the lease ends laws-lois.justice.gc.ca.

Each layer stops once its claims reach its cost, and the whole class stops once its UCC hits nil laws-lois.justice.gc.ca. Track every lease and every year of spending on a working paper, because Schedule 8 only shows the class total. The CCA classes table puts class 13 next to the other classes.

What is the first year claim in 2026?

For improvements acquired after 2024, the first year claim is the lesser of 150% of the Schedule III amount and the class UCC, as long as the cost is incurred before 2030 laws-lois.justice.gc.ca. That is the reaccelerated investment incentive, which covers property acquired after 2024 that becomes available for use before 2034 laws-lois.justice.gc.ca. Property that is neither accelerated nor reaccelerated gets only 50% of the Schedule III amount in its first year laws-lois.justice.gc.ca.

The CRA's Schedule 8 instructions state the 2026 rule the same way: for reaccelerated class 13 property with a cost incurred before 2030, the lesser of 150% of the Schedule III amount and the UCC, and in any other case the plain Schedule III amount canada.ca.

The last row is a proposal. On September 15, 2026 Finance proposed permanent immediate expensing for most depreciable property acquired on or after that date, excluding buildings in classes 1 and 3, classes 14, 14.1 and 51, certain vehicles in classes 10 and 10.1, and property depreciated under Schedules V and VI; class 13 isn't on that list canada.ca. The draft regulations rewrite paragraph 1(b) of Schedule III so the UCC cap works with the new deduction, and they cap the claim of anyone other than a corporation or an all corporate partnership at the income from the business that uses the property canada.ca. As of October 2026 it isn't law. The immediate expensing page tracks it.

What does a $120,000 fit out on a 10 year lease claim each year?

Your client is a CCPC with a December 31 year end. It signs a 10 year retail lease running January 1, 2026 to December 31, 2035, with two 5 year renewal options. It spends $120,000 fitting out the space, and the store opens in June 2026, so the cost is incurred in 2026. Nobody owned the improvements before, so they are reaccelerated property, and they were acquired before the September 15, 2026 announcement.

The second renewal option never enters the count. Schedule III deems the lease to end when the term following the one in which the cost was incurred ends, so only one renewal counts laws-lois.justice.gc.ca. The extra 50% in 2026 comes off the back end: the 2040 claim drops to $4,000 because a layer can't claim more than the cost still left.

If the same store opened in November 2026, the improvements would be acquired after September 15, 2026, and under the draft the full $120,000 could come off 2026 income instead.

What goes into class 13, and what goes into a building class?

The CRA puts in class 13 what a tenant spends on capital improvements or alterations to leased property and what it pays the landlord to get or extend a lease or sublease. Left out: a payment to cancel a lease, and an amount paid instead of rent or as prepaid rent canada.ca.

Bigger work moves to a building class. Under Regulation 1102(5), a tenant who erects a building on leased land, adds to a leased building, or alters it enough to substantially change the nature of the property treats that part of the leasehold as a building laws-lois.justice.gc.ca. Schedule II then excludes that part from class 13 laws-lois.justice.gc.ca. Building classes use declining balance, so the write off stops following the lease. The September draft also excludes buildings in classes 1 and 3 from immediate expensing, so settle this split before assuming a fit out can be expensed.

Which edge cases change the number?

A lease shorter than five years. A $30,000 fit out on a 3 year lease with no renewal gives $30,000 / 3 = $10,000, but the 1/5 cap allows only $6,000, so the claim runs five years laws-lois.justice.gc.ca. When the lease ends, any balance becomes a terminal loss if your client has no class 13 property left and doesn't acquire another leasehold interest before year end canada.ca. The recapture and terminal loss page has the mechanics.

Improvements later in the lease. A new layer counts its own periods from the start of the tax year it is incurred. In the example, $30,000 spent in 2031 counts January 1, 2031 to December 31, 2040, or 10 periods, so it gets $3,000 a year. It is incurred after 2029, so its first year gets the plain Schedule III amount, not 150% laws-lois.justice.gc.ca.

Counting from the start of the tax year. Because the count runs from the beginning of the tax year, a cost incurred in December still counts that whole year as one of its periods laws-lois.justice.gc.ca.

Renewal options. Only a renewal the tenant has a right to under the lease counts. The CRA's archived bulletin says a right to negotiate a new lease isn't a renewal option, and that costs with no written lease were prorated over five years canada.ca. Treat that bulletin as background: it dates from 1985 and the CRA no longer updates it.

A short tax year. Class 13 is not on the list of paragraphs exempt from the short year rule, so a tax year of less than 12 months allows only days in the year / 365 of the maximum laws-lois.justice.gc.ca. See the corporate tax year end page for when a short year happens.

How do you enter class 13 on Schedule 8?

Class 13 gets one line on T2 Schedule 8. Enter "N/A" as the rate in column 18, since it isn't declining balance, and enter the claim you calculated in column 21 canada.ca. The column 16 factor for class 13 is 0, because Note 16 sets its first year rule instead. Leave the half year adjustment in column 17 at nil: Regulation 1100(2) excludes class 13 laws-lois.justice.gc.ca.

The CRA's T2 guide confirms the method: straight line, with the half year rule only for property acquired before November 21, 2018 canada.ca. The Schedule 8 page walks through every column, and a sole proprietor runs the same Schedule III calculation on the T2125.