CCA class 14.1: goodwill at 5%, and 7.5% in year one for 2026 buys

What goes in class 14.1, and what stays out?

Schedule II puts three things in class 14.1, all in respect of a business: goodwill, property that was eligible capital property immediately before January 1, 2017 and still owned that day, and intangible property acquired after 2016 for the business that isn't caught by one of eight exclusions laws-lois.justice.gc.ca. The CRA's examples are franchises, concessions or licences for an unlimited period, and milk and egg quotas for farmers canada.ca.

Goodwill is one property per business. Subsection 13(34) deems a single goodwill property for each business, and every later goodwill purchase for that business adds to its cost laws-lois.justice.gc.ca. Subsection 13(35) adds any capital outlay that isn't the cost of a property, isn't deductible and isn't paid to a creditor or a shareholder, so a capital payment with no asset behind it still lands in the class laws-lois.justice.gc.ca.

The first $3,000 of incorporation expenses is deductible under paragraph 20(1)(b), shared with anyone else who deducts for the same incorporation laws-lois.justice.gc.ca. Finance's notes on the 2017 change say the amount above $3,000 goes into class 14.1 budget.canada.ca. Limited life franchises are class 14, and patents default to class 44 at 25%; an elected out patent with no end date can fall into class 14.1 canada.ca. The other rates are on the CCA classes table.

What can your client claim on class 14.1 in 2026?

The base rate is 5% declining balance under Regulation 1100(1)(a)(xii.1) laws-lois.justice.gc.ca. Class 14.1 isn't on the list of classes excluded from the reaccelerated first year factor, so goodwill acquired after 2024 and available for use before 2030 adds half the net addition to the base in year one instead of taking half off. That makes the first claim 7.5% laws-lois.justice.gc.ca.

Worked example: your client's corporation, incorporated in 2020 with a December year end, buys a competitor's business at arm's length in June 2026. The purchase agreement puts $200,000 on goodwill.

The bigger first claim only moves the deduction forward. The pool still runs down at 5% on the declining balance after year one. The mechanics of the first year factor are on the accelerated investment incentive page.

Selling goodwill: recapture up to cost, capital gain above it

On a sale, the class drops by the lesser of the proceeds (minus selling costs) and the capital cost of the property, under element F of the UCC definition in subsection 13(21) laws-lois.justice.gc.ca. A negative balance at year end is recapture, 100% included in income. Proceeds above capital cost are a capital gain, and half of a capital gain is taxable under paragraph 38(a) laws-lois.justice.gc.ca. Today's inclusion rate is on the capital gains inclusion rate page.

Same corporation: it sells the whole business in 2028, before claiming any 2028 CCA, and stops carrying it on. UCC is $175,750 after the 2026 and 2027 claims.

The third column only works because the business has ended. Paragraph 20(16.1)(c) switches off the terminal loss for class 14.1 property unless your client has stopped carrying on the business the class relates to laws-lois.justice.gc.ca. Sell part of the business and keep running the rest, and the $25,750 stays in the pool at 5% a year. General recapture and terminal loss rules are on the recapture and terminal loss page.

Goodwill your client built has a capital cost of nil, so nothing comes off the class and the whole price is a capital gain. A sole proprietor who sells a business they built for $350,000 of goodwill reports a $350,000 capital gain, $175,000 taxable, with no recapture because no CCA was ever claimed laws-lois.justice.gc.ca.

How did eligible capital property move into class 14.1?

On January 1, 2017 the cumulative eligible capital pool became class 14.1. Subsection 13(38) deems the class's capital cost to be 4/3 of the CEC balance plus the old deductions, and deems the difference between that cost and the CEC balance to be CCA already claimed laws-lois.justice.gc.ca. The result, in Finance's words, is an opening UCC equal to what the CEC balance would have been budget.canada.ca.

The 4/3 grossup undoes the old 75% inclusion, so a sale needs a matching cut. Subsection 13(39) deems your client to acquire a new class 14.1 property costing the least of 1/4 of the proceeds, 1/4 of the capital cost and a goodwill tracking amount, which nets the reduction down to 75% for property from before 2017 laws-lois.justice.gc.ca. The CRA's shortcut: for class 14.1 property that was eligible capital property before 2017, take only 75% of the lesser of the proceeds and the capital cost into the class canada.ca. The rule doesn't apply on a section 85 rollover or a windup under 88(1), among other rollovers listed in 13(39).

The rate relief ends with 2026 year ends. Regulation 1100(1)(c.1) adds 2% on the balance left from before 2017, which is how that property gets 7%, and tops the class up to a $500 claim (or the UCC, if lower), for tax years ending before 2027 laws-lois.justice.gc.ca. Finance described the top up as allowing $500 of total CCA where the normal claim falls short budget.canada.ca.

Where does goodwill trip people up on incorporations and purchases?

Section 85 at nil. On a rollover of class 14.1 property, the floor in 85(1)(e) is the least of the UCC of the class, the cost of the property and its FMV laws-lois.justice.gc.ca. Goodwill a sole proprietor built has a nil cost, so it can go into the corporation at $0 for preferred shares; the full example is on the section 85 rollover page.

The 7.5% after a related party transfer turns on past CCA. Regulation 1104(4.01) gives the 1.5 factor to property nobody claimed CCA on before your client acquired it, or, failing that, to property your client didn't get on a rollover or from a non arm's length person who owned it earlier laws-lois.justice.gc.ca. Purchased goodwill the owner was already depreciating fails both tests when it moves into the new corporation. Goodwill the owner built never carried CCA, so it can still pass the first test.

No full expensing. Finance's September 15, 2026 Productivity Mega Deduction would expense most property acquired on or after that date, but it excludes classes 14 and 14.1, naming goodwill canada.ca. It's proposed, not law, as of October 2026; see immediate expensing.

GST/HST. The CRA says class 14.1 property isn't capital property for GST/HST purposes canada.ca. On a sale of a business where the buyer acquires substantially all the property needed to run it, section 167.1 of the Excise Tax Act leaves the price for goodwill out of the tax laws-lois.justice.gc.ca. The election for the rest of the assets is on the GST44 page.

Capital receipts with no property behind them. Under 13(37), a capital amount your client receives for the business that doesn't reduce the cost of any property and isn't otherwise taxed is deemed proceeds from disposing of goodwill laws-lois.justice.gc.ca. It reduces the class like any other goodwill sale.