Tools and equipment deductions for Ontario trades

One number decides how most of a trades business's tool spending gets treated. A tool costing less than $500 goes into capital cost allowance Class 12, which is written off at 100% with no half-year rule on most items. A tool costing $500 or more is a capital addition to a class and comes off over several years at that class's rate. The test is applied per tool, so an invoice covering twelve drivers at $180 each is twelve Class 12 items rather than one $2,160 capital addition.

CRA's page on classes of depreciable property sets Class 12 for tools "costing less than $500" acquired on or after May 2, 2006. We checked it in August 2026 and it still reads $500. The figure is not indexed, so it has sat at $500 for twenty years while tool prices did not, and it catches more purchases every year than it used to.

Below that sits a third category people forget. Blades, bits, abrasives, fasteners, tape, sealant and consumables are supplies, expensed as bought. There is no class and no threshold to think about, and on a working trades and contracting file they are most of the tool line.

The classes a trades business actually meets

Two rows need a note. Class 10 covers contractor's movable equipment, which CRA describes as equipment moved from place to place in the course of a contractor's business, with portable camp buildings, welding equipment and portable crushers given as examples. Anything acquired after December 23, 1991 has to be acquired for use in a construction business, or for lease to someone who will use it in theirs. Class 38 carves out of that, so an excavator is Class 38 and the jobsite compressor beside it is not.

The Class 53 row is date-stamped and it matters this year. Class 53 at 50% applies to eligible manufacturing and processing machinery acquired after 2015 and before 2026. A fabrication shop buying a new brake press in 2026 is looking at Class 43 at 30% instead. That change is easy to miss because last year's file will show Class 53.

Vehicles run on their own rules, including a separate cap for passenger vehicles and a different treatment for a work truck that qualifies as a motor vehicle. We deal with that in the post on writing off a work truck or van, and it is worth reading before you sign anything at a dealership.

A year of tool spending, worked through

A plumbing corporation buys the following in its 2026 fiscal year, all figures net of HST because a registrant recovers the 13% as input tax credits and claims CCA on the pre-tax cost:

The Class 8 and Class 10 figures are half of the normal rate, which is the half-year rule: in the year you acquire property, you generally claim CCA on half your net additions to the class. Class 12 tools mostly escape it. The exceptions are dies, jigs, patterns, moulds and lasts, and the cutting or shaping part of a machine, which do get the half-year treatment.

The first-year number can be considerably larger than the table shows. CRA's T2 corporation guide describes a reaccelerated investment incentive available for qualifying property acquired on or after January 1, 2025 that becomes available for use before 2034, generally with a four-year phase-out for property available for use after 2029. Budget 2025 also confirmed the government is proceeding with immediate expensing of manufacturing and processing machinery and equipment. The exact first-year percentage depends on the class and the in-service date, and these rules have moved more than once in two years, so confirm the figure for the specific purchase before you build a tax saving into the decision to buy.

The $13,760 of the jetter and threader you did not deduct this year is not lost. It sits in the undepreciated capital cost of each class and comes off in later years at 20% and 30% of the declining balance.

Leasing rather than buying

A lease is a current expense. Monthly payments come off income as you make them and nothing goes into a class. Buying puts the asset on the books and spreads the deduction over the class's life.

The tax difference is timing rather than total. Leasing wins on equipment you will outgrow, on machines where maintenance is bundled in, and on cash flow in a season when the money is better used on materials. Buying wins on equipment you will still be running in eight years. A lease-to-own arrangement can be treated as a purchase, so read the end-of-term clause rather than the monthly payment.

Selling or trading in a tool

You cannot simply take the machine off the books. Proceeds go against the class at the lesser of what you received and the original capital cost. A trade-in counts as proceeds even though no cash changes hands, which surprises people every time.

Three outcomes follow, depending on what is left in the class. Sell a welder for $4,000 out of a Class 8 balance of $9,400 with other property still in the class, and the balance simply drops to $5,400. Sell the last item in a class for $3,000 when the undepreciated capital cost is $8,200, and the $5,200 remaining is a terminal loss, deductible in full that year. Sell it for $11,000 against that same $8,200 balance and the $2,800 excess is recapture, which goes into income.

Year-end timing is real here. A disposition three days before your year end lands in this year. Three days after and it lands in the next one.

The employed tradesperson's deduction, which is a different thing entirely

This is where the confusion on this topic almost always sits, so it is worth being blunt. The tradesperson's tools deduction is claimed by an individual on a T1, against employment income, for tools they bought and own personally. It has nothing to do with a corporation deducting the tools it buys for its own crew. A trades corporation does not claim it, and an employee does not get the corporation's CCA. Two separate people, two separate returns.

For an employed tradesperson the deduction is the lesser of $1,000 and the amount by which eligible tool purchases exceed a threshold equal to the Canada employment amount for the year. CRA's indexed amounts put the Canada employment amount at $1,501 for 2026, up from $1,471 in 2025. So an apprentice who spent $1,400 on tools in 2026 deducts nothing, $2,100 of purchases gives $599, and the full $1,000 arrives once purchases reach $2,501. The employer signs a T2200 certifying the tools were required for the job.

Apprentice mechanics registered in a program leading to a licence to repair self-propelled motorized vehicles get a separate and more generous deduction on top of that. Its threshold is the greater of an amount tied to the Canada employment amount and 5% of the income from the apprenticeship, unused amounts carry forward to later years, and the employer has to certify the tools with receipts attached.

One trap on the employer side. Buy the tools and they are a deductible business expense owned by the company. Hand the worker cash for tools, pay a tool allowance, or pay them rent for using their own tools, and CRA's guidance on tool reimbursements and allowances treats all three as taxable benefits. A cash allowance attracts income tax, CPP and EI. Protective gear runs the other way: employer-provided safety footwear, safety glasses and protective clothing designed to protect against hazards of the employment are not a taxable benefit, and neither is a reasonable reimbursement supported by receipts.

Record keeping that makes the claim defensible

Capture the per-item cost, not just the invoice total. A $2,400 tool invoice coded as a single line has lost the information needed to make the Class 12 call, and the fallback treatment is the more expensive one. Keep a fixed asset schedule carrying the description, date acquired, cost, class and disposal date for anything above the threshold. Where a tool goes home with a worker, note it.

The same discipline pays twice, since the coding you do through the year is what feeds job costing and the equipment recovery rates in your pricing. Our bookkeeping work for trades sets the asset threshold and the coding rules once, so the year-end claim is assembled from the file instead of reconstructed from a shoebox in April.

All of our contractors and trades work

General information only, current at August 2026. Tax rules change and GST/HST status is fact-specific. Confirm your own position before relying on anything here.