What does capital cost allowance (CCA) reflect?

Capital Cost Allowance (CCA) reflects the depreciation allowance of capital assets in Canada. It allows property owners and investors to recover the cost of their investments in capital property over time through tax deductions. Essentially, CCA accounts for the wear and tear that an asset experiences as it ages, providing a method for investors to reduce taxable income by deducting these annual depreciation amounts.

For real estate investors, this means that the cost of buildings, improvements, and certain equipment can be claimed over a specified period, which lowers taxable income and can lead to tax savings. Understanding CCA is crucial for effective tax planning, as it impacts cash flow and overall investment strategy.

The other options, while related to real estate or finance, do not accurately describe CCA. They cover areas such as property appreciation, total income from a property, or loan amounts, but they do not capture the essence of what CCA represents within the context of capital assets.