Tools and Equipment for Ontario Trades: What You Expense and What You Capitalize

Last reviewed: July 2026

A tool that costs less than $500 goes in capital cost allowance Class 12 and is fully deductible in the year you buy it, with no half-year rule. A tool costing $500 or more goes in Class 8 and is written off at 20% a year. That single threshold decides how most of a trades business's tool spending gets treated, and it is measured per tool, not per invoice.

The $500 figure has not moved since 2006 and is not indexed, so it catches more purchases every year.

The classes that matter to a trades business

Class	Rate	What goes in it
12	100%	Tools costing less than $500 each. No half-year rule on most of them
8	20%	Tools costing $500 or more, shop equipment, compressors, welders, benches, shelving, office furniture
10	30%	Work trucks and vans that qualify as motor vehicles, and contractor's movable equipment acquired for use in a construction business
10.1	30%	Passenger vehicles, capped at $39,000 for 2026, each in its own separate class
38	30%	Power-operated movable equipment for excavating, moving, placing or compacting earth, rock, concrete or asphalt. Excavators, backhoes, loaders, dozers

The one people get wrong: an excavator is Class 38, not Class 10.

The $500 rule, measured per tool

Class 12 includes tools that cost less than $500. The test is applied to each individual tool, so a single invoice for twelve $180 tools is twelve Class 12 items, not one $2,160 Class 8 addition.

Most Class 12 tools are also not subject to the half-year rule, which means the full cost is deductible in the year of purchase rather than half of 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.

Practically, this means the ordinary running spend of a trades business, drills, saws, hand tools, meters, small power tools, replacement bits and blades, is almost all immediately deductible. The classification effort belongs on the bigger purchases.

One habit worth building: have your bookkeeper capture the per-item cost, not just the invoice total. A $2,400 tool invoice coded as one line loses the information needed to make the Class 12 call, and the default treatment is the worse one.

What about consumables?

Blades, bits, abrasives, fasteners, tape, sealant, gloves and the rest are not capital at all. They are supplies, expensed as bought. There is no CCA analysis and no threshold to worry about.

The line is whether the item gives a lasting benefit. A $60 reciprocating saw blade you will destroy in three weeks is a supply. A $300 impact driver you will own for four years is a Class 12 tool. Both are fully deductible this year, which is why the distinction rarely changes your tax, but it does keep your job costing honest.

Equipment purchases and the first-year deduction

For property acquired after 2024, the Accelerated Investment Incentive was fully reinstated in March 2026. Eligible property gets a first-year deduction of three times the normal amount where the half-year rule would otherwise apply. On a 20% class like Class 8, that means roughly 30% in year one rather than 10%. On a 30% class like Class 10 or Class 38, roughly 45% instead of 15%.

Two corrections to material still circulating:

• The phase-out schedule that many articles still describe no longer applies. The incentive was reinstated, not wound down. CRA's own page on the subject has not been updated

• The $1.5 million immediate expensing for CCPCs is finished. It applied to property available for use before 2024 and was not extended. If you are planning a large equipment purchase on the assumption that you can write off the whole thing, check that assumption

Confirm the exact first-year figure for your purchase and fiscal year before committing to it. These rules moved recently and the numbers depend on the class and the in-service date.

Safety equipment and protective gear

This is one of the few areas where the tax treatment is genuinely favourable and clear.

Employer-provided protective clothing, including safety footwear and safety glasses, designed to protect the employee from hazards of the employment, is not a taxable benefit. Neither is:

• A reasonable allowance for the cost of required protective clothing, where it is actually used for that

• A reimbursement or accountable advance supported by receipts

• Paying for laundering or dry cleaning of uniforms and protective clothing, or a reasonable allowance for it

• A distinctive uniform the employee must wear on the job

What is taxable: ordinary clothing that could be worn outside work. A branded hoodie is a grey area worth a conversation. Steel-toed boots are not.

The tool allowance trap

Here is the asymmetry that costs trades employers money.

Employer buys the tools: deductible business expense, business owns the tools, no taxable benefit to the worker.

Employer gives the worker money for tools: taxable benefit. This applies to reimbursing them for tools they own, giving them a tool allowance, and paying them rent for using their own tools. All of it goes on the T4 with income tax and CPP withheld.

Same money, same intent, worse outcome. If you want to help a worker equip themselves, buy the tools and put them on the company's books.

What an employed tradesperson can deduct themselves

Separate from the business side, and worth knowing so you can answer the question when a worker asks.

An employed tradesperson can deduct eligible tools they buy for work, to a maximum of $1,000. The deduction is the lesser of $1,000 and the amount by which their eligible tool purchases exceed a threshold tied to the Canada employment amount. For 2026 that threshold is $1,501.

So the practical shape of it: nothing below about $1,500 of purchases, and the full $1,000 once purchases reach about $2,500.

Apprentice mechanics registered in a program leading to a licence to repair self-propelled motorized vehicles get a separate and more generous deduction that stacks on top, with unused amounts carried forward to future years even after they stop being an apprentice. It requires the employer to certify the tools on Form T2200 with receipts attached.

A tradesperson cannot deduct the cost of special clothing they have to wear for work. Tools yes, clothing no.

Confirm the threshold for the specific tax year. It is indexed annually and published guides lag the current year.

Frequently asked questions

Can I write off tools in the year I buy them?

Yes, if each tool costs less than $500. Those go in CCA Class 12 at 100%, and most are not subject to the half-year rule, so the full cost is deductible in the year of purchase. Tools costing $500 or more go in Class 8 at 20%.

Is the $500 tool threshold per tool or per invoice?

Per tool. An invoice covering twelve tools at $180 each is twelve separate Class 12 items, not a single larger capital addition.

What CCA class does an excavator or backhoe go in?

Class 38, at 30%. It is power-operated movable equipment used for excavating, moving, placing or compacting earth, rock, concrete or asphalt. It does not belong in Class 10 with the trucks.

Is safety equipment I buy for my crew a taxable benefit?

No. Protective clothing, safety footwear and safety glasses designed to protect against hazards of the employment are not a taxable benefit, and neither is a reasonable reimbursement or allowance for required gear supported by receipts.

Is a tool allowance a taxable benefit?

Yes. Reimbursing a worker for tools they own, paying a tool allowance, or paying rent for the use of their tools are all taxable benefits reported on the T4. Buying the tools yourself is not.

How much can an employed tradesperson deduct for tools?

Up to $1,000, but only for purchases above a threshold tied to the Canada employment amount, which is $1,501 for 2026. Purchases below roughly $1,500 produce no deduction.

Is the $1.5 million immediate expensing still available?

No. That measure applied to property available for use before 2024 and was not extended. The Accelerated Investment Incentive was reinstated in March 2026 instead, with no dollar cap but a percentage rather than full write-off.

Are blades and consumables treated as tools?

No. Items consumed in the work, blades, bits, abrasives, fasteners and similar, are supplies expensed as purchased. No CCA class applies.

Key takeaways

• Under $500 per tool goes in Class 12 at 100%, with no half-year rule on most items

• $500 or more goes in Class 8 at 20%. The threshold is per tool and has not moved since 2006

• Excavators and similar earth-moving equipment are Class 38 at 30%, not Class 10

• The Accelerated Investment Incentive was reinstated in March 2026, so first-year deductions are larger than most online advice says

• The $1.5 million CCPC immediate expensing is gone

• Buy the safety gear and the tools. Cash allowances for either turn a clean deduction into a taxable benefit

Talk to an accountant who works with trades

Our team handles corporate tax, bookkeeping, HST and payroll for trades and construction corporations across Mississauga, Oakville, Vaughan, Markham, King City, Caledon and Burlington. Getting the tool and equipment coding right through the year is what makes the year-end claim defensible. Knowing what is a supply and what is a capital asset changes your CCA claim every year. It is routine in our bookkeeping for trades corporations.

Fixed fees quoted up front. Straight answers, no lecture.

Book a free 20-minute call

References: CRA, classes of depreciable property, uniforms and protective clothing, tool reimbursement or allowance and employment expenses T4044. General information, not advice on a specific purchase.