The capital cost tax factor (CCTF) is a calculated value summarising the benefit in future tax savings due to Capital Cost Allowance (CCA) in Canada.
CCTF allows analysts to take these benefits into account when calculating the
present value
In economics and finance, present value (PV), also known as present discounted value, is the value of an expected income stream determined as of the date of valuation. The present value is usually less than the future value because money has inte ...
of an asset. The CCTF is a constant, that is a function of the
Capital Cost Allowance Capital Cost Allowance (CCA) is the means by which Taxation in Canada, Canadian businesses may claim depreciation expense for calculating taxable income under the ''Income Tax Act'' (Canada). Similar allowances are in effect for calculating taxable ...
rate, the
interest rate
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, th ...
, and the
tax rate
In a tax system, the tax rate is the ratio (usually expressed as a percentage) at which a business or person is taxed. There are several methods used to present a tax rate: statutory, average, marginal, and effective. These rates can also be p ...
. CCTF allows the analyst to find the present value independently of the initial cost of the asset.
Calculation
There are two ways to calculate CCTF. The older method was replaced on November 13, 1981, but is still used for assets purchased before that date.
Capital Cost Tax Factor = 1 -（td) /(i+d);
t= tax rate; i= interest rate; d= capital cost allowance;
External links
Crypto Tax Advice
Taxation in Canada
Capital gains taxes
{{Tax-stub