There are two capital cost allowance (CCA) classes for zero-emission vehicles acquired after March 18, 2019. Class 54 is the one for zero-emission vehicles (would be Class 10 or 10.1) — vehicles that, if they ran on fuel, would sit in one of those two classes. CCA still applies on a declining-balance basis, and on Form T2125, Statement of Business or Professional Activities, the class is one of the rows in Area A.
What goes in this class
A zero-emission vehicle acquired after March 18, 2019 that is not included in Class 16 or Class 55, and that would normally be included in Class 10 or Class 10.1.
The class has its own rate, set out on the Canada Revenue Agency (CRA)'s page of classes. Zero-emission vehicle is a defined term; the CRA's pages set out what qualifies.
What is different about it
There is a cap, but not a separate class per vehicle. There is a limit on the capital cost of each zero-emission passenger vehicle in Class 54, plus federal and provincial sales taxes. Class 54 may include both zero-emission passenger vehicles that do and do not exceed the prescribed threshold. Unlike Class 10.1, it does not establish a separate class for each vehicle over the threshold.
Disposing of one is adjusted. If you dispose of a zero-emission passenger vehicle to a person or partnership you deal with at arm's length, and its cost exceeds the prescribed amount, the proceeds of disposition are adjusted by a factor equal to the prescribed amount as a proportion of the actual cost of the vehicle. For dispositions made after July 29, 2019, the actual cost is also adjusted for the payment or repayment of government assistance.
An enhanced first-year deduction applies, with phase-outs. Under proposed changes, the enhanced first-year CCA deduction is reinstated for zero-emission vehicles in Classes 54 and 55 acquired after 2024; qualifying property has to be acquired and become available for use on or after January 1, 2025 and before 2034, and the reinstated deduction has its own phase-out period. This is a proposal rather than settled law, so the first-year treatment is worth confirming when you file.
You may elect out. You can elect not to include a vehicle in Class 54. The vehicle is then no longer treated as a zero-emission vehicle, and it goes into its usual class — Class 10, 10.1, or 16. It will not qualify for the enhanced first-year CCA under the zero-emission vehicle rules, though it may be eligible for the immediate expensing incentive or for enhanced CCA under the accelerated investment incentive rules. The election is filed with your Income Tax and Benefit Return for the tax year in which the vehicle is acquired. There is no provision for late-filing or amended elections.
What to keep
Keep the bill of sale or purchase invoice, showing the seller, the date, the vehicle, the price before tax, and the federal and provincial sales taxes shown separately. The cap and the disposition adjustment both work from the actual cost, so the document that states it plainly is the one that matters.
Keep any record of government assistance you received or repaid on the vehicle, and keep the paperwork if you sell it. Dossier tags the invoice and files it with the year's records; the election, the cap, and the first-year amount are settled on the return. Don't send the invoice in with your return — keep it in case the CRA asks to see it.
Official CRA sources
Source: Canada Revenue Agency (canada.ca). Not tax advice.