Annual Allowance Law and Legal Definition

An annual allowance refers to a tax deduction relevant to Canadian businesses that have purchased eligible capital property. The Canada Revenue Agency considers that the amount paid for an eligible capital property is an eligible capital expenditure, which means that while calculating income tax, it's a tax write off over time and not the deduction of the full amount of the business expense. Although eligible capital property does not exist, it gives an economical benefit. Annual allowance can be deducted in any given year. It is computed in the same manner as capital cost allowance.