Depreciation

Explore how depreciation works in Canadian real estate, how it affects insurance, investment taxes, and how it’s calculated for assets and property value.

Depreciation

May 22, 2025


What is Depreciation?

Depreciation is the reduction in the value of a property or asset over time due to wear and tear, aging, or market conditions.

Why Depreciation Matters in Real Estate

In Canadian real estate, depreciation plays an important role in property valuation, insurance claims, investment accounting, and taxation.


Depreciation affects:
  • Actual Cash Value (ACV) of insurance claims
  • Capital cost allowance for rental properties
  • Resale value and maintenance planning


For investment properties, the Canada Revenue Agency (CRA) allows owners to claim depreciation (called capital cost allowance) as a tax deduction, although it may affect capital gains tax on sale.


Understanding depreciation helps owners plan maintenance, assess insurance claims, and track asset value over time.

Example of Depreciation in Action

An older furnace is worth less today than when it was installed. Depreciation is deducted from its value in an insurance claim after a fire.

Key Takeaways

  • Reflects wear and aging over time.
  • Lowers insurance payouts under ACV.
  • Impacts taxes for investment properties.
  • Important for asset and claim evaluations.
  • Can affect resale value.

Related Terms

  • Actual Cash Value
  • Capital Cost Allowance
  • Replacement Cost
  • Home Insurance
  • Property Value

Additional Terms

Sale and Investment Solicitation Process (SISP)

A Sale and Investment Solicitation Process (SISP) is a formal court-supervised method of marketing, selling, or refinancing distressed assets during. more

Retail Zoning

Retail zoning is a land use designation that permits commercial activities such as stores, restaurants, and service-based businesses to operate in. more

Ingress and Egress

Ingress and egress refer to the legal rights of access into (ingress) and out of (egress) a property, particularly important in commercial real. more

Housing Supply

Housing supply refers to the total number of homes — both for sale and under construction — available to meet the housing needs of a population in a. more

Housing Inventory

Housing inventory refers to the total number of homes available for sale in a specific real estate market at a given time.. more

Gentrification

Gentrification is the process by which a traditionally lower-income neighbourhood undergoes revitalization and attracts higher-income residents,. more

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