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

Construction Loan

A construction loan is a short-term, interim financing option used to fund the building or major renovation of a property, with funds disbursed in. more

Certificate of Occupancy

A certificate of occupancy is an official document issued by a municipal authority confirming that a building complies with applicable codes and is. more

Bylaw Variance

A bylaw variance is official permission granted by a municipal authority allowing a property owner to deviate from local zoning or building bylaw. more

Absorption Rate

Absorption rate is a metric that measures the rate at which available properties are sold or leased in a specific market over a given period.. more

Corporate Restructuring

Corporate restructuring refers to the reorganization of a company’s operations, assets, or liabilities, often under court supervision, to improve. more

Consumer Proposal

A consumer proposal is a formal, legally binding agreement in Canada between an individual and their creditors to repay a portion of their debt over. more

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