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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

Public Realm Improvements

Public realm improvements are enhancements to public spaces such as sidewalks, parks, plazas, and streetscapes, often funded or contributed by. more

Mortgagee in Possession

A mortgagee in possession is a lender who takes control of a property after borrower default, but before foreclosure or power of sale. The lender. more

Lease Surrender Agreement

A lease surrender agreement is a negotiated contract between a landlord and tenant that ends a lease before its scheduled expiration. Terms may. more

Green Infrastructure

Green infrastructure refers to natural or engineered systems that manage stormwater, reduce heat, and improve sustainability in developments.. more

Escrow Holdback

An escrow holdback is a portion of funds withheld at closing and held in escrow until specific conditions are met, such as completion of repairs,. more

Underused Housing Tax

The Underused Housing Tax (UHT) is a federal annual 1% tax on the value of vacant or underused residential property owned by non-resident,. more

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