Is replacing a broken furnace in my rental property a repair or a capital expense?

Replacing a broken furnace with a reasonably similar, standard replacement is often treated as a current expense, since you're restoring heating that already existed rather than adding something new. But CRA also looks at whether the furnace is really a whole separate asset being replaced outright versus a component being repaired, and a full furnace swap is more borderline than something like patching a part or a minor fix, which is more clearly current.

Where it tends to shift toward capital is if the new furnace is a significant upgrade - larger capacity, a materially better system, or work bundled into a broader HVAC overhaul - since that provides a lasting benefit beyond simply restoring what was there. A single, reasonably standard replacement of a like-for-like unit that failed is generally easier to support as current. Because this is genuinely a grey area that depends on the specific facts - age of the old unit, what was actually installed, and whether it was an isolated job or part of larger renovation work - keeping the invoice details and a clear description of what was replaced is the most useful thing you can do to support whichever position applies to your situation.