math
depreciation calculation
A depreciation calculation estimates the loss in value of an improvement over time. Exams usually use the straight-line method: divide the cost of the improvement (not the land) by its useful or economic life to get annual depreciation, then multiply by the number of years to find accumulated depreciation. Subtracting accumulated depreciation from cost gives the depreciated value. Tax depreciation follows IRS recovery periods rather than appraisal estimates.
- Exam tip
- Never depreciate land. Remove land value first, then divide the building cost by its useful life.
- Example
- A building costs $300,000 with a 40-year life; annual depreciation is $7,500, so after 8 years accumulated depreciation is $60,000 and value is $240,000.
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Last verified: 2026-10-23