If it s curable, the amount of depreciation is usually the cost to fix it. As many Californians discovered in the middle 1990s, land can lose value. However, when it does it s not called depreciation. Depreciation, by definition, applies only to improvements. The old real estate saw that land does not depreciate is true but misleading.
Physical depreciation includes the normal wear and tear on a building as it ages.
Most physical depreciation is the incurable kind, because it's usually too expensive or impractical to replace major building components such as the foundation, framing, plumbing and electrical systems. Another kind of physical depreciation is deferred maintenance , which is the curable kind. This includes routine painting and replacing roof and floor coverings. For accounting and tax purposes, physical depreciation is normally calculated by the straight line method. However, for real estate purposes, depreciation follows a curve calculated by the age-life method.