When you base your depreciation estimate on the "effective age" of the building rather than the actual age, you are relying on an estimate of the market's view of the property.

Question

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When estimating depreciation based on effective age, one considers how the market perceives the building's condition and functional utility, rather than its actual age. This approach assumes that the value of a property depends on its usefulness and how it compares to newer properties in the market. Therefore, the estimate considers factors such as maintenance, upgrades, and obsolescence that affect its effective age rather than the actual number of years since it was built.

When You Base Your Depreciation Estimate on the "Effective Age