What is the formula to calculate the percentage of depreciation?

The formula to calculate the percentage of depreciation is based on the relationship between effective age and economic life. Using effective age helps to understand how much of a property's potential useful life has already been consumed, while economic life refers to the total expected life of the property from the point of view of its utility and market value.

When you divide the effective age by the economic life, you obtain a fraction that represents the proportion of the property’s life that has already been utilized. This fraction, when expressed as a percentage, indicates how much the property has depreciated due to aging and wear. In essence, this calculation reflects the loss in value based on the age of the property relative to how long it is expected to last economically.

This understanding is critical for property appraisers as it informs them not only of the current market value but also assists in determining fair tax assessments and investment strategies. Thus, the relationship between effective age and economic life is the key concept behind calculating depreciation percentage effectively.