Depreciation for a property is typically calculated based on what?

Depreciation for a property, particularly in real estate and accounting contexts, is typically calculated based on the cost of the building only, excluding the land. This is because land is not a depreciable asset; it generally retains its value or may even appreciate over time, while the structures on the land can wear down and lose value due to various factors such as physical deterioration, economic obsolescence, or functional obsolescence.

When calculating depreciation for tax purposes or financial reporting, the focus is placed solely on the improvements (the building) since they have a finite useful life and are subject to depreciation. This approach reflects the reality that buildings require maintenance and can have their value diminished over time, while the land beneath them does not face the same conditions.

Thus, in the context of this question, recognizing that depreciation applies to the building alone ensures accurate accounting practices and aligns with commonly accepted methods in real estate financing and taxation.