How is the economic age-life method utilized to determine depreciation?

The economic age-life method is a commonly used approach to calculate depreciation based on the relationship between a property's effective age and its total economic life. The effective age represents the physical and economic condition of the property, while total economic life reflects the expected lifespan of similar properties under normal conditions.

By utilizing the effective age divided by the total economic life, we can derive the depreciation rate for a property. This method effectively captures how much of the property's useful life has been consumed and, accordingly, gauges the impact that this consumption has on the value of the property.

This calculation is essential for assessors and appraisers in determining an accurate market value based on wear and tear over time, ensuring that real estate assessments reflect the current economic reality of a property. The ratio derived from this method provides insight into how much value a property has lost due to its effective age.