function calculateLandValue() {
// Get input values
var totalValue = parseFloat(document.getElementById('totalMarketValue').value);
var costNew = parseFloat(document.getElementById('replacementCostNew').value);
var age = parseFloat(document.getElementById('effectiveAge').value);
var life = parseFloat(document.getElementById('economicLife').value);
// Validation
if (isNaN(totalValue) || isNaN(costNew) || isNaN(age) || isNaN(life) || life 1) depRateDecimal = 1; // Cannot depreciate more than 100%
var depRatePercent = depRateDecimal * 100;
// 2. Calculate Total Depreciation Amount
// Formula: Replacement Cost New * Depreciation Rate
var depAmount = costNew * depRateDecimal;
// 3. Calculate Depreciated Building Value
// Formula: Replacement Cost New – Depreciation Amount
var buildingValue = costNew – depAmount;
// 4. Calculate Residual Land Value
// Formula: Total Market Value – Depreciated Building Value
var landValue = totalValue – buildingValue;
// 5. Calculate Land Ratio
var landRatio = (landValue / totalValue) * 100;
// Format Currency Helper
var formatter = new Intl.NumberFormat('en-US', {
style: 'currency',
currency: 'USD',
minimumFractionDigits: 2
});
// Display Results
document.getElementById('resDepRate').innerHTML = depRatePercent.toFixed(2) + "%";
document.getElementById('resDepAmount').innerHTML = formatter.format(depAmount);
document.getElementById('resBuildValue').innerHTML = formatter.format(buildingValue);
document.getElementById('resLandValue').innerHTML = formatter.format(landValue);
document.getElementById('resLandRatio').innerHTML = landRatio.toFixed(2) + "%";
// Show result section
document.getElementById('results').style.display = 'block';
}
How to Calculate Land Value Using Building Depreciation
Calculating the value of land separate from the improvements (buildings) sitting on it is a critical task for real estate appraisers, tax assessors, and investors. Since land is an asset that generally does not depreciate, separating it from the depreciable building value is essential for accurate taxation and investment analysis.
The most common method used to determine this figure when comparable vacant land sales are unavailable is the Extraction Method (also known as the Abstraction Method). This calculator utilizes the Cost Approach logic to derive the residual land value.
The Formula for Residual Land Value
The core concept is relatively straightforward: if you know the total value of the property and the current value of the building, the remaining value must be the land.
Land Value = Total Market Value – (Replacement Cost New – Accrued Depreciation)
Step-by-Step Calculation Process
To use this calculator effectively, you need to understand the four primary inputs:
Total Market Value: This is the current appraised value or sale price of the entire property (Land + Building).
Replacement Cost New: This represents how much it would cost to build the same structure today using modern materials and labor rates. This is not the original cost, but the current construction cost.
Effective Age: This differs from actual age. A 50-year-old home that has been completely renovated might have an "effective age" of only 10 years. It represents the building's physical condition.
Total Economic Life: This is the expected period over which the building contributes value to the property. Residential properties often use 60 years, while commercial structures may vary.
Understanding the Age-Life Depreciation Method
This calculator determines the building's depreciation rate using the Age-Life Method. This is the simplest and most widely used method in appraisal.
The formula for the depreciation rate is:
Depreciation Rate = Effective Age รท Total Economic Life
For example, if a building has an effective age of 15 years and a total economic life of 60 years, it has depreciated by 25% (15/60). You then subtract this 25% from the Replacement Cost New to find the building's current contributory value. Subtracting that building value from the total property value leaves you with the estimated Land Value.
Why Land Does Not Depreciate
In accounting and real estate appraisal, land is considered to have an indefinite useful life. Unlike a roof that wears out or a foundation that cracks, the land itself persists. Therefore, when calculating tax deductions for real estate investments, you must subtract the land value from your cost basis, as you can only claim depreciation on the building portion of the asset.
When to Use This Calculation
Tax Assessment Appeals: If you believe your land is assessed too high compared to the building.
Investment Analysis: To determine your depreciable basis for IRS tax filings.
Insurance: To ensure you are not paying to insure the land value, but rather the replacement cost of the structure.