why depreciation is not done for land even we consider the land also as an asset ?

Answer 1

Land does depreciate. In areas where there are floods or such, the land loses it value

Answer 2

To best understand the answer to your question, you need to first understand depreciation. Depreciation takes into account that you are going to use a valuable asset and, when done, the asset will be worthless.

Take, for example, a business truck. When purchased new, the truck is worth, say, $20,000. Once the business is done with the truck, the theory is it will be worthless.

To encourage businesses to invest in the things that are needed to keep it going and make it grow, the tax code allows these valuable items that will be used by the business to be written off of your taxes. A schedule is set based upon the average expected life expectancy for the item.

Keeping with our truck, let's suppose it can be depreciated over 5 years. That means for each of the next five tax years, the business gets to write off $4k in depreciation.

Now, suppose after the five years, the truck was sold for $3,000. Because the truck was already depreciated down to zero, for tax purposes, it would be like the business had no equity in the truck and the $3,000 would all be treated as a profit. That's because the value has already been used as depreciation.

So, back to your question; land would not ordinarily be depreciated because it should not lose its value as it is used. In many cases where it does - oil fields, timber land, coal mines - the value of the land is depleted on a businesses taxes. Depletion is very similar to depreciation, but used for natural resources such as those types of land holdings.

Answer 3

Only structures suffer depreciation, land can suffer value loss or gain. Even though lands value is an asset as you say, its value is calculated apart from the structure if present. So you always have the appraised value of the whole property, the land value and the structure value (how much does it cost to build that same structure again).

Answer 4

Depreciation has to do with the concept of aging of an asset. Typically, as a tangible asset such as machinery, equipment, furnitire, fixtures, vehicles etc ages, it loses some of its useful life. However, this is not the case with land and in deed most real estate, whose value is not determined by age but rather by changes in the market place.

Answer 5

Land does "NOT" depreciate. Land may be an investment as it will grow in value but it is not an active investment where you get income from it. Also you don't put money in for improvements which you would in a building. You get to depreciate your investment both in building and in improvements.