What is Construction Cost (for Depreciation Estimates)?
Quick definition
Construction cost is the building and eligible structural works cost used for depreciation estimates, excluding land value.
InvestingGeneral
Overview
Construction cost is not the same as purchase price. Land value should not be included when estimating capital works deductions.
If exact cost is unknown, use a cautious estimate or a professional schedule rather than assuming high precision.
Why it matters
- Using purchase price as construction cost can materially overstate depreciation.
- Clear cost assumptions improve trust and reduce estimate bias.