Texas Property Tax Consultant Practice Exam

What is the term used to define the loss of property value from any source?

1. An absolute exemption

2. A partial exemption

3. Income capitalization

4. Depreciation

The correct answer is: Depreciation

The term that defines the loss of property value from any source is depreciation. Depreciation refers to the reduction in the value of an asset over time, particularly due to wear and tear, age, or adverse market conditions. In the context of property, depreciation can occur for various reasons, including physical deterioration, functional obsolescence (where a property becomes less useful due to changes in design or technology), or external obsolescence (economic factors that affect property value such as nearby industrial developments or changes in neighborhood desirability). Understanding depreciation is crucial for property tax consultants as it impacts property valuation assessments, which are essential for determining tax liabilities. Properly accounting for depreciation helps ensure that property taxes are fair and equitable, reflecting the true value of the property in its current condition.