Prorated Deduction

Full Definition

A prorated deduction is the fair, depreciation-adjusted amount a landlord can charge for damaged property. The formula divides the remaining value of the item by its original cost, then multiplies by the replacement cost. For instance, suppose a refrigerator costs $800 to replace and has a 15-year expected useful life; if it is 12 years old, only 3 years of value remain (3/15 = 20%), so the maximum allowable deduction is $160. Prorating is required in states like California and strongly encouraged in others under general principles of fairness. Without prorating, landlords would profit from damage by receiving brand-new replacements for items that were largely depreciated and almost due for replacement anyway. Courts regularly reduce deductions to reflect proper proration even when landlords submit full replacement-cost invoices. Tenants should calculate the prorated value of any damaged item when reviewing an itemized statement.