Residential property tax is ad valorem tax based on the value of a house. Houses are often not only the most valuable single asset an individual ever owns, but also the primarily source of funds for local governments in most countries. In consequence, an accurate tax base is the prerequisite for a sound property tax system. Cost approach is a widely applied method to value homes for property tax purposes, and it explicitly takes account of the effects of building depreciation. Depreciation is the decline in the price of assets due to aging. Tax depreciation for real property shall equal its economic depreciation as far as economic efficiency and tax equity are concerned. Empirical study of Taipei City, Taiwan indicates a concave depreciation path for residential properties that conspicuously deviates from the straight-line path specified by legislation. The property values of residential properties in Taipei City are therefore underestimated. Empirical evidence also suggests that concrete and reinforced-brick properties depreciate differently, and thus different annual depreciation rates for them depicted by law are justified. Finally, the reinforced-brick properties with a single ownership on site do not depreciate at their later stages. This is likely because the difficulties with assembling land parcels for redevelopment are largely solved. The discovered difference between tax depreciation and economic depreciation would contribute to unfair tax liability.