During and after tunnel construction, the surrounding building is subjected to different deformations and strains which can cause damage to the surrounding buildings. Current prediction approaches are conservative and lead to unnecessary cost in protective measures. This research study introduced a 3D elasto-plastic finite difference model to predict building damage due to tunneling taking into account the interaction between building stiffness, tunnel and the surrounding soil. Different aspects of geotechnical modeling were discussed such as soil initial stress state, excavation and construction sequence, soil material model behavior, volume loss, and building stiffness. The parameters used to assess building damage are building vertical movement, differential movement, deflection ratio, horizontal movement, horizontal strain, and maximum tensile strain. The proposed verified model was used to generate settlement prediction/building damage assessment charts. These charts can be incorporated in the current preliminary damage risk assessment and it may reduce the number of buildings for which an expensive, detailed evaluation has to be performed.