determining land versus building proportions for use in depreciation on rental house


D

dandau

Hello,

I hope this is the correct place to post.

My wife and I started renting out our house last year
(2006). We purchased the house in 2002. I have the county
assessments for 2004-2007. For 2004 - 2006, the breakdown
was roughly 40% Buildings and 60% land. Then with the 2007
assessment, the county changed their assessments to be 24 %
Buildings and 76% land.

My questions are:

Which ratio do I use to get the building amount, for
determining my allowable depreciation on my tax return?

Do I need to get the 2002 numbers, or do I use the 40/60
split from 2006?

If I use the 2006, do i need to change it come 2007 to
reflect the new assessments?

If I use the 40%, my expenses will be larger and will thus
offset my gain for the years I am renting it, but will
additionally affect my gain (via the basis) when it comes
time to sell?

What is the correct course of action.

I would really appreciate some assistance.

Thanks!
 
Last edited by a moderator:
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E

ebetts3

I hope this is the correct place to post.

My wife and I started renting out our house last year
(2006). We purchased the house in 2002. I have the county
assessments for 2004-2007. For 2004 - 2006, the breakdown
was roughly 40% Buildings and 60% land. Then with the 2007
assessment, the county changed their assessments to be 24 %
Buildings and 76% land.

My questions are:

Which ratio do I use to get the building amount, for
determining my allowable depreciation on my tax return?

Do I need to get the 2002 numbers, or do I use the 40/60
split from 2006?

If I use the 2006, do i need to change it come 2007 to
reflect the new assessments?

If I use the 40%, my expenses will be larger and will thus
offset my gain for the years I am renting it, but will
additionally affect my gain (via the basis) when it comes
time to sell?

What is the correct course of action.

I would really appreciate some assistance.
You need your 2002 figures. It's the lower of cost basis or
fair market value that you use. Also you don't change the
figure once you start depreciation for the 27.5 years and
the land is never depreciated. You only add to it later for
improvements, etc. which each begin a new depreciation
cycle.
 
Last edited by a moderator:

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