Depreciation on rental home
 

I'm a new home owner/ renter. Was wondering how villagers decide the value of house lot vs home for the purposes of properly depreciating for tax purposes?

let me guess, you bought a prebuilt structure?

finance guy

I may be wrong, probably am, but I thought you could only depreciate improvements made to the lot, not the property itself. The term (I believe) to write off the structure is 27.5 years.

Please look it up and be sure. I do know it is IRS pamphlet 946.

How to Calculate Rental Property Depreciation

Publication 527 (2020), Residential Rental Property | Internal Revenue Service

Likely you are seeking input on structure value vs. land value. It is a case by case situation. A large percentage of a golf front home's value is in non depreciable land whereas a patio villa in no special view location may have a relatively high structure to land value ratio.

Perhaps your appraisal on it would be helpful if you have one.

just out of curiousity, because i haven't looked, do county tax statements separately value land vs structure? just a thought as I know other jurisdictions do.

Secondarily, a paid property valuation should be proof required for an IRS audit, if one even gets audited, which is low considering the total value of the rental property.

finance guy

In Sumter county you can look up property tax records online by address. The record includes a separate line for land value

The tax records indicate separate values for the land and the building. But, both of these values are usually significantly lower than the actual market values. So, you may need to escalate the values to determine how much to depreciate. Also, apparently some people don't realize that you must claim the depreciation deductions every year. It is not optional, because the "allowable" depreciation will be taxed by the IRS when you sell the property, even if you didn't deduct it.

Take the cost of the home including closing costs, add improvements less the appropriate value of the appliances.
The total is reduced by the value of the land at time of purchase which can be obtained by going to the property appraiser's site. Subtract this from the amount on line. Write off over 27.5 years.

Take the appliance value from above, add new purchases of furniture. Write this over 5 year.