PatriciaV
Expert Alumni

State tax filing

This activity would be reported as a Rental Property and the cost to build the ADU would be recorded as the main asset for depreciation. If there is a possibility of the ADU being sold separately from the primary residence, then you should plat and allocate the land under the ADU to the rental property as well. (Land is not depreciated but does increase your basis in the property a whole.)

 

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