In determining my HO basis, are there other costs that are included in "Land" other than the original purchase of pasture? Before the house was set, we had to develop the lot by adding a culvert, driveway, garage, carport, water & electric underground lines and septic, including grading concrete runners, a concrete pad and crushed concrete carport pad. These items are normally part of the purchase of a developed lot, but I have seen conflicting information on whether they are added to the cost of the house & structures or to the land for basis and depreciation purposes.
Similarly, would improvements after HO starting service date be related to land or structures for sidewalks and grass around the dirt surrounding the buildings? The IRS website indicated some land-type items could be said to have a limited time of use and could/should be depreciated, so are they not considered land (which cannot be depreciated) when filling out the Asset Form for Improvements?
It just seems like I'm getting inconsistent information, where sometimes items are lumped in with the basis for developing the "land", but not so later when additional improvements are done. Is the definition due to development of land before building, and improving afterwards?
Also, if it's undefined and a free choice, it seems that including the land "development" to the initial cost of the house, garage and carport basis, could give reason for the county to increase my property tax on the buildings, that might be worse that the HO depreciation benefits to my income taxes.
If there's a clear rule on what is defined as "land basis & improvements," I don't have to try and figure out if I'm making the right choices. The IRS had determinations for big businesses, but not for home offices. Examples related to Improvements (see below), don't mention them being land improvements, so do I use that as a guide for determining the initial basis, too?
Improvements
You paid for an improvement to your property if you spent money to enhance your property, restore your property, or adapt your property to a new or different use.
Examples of improvements include:
- Installation of new plumbing or wiring
- Addition of paneling to a room
- Installation of a fence
- Paving of a driveway
- Installation of new cabinets
- Addition of a new roof
- Assessments for streets, sewers, and sidewalks
