Hi All -
I'd like to revive this topic from a few years ago in hopes that you can help me figure out if I'm doing the depreciation part of my rental property accurately. Below are the basics:
Purchased on 5/28/21 for $125,000
Per the tax record for right around that date, the property had an assessed value of $105,100. $75,100 was for the improvement and $30,000 was for the land. I know these two amounts are only used to give me a land/improvement ratio.
I had $2,150 in eligible closing costs to add to the basis and I spent $10,739 in capital improvements before the rental was put in service on 8/26/2021. The adjusted basis is $137,889.
This is what I thought the calculation should should look like:
$30,000 Land Value / $105,100 Total Value = 28.54424%
$125,000 Purchase Price x 28.54424% = $35,680.30 Land Value Based on PP
$125,000 PP + $12,889 in Adjs - $35,680.30 Land Value = $102,208 Depreciation Start Value, which when multiplied by the August partial year percentage of 1.364% you get an appreciation amount of $1,394.
This is what TurboTax is actually doing:
$30,000 Land Value / $105,100 Total Value = 28.54424%
$137,889 Adjusted Basis x 28.54424% = $39,359 Land Value Based on Adjusted Basis
$137,889 Adjusted Basis - $39,359 Land Value = $98,530 Depreciation Start Value, which when multiplied by the August partial year percentage of 1.364% you get a depreciation amount of $1,344.
I know I'm splitting hairs when the final depreciation amounts aren't that far off, but which way is the correct way? Should the Land Value be calculated using the Adjusted Basis or the actual Purchase Price?
Any help you can give would be greatly appreciated!
