I has to pay for a special assessment on a condo property that I'm renting out for business income and reporting that income. The assessment was for pavement of the streets in the neighborhood, so I assume this cannot be deducted. In a different posting on this forum, it is mentioned that such improvements assessments can be both added to the basis and depreciated. I'm trying to make sure I understand this correctly.
In IRS publication 527, I read:
"Assessments for local improvements. Assessments for items which tend to increase the value of property, such as streets and sidewalks, must be added to the basis of the property. For example, if your city installs curbing on the street in front of your house, and assesses you and your neighbors for its cost, you must add the assessment to the basis of your property. Also, add the cost of legal fees paid to obtain a decrease in an assessment levied against property to pay for local improvements. You can’t deduct these items as taxes or depreciate them."
This last statement is confusing me. Am I misunderstanding the context? It seems to say I cannot depreciate the special assessment. Is it only referring to the previous sentence regarding cost of legal fees? Please clarify.
