On subsequent years, where you enter the cost,
Once you enter the cost and cost of land data in that first year, you will never ever ever again be asked for that information on that property in a later year.
COST: what you paid for the property in it's entirety. This is usually the contracted sales price as listed on the sales contract you signed, as well as line 100 of the HUD-1 closing statement if you received such a statement at the closing.
COST OF LAND: the amount in the COST box that will be allocated to the land. Period.
When you subtract COST OF LAND from the amount in the COST box, the answer is the cost of the structure(s) on that land. That is the amount used to figure your depreciation each and every year, and your cost of that specific asset entry will never change.
Note that the program will also asks you for other costs that will change your end result of what gets depreciated. This is because:
- expenses you incur in the acquisition of the loan are amortized (not capitalized) and deducted (not depreciated) over the life of the loan. Example: loan application fees.
- Expenses you incur in the acquisition of the property are added to the cost basis, get capitalized and depreciated over time. Example: Title transfer fees you pay to the courthouse to change ownership of the property on the property deed, to you.
