It depends on what the special assessment is for, and what entity assessed it. For examples see IRS Pub 527 page 8 at https://www.irs.gov/pub/irs-pdf/p527.pdf
In the example, it uses streets and curbs. For example, a dirt road gets paved and sidewalks are installed. Your municipality imposes a $10,000 assessment on all residents in the subdivision where they do this. You have no direct ownership in it. But it does increase the value of your property. Your $10K assessment gets added as a land improvement and is "NOT" depreciated for two reasons.
- You have no ownership *control* directly or indirectly of the new streets and sidewalks.
- It doesn't become "a material part of" the structure that you do own and do have control of.
As another example:
You own a condo unit. One of 10 units in your building and there are 5 buildings - meaning a total of 50 condo owners. The HOA/Condo association assessed a $10K assessment on each unit to pay for the following on all buildings:
- New roof
- repair of stairways in a few buildings that are in need to retain their safety standards of use.
- Repainting of curbs and parking spaces to clearly identify no parking areas, resident only areas, and handicap parking.
- Additional lighting in hallways/walkways to increase safety for residents/guest at night going to/from the parking lot.
All of the above are property improvements for three reasons.
1) A majority of the improvements are without question "a material part of" the structure you own.
2) There is no doubt that a majority of the improvement cost is for those things that add value to the structure, more so than the land.
2) As a condo owner that pays condo dues, you have an ownership interest in the common areas and you do have a say as a member of that association in how the common areas are managed and utilized.
These types of improvements would be classified as a property improvement and depreciated over 27.5 years.
IN a situation where it's hard to make a call on weather it should be classified as a non-depreciable land improvement or a depreciable structure improvement, you can get a breakdown of the estimated itemized costs from the entity imposing the assessment. Not only does that let you "see the numbers" for yourself, it also gives you the ammunition you need to prove your classification should you be questioned or challenged on it with an audit.
