I converted my previous primary residence into a rental in 2020 and am trying to figure out how much of the property value to attribute to the land. When working through the TurboTax screens for rental property income, in the section on property info, it first asks me how much I bought the house for and then the value of the improvements I've made (about $59,000 worth) to find my basis. Then it asks me for the Fair Market Value (FMV) when I converted the house to a rental - which I researched online and believe to be substantially more than my basis. Then on a later screen it asks me to enter the current value of the land and improvements. I pulled the current value of the land from my local assessor's website, but I don't believe that the assessor's estimate of the value of the improvements is correct because I know I could sell the house for far more than the sum of the assessor's estimate of land plus improvements. Would it be correct to simply subtract the assessor's value of the land from my estimate of the FMV and attribute the difference to improvements? That's what I tried, and it seems that using that method, the value of the land is roughly 75% of the total FMV.
When I got to the screens to work through depreciation of the house, I noticed that TurboTax had automatically filled in my basis in the house (purchase price + $59,000 in improvements) and also automatically filled in the value of land included in my basis. To find the land value , TurboTax seems to have simply multiplied my basis by the same ratio of land value to total value as found on the earlier screen - 75%. The problem is, this calculation seems to yield too high a value for the land when I purchased it in 2013. I have an appraisal report from 2015 that shows the land value to be far less than TurboTax is automatically filling in, and I know that land values in my area appreciated from 2013 to 2015. In other words, I am positive that the value of the land in 2013 was less than what is shown on the 2015 appraisal report. Instead of using the amount that Turbo Tax is automatically filling in, would it be appropriate to manually revise the land value downward to match what is shown on the 2015 appraisal report (as even that amount seems to be more than what the land was worth when I bought the house in 2013)?
