The 61.3%/38.7% split we figured is for mortgage interest only. It does not apply and can not be used for figuring anything else. You’ve got that done now, and can leave it in the dust.
My only issue here had to do with the size of the property versus the land and I thought I had to calculate that to arrive at a percentage and then divide by two.
For depreciation of the rental property, you only depreciate the value of the structure, as the land is not depreciated. So you have to figure what percentage of the $380K paid for the rental, gets applied to the land. In your case you first have to figure what percentage of the cost of the entire property, is applied to the land. Then apply that percentage to what you paid for the rental property.
Start by looking at your most recent tax bill. (You should be able to find it on line at your property appraiser’s website, if you don’t have a hard copy). Take note that you can not use the monetary values on your tax bill anywhere on your tax return. We’re only using the tax bill to figure what percentage of the total tax value is applied to the land. Then we will apply those percentages to your “actual” cost basis.
So for the sole purpose of learning, I’m going to pick tax bill numbers out of thin air, and say that your tax bill shows that 30% of it’s tax value is applied to the land. We now have to use that percentage to figure how much of the $380K you paid for the rental, gets applied to the land.
So 30% of $380K (380,000 times .3) is $114,000. So in the assets/depreciation section you’ll enter the total of $380,000 in the “Cost” box, and $114,000 in the “Cost of land box”. The program (not you) will do the math to assign the difference of $266,000 to the structure, and that’s what will be depreciated over the next 27.5 years.
Finally, are the utilities (gas, water, electric, cable, etc) metered and billed separately between the two units? If they are not, then you “may” have options on this, and can therefore select the option that is most beneficial to you tax-wise.
