@eleven13 wrote:
Thank you! I decided not to depreciate those appliances. I got another question wanna double check with you though! How do I calculate the land value? The original contract doesn’t have the land value list out, is there a general percentage I can use? The property value basis, should I just use the exact amount I paid for it? On the contract there’s a sell price but the seller issued some credit, I’m just wondering if I should use the sell price or the price I paid, which is after the seller credits. Thank you!
For the value of the land relative to the structures (house, shed, whatever), it might be listed on your property tax bill. Or you could call your local tax assessor's office. Or possibly ask a real estate professional. There is no "standard" amount.
For the "cost" of your home, you want to know the cost basis. That is the net purchase price, plus you can add certain closing costs, plus you can add the cost of permanent improvements you made between 2016 and when you listed the home on the market. Seller credits reduce your purchase price. (If you list the home as sold on the contract or in the MLS for $100,000, but the seller paid $5000 of your closing costs, your real purchase price for tax purposes was $95,000.)
Even though publication 523 is titled "selling your home", the information about determining your cost basis applies to your situation as well (starting on page 8).
https://www.irs.gov/pub/irs-pdf/p523.pdf
Once you know the cost basis of the entire property (land plus buildings), subtract the land value to get the cost basis of the house. Then your basis for depreciation is either the cost basis or the current fair market value, whichever is less.
