Retirement tax questions

Let's list each question with the answer.  You can choose to separate now or later at the time of sale after you review the information below.

1. Do I need to report the cost somehow for 2024 tax?  
   • No.  The cost of improvements  will be used at the time of sale, or the date placed in service if applicable before sale.  Include the cost for each lot as it applies.  
2. Do I separate into 3 properties on my 2024 tax? 
   • It depends. If the property is rental property you must maintain the original rental cost basis and date placed in service as it was first listed on your tax return.  My advice would be to separate the original land and buildings into three separate rental properties.  
     • Land is never depreciable so the vacant lot original cost basis would be separated out from the original land cost basis in total and a portion given to each property. The amount for the vacant  land will remain idle until you build on it and place it in service (available for rent). Also include the portion of the improvements that apply to this piece of land.  
       • You can use county or city tax assessments to arrive at the percentage of each building and land. Then the acreage can be used to split the land. Use the same percentages for the improvements recently made.
   • Use the cost of improvements, as a new asset for the properties already in use on the two lots.  Calculate the amount that is attributable to each lot as a new asset for each property, placed in service in 2023 where applicable.  If these improvements are not available for use until 2024, list each new asset on your 2024 tax return.  
3. These steps would make reporting any sale easier in the year of sale. 
4. The subdivision costs will not be lost since you can add a new asset for each lot in 2023 (or 2024 based on date placed in service for use).
5. Any carryover losses can likewise be divided with the percentages you determine from the tax assessments or a method you believe is a more accurate reflection.

Reminder:  The vacant lot must remain idle until it is available for use when you add the building and place it in service.