Help establishing land vs. improvement cost of rental property

rebecca-a-gelb · ‎January 25, 2026

I purchased an investment property in 2025 for $360,000. My latest tax bill has the following:

Value as of 1/1/2024: $317,400

Land: $110,000

Improvements: $207,400

My current plan is to take the % $110,000/317,400 = 34.66% and calculate the land/improvement %'s for the purchase price of $360,000. This comes out to land: $124,776 and improvements: $235,224.

Is this the appropriate methodology or is there a better way to calculate this?

M-MTax · ‎January 25, 2026

The method you delineated is one way to make that calculation, and most likely fine with the IRS.

You could also get a CMA from your real estate broker (or agent) or an actual appraisal (probably overkill for this purpose).

There is also the square footage method where you take the cost of the improvement, apply a depreciation factor, and then subtract that from the total cost which should give you the basis for the land.

View solution in original post

M-MTax · ‎January 25, 2026

The method you delineated is one way to make that calculation, and most likely fine with the IRS.

You could also get a CMA from your real estate broker (or agent) or an actual appraisal (probably overkill for this purpose).

There is also the square footage method where you take the cost of the improvement, apply a depreciation factor, and then subtract that from the total cost which should give you the basis for the land.