How can I determine the value of land included in the total cost of my rental real estate property asset? This requirement is new this year.

[jackson-sally-e]

Turbotax already depreciates the cost of this asset year by year. I have never broken the cost into building and land components. My deed and mortgage do not break down between building and land assessments.

[jtax · Accepted solution]

This is not a new requirement. One has never been able to depreciate land.

"The depreciation allowance in the case of tangible property applies only to that part of the property which is subject to wear and tear, to decay or decline from natural causes, to exhaustion, and to obsolescence. The allowance does not apply to inventories or stock in trade, or to land apart from the improvements or physical development added to it." https://www.law.cornell.edu/cfr/text/26/1.167(a)-2

If you had an appraisal done at purchase, that might have a breakdown of land value vs. improvements. If not, you might look at your town assessment. That usually breaks down land vs. improvements.  From that you could get a % of land and apply that you your total purchase price.

If you search further in this forum you will find a number of responses suggesting a 20% land, 80% usual ratio. I don't know if that is right, but it would only be a guide. For example I have seen waterfront property with well over than 50% of the value being the land.

Some prior posts:

https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/real-estate-depreciat...

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/how-should-i-split-the-basis-and...

https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/land-and-improvement-...

[Mike9241 · Accepted solution]

The other thing I did not see mentioned is that since you took depreciation on nondepreciable land, your prior returns were wrong.  You can't just stop depreciating it. Because prior years were wrong, you'll need to file Form 3115 to correct for the excess depreciation taken.