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falak-patel
New Member

I own a rental property. How can I determine building value of my property for depreciation purpose?

I am trying to depreciate my property for 27.5 years.
1 Reply
MelaineC
Level 1

I own a rental property. How can I determine building value of my property for depreciation purpose?

Generally, depreciation on your rental property is the based on the original cost of the rental asset less the value of the land (because land is not depreciable). The original cost can include various expenses related to the purchase of the property. If you make a capital improvement to the rental property, you will depreciate it using the same useful life of the underlying property. If you don't know the original house and land separate costs, you can use the percentage of house and land to total value listed on your property tax bill to allocate the original cost.

So for example, if you bought a rental property (house and lot) for $148,000, had capitalized purchasing expenses of $2,000 and the cost allocated to the land part of the purchase was $50,000, then your depreciable basis in your rental property is $100,000 ($148,000 + $2,000 - $50,000).

A residential real estate is depreciated over a 27.5-year life on a straight-line basis and used a mid-month conversion (this means that for the month placed in service, no matter what day during the month, you will only get a half of month worth of depreciation for this first month).

Click for more information about depreciation on rental property

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