Improvement value for a new house

[goyal_raj]

Hi,

I bought a new single family home for rental purposes in 2025 and the property tax at year end shows just the land value. When i try to enter the details in Turbo tax it asks for land value and improvements made. If the land value is shown as 50000 and i bought the property for say 400k, then what value do i need to enter under improvements? Is it 400k or the difference of land value and purchase price?  do not see that value anywhere in any document.

Another question- where do i add the value of appliances and fixtures and handyman charges etc that i added to the house in order to make it ready for a rental? Would they be added in the Improvements or somewhere else? Would they not be depreciated in some way?

Where do i enter things like the cost of inspection before buying the house?

thanks

[pk]

@goyal_raj , Namaste Goyal ji

If I assume that the property you bought  is in a sub-division i.e.  a developer / builder  took some totally undeveloped land, platted and then built houses for sale, then the land value is totally un-realistic for your purposes.  You did not pay separately for the  house ( the built -up portion ) and the development of the land underneath.  I would go to the city and ask for guidance on land underneath vs. total price of purchase.  Generally the assessor will  use something like  1/3 to 1/4th of the total purchase price  for land.  Note that   depending on the state, there may be other considerations.  Therefore , it may be safer to use  statistical / historical  ratio  to determine  total vs. land cost.  Talk to a local realtor -- they are generally quite in tune with the actual situation.

I am also surprised that  your purchase price did not include  appliances  -- generally  a certificate of occupancy requires the appliances essential for living be already installed and operational.  However,  costs  of any improvements  that you installed prior to  start of rental ( appliances, labor/material, certification etc. )  or during rental period  be  counted as depreciable asset.   If it was not part of original purchase then these need to be depreciated separately based on MACRS.

Any costs associated with the purchase effort ( inspection, title work  etc. etc. ) are  generally part of the acquisition cost and generally part of the depreciable basis.

Does this make sense ?

Is there more  I can do for  you ?

Namaste  Goyal ji

[goyal_raj]

Thanks pk. Namaste.

My 2025 property tax bill shows only the land value and nothing else. So I am not sure if i should add that land cost separately and the rest as improvements.

And yes, this is a piece of land bought by the builder on which they are constructing houses.

The builder gave me some appliances but i had to add fans, lights, washing machine, dryer etc so that was additional cost. Where should i add that in Turbo tax?

[pk]

@goyal_raj , 

Tax assessors are often behind, at least the first year -- often they will use  "supplementary " tax bill , if possible within the year.  Else you will see a large update based on assessment next / first year after purchase.  That is why I am suggesting that for land price , go talk to local realtor or even the assessor's office to get a generally accurate figure.  Once you rent out the prop. and start the depreciation schedule , it is easier  to keep it consistent and constant.  Note that the depreciation that you are allowed each year  will accumulate and when the prop. is sold off will  ( a) increase the taxable gain and (b) any gain caused by this will be given ordinary gain  tax  (-- not capital gain --) treatment.

Items that you purchase  and generally with a life lime less than  a year are reported as expense.   Washing machines, dryers generally have a life of five years ( I think ) and  can / should be  depreciated -- separately if not included in the acquisition price of the house.  Items   with nominal cost such as fans are often expensed.

Is there more I can do for you ?

Namaste  ji