When depreciating my rental, how do I decipher between the land and building value if there was never an appraisal done on the property?

[DianeW · Accepted solution]

The Tax Assessor will have the break down value for both the land and buildings which is how they determine the real estate tax assessment for each land owner.  This is located on the real estate property tax bills or a call to your local courthouse will provide you with this information.

Once you have the information you can use the percentage for each against your purchase of the rental property.  

Example:  land plus building = total assessment.  Use the percentages below against the purchase price to arrive at the cost basis for both land and building.

• land divided by total = land value percentage
• building divided by total = building value percentage

[clarindadanielle]

You are amazing! I read somewhere that there is a difference between depreciation for residential (depreciate over 27.5 years) and commercial rentals (depreciate over 39 years). Is this correct?

[DianeW]

Yes, that is correct.

[clarindadanielle]

Lastly, when I look up the property values on the assessors page, it has an appraised value and an assessed value. There is a large difference between the 2 options for land. Which do I use?

[clarindadanielle]

Also, the value of the land has gone both up and down over the years, do I just base the value off the year we started using it as a rental? Or will I have to change it each year?

[DianeW]

Once a value is established it is not changed on your tax records, it should be the value used when the rental was placed in service. Use the assessed value.

[clarindadanielle]

Thank you! I really appreciate your help!