ADU Cost/Land value

[rfsmit]

When I did 2021's taxes I entered my ADU Cost and Land amount incorrect.  I noticed this when I was doing my 2022 taxes and the depreciation percentage was not 3.636% over 27.5 years.  In 2021 for Cost i entered $362,000 and Land $159,000.  When I was entering my assets for depreciation in 2022 I realized Turbotax subtracted the cost from the land and depreciated the percentage from that total.  So I deleted the Land amount and kept the $362,000 in the Cost and now its correctly depreciation the percentage.  Do I have to amend last years taxes now? Not sure it if makes a difference but we built our ADU on our main property where we live as well.  The ADU is a single dwelling.

[DaveF1006]

Yes, I would amend your 2021 return because it will make a difference on your taxes as you can claim a larger depreciation amount for the building? My question to you is, are you depreciating the ADU because it is a rental?

[rfsmit]

Yes, the ADU is a rental property.  Thank you for all your help.

[KrisD15]

Please be aware that if the rental is on a lot, the value of the land needs to be reported separately and land does not deprecate. 

You can ask a real estate agent or look at your tax assessment to get a value of the land. 

Remember also that when you eventually sell the property, you will allocate part of the selling proceeds to the land. Additionally, you most likely will have Depreciation Recapture, so keep track of the depreciation you claim over the years. 

If you make improvements suck as a new roof or purchase new appliances, they will each be listed and depreciated separately. 

@rfsmit