I need to determine the land value of my rental property (just converted to rental this year) but can't find it broken out on property tax bill.

[angela-anderson]

The home is in Spartanburg Country, South Carolina.

[MichaelDC · Accepted solution]

If you do not have any information to determine land value, the IRS auditor will not have any information either..

Comparable sales of nearby lots are helpful. Contact a realtor or Zillow.com for that.

Percentage allocation is another way to make a decision. 

If your personality is aggressive, you may want to allocate 80% of the value to the building and 20% of the value to the land. If your personality is conservative, you may want to allocate 60% of the value to the building and 40% of the land.

Separating cost of land and buildings.   If you buy buildings and your cost includes the cost of the land on which they stand, you must divide the cost between the land and the buildings to figure the basis for depreciation of the buildings. The part of the cost that you allocate to each asset is the ratio of the fair market value of that asset to the fair market value of the whole property at the time you buy it.

If you are not certain of the fair market values of the land and the buildings, you can divide the cost between them based on their assessed values for real estate tax purposes.

Example.

You buy a house and land for $200,000. The purchase contract does not specify how much of the purchase price is for the house and how much is for the land.

The latest real estate tax assessment on the property was based on an assessed value of $160,000, of which $136,000 was for the house and $24,000 was for the land.

You can allocate 85% ($136,000 ÷ $160,000) of the purchase price to the house and 15% ($24,000 ÷ $160,000) of the purchase price to the land.

Your basis in the house is $170,000 (85% of $200,000) and your basis in the land is $30,000 (15% of $200,000).

I’ve included a link to the IRS website for your reference:  Click here for Residential Rental Property information.

[MT951]

I have to disagree with the previous posting. First of all, Zillow is not a reliable source for determining value, in my opinion. One can look at Zillow to see recent sales to get a rough indication of market value, but not for allocation of value, especially for tax purposes.

For tax purposes, if the property was unimproved land it is likely to have a different base year than improvements (such as a home) that are constructed years later. If the property was already improved (with a home) then different areas may have different land allocations for tax purposes. For example, a sale in one area may have a 70/30 split (70% for improvements and 30% towards land) while a different area of the county may have a typical 65/35 split (65% for improvements and 35% towards land). If the property is a condo or doesn't own the land the split may be much lower say 75/25.  This last example may have some asking, "If I don't own the land, why would I need to pay taxes on the land?" Well, this falls into the category of possessory interest, in that while the building is occupying the land, it can't be used for any thing else or by a different party's sole title. Therefore, the best thing to do, if one is unable to determine on her or his own, is to call the assessor's office and ask what is the current allocation of land value to the parcel.  The assessor's number or at least the tax collector's should be listed on the tax bill. 

If one must use a third party source, try Redfin. If the property had a relatively resent sale or listing, Redfin may contain the improvement/land value brake down (which may have been pulled from the assessor's records).  

[Carl]

It is broken out on  your property tax bill. Just not in what may be a user-friendly way.  You'll have a land value, and then a separate value for the structures that may be called something like improvement value.

For example, take a look at a random tax assessment I pulled up at https://qpublic.schneidercorp.com/Application.aspx?AppID=960&LayerID=21179&PageTypeID=4&PageID=9059&...

You can see it has "land value" as well as "building value". Added together that's the total taxable value of the property. Understand this for only for the purpose of determining how much tax will be assessed for the owner to pay. It serves *no* *other* *purpose* on this planet.

Now if you look at https://putapps.putnam-fl.com/palookup/main.php which is a property tax bill from a completely different county, you can see they have it broken out as "Just Value of Land" and "Improvement Value".

So you can rest assured that it's broken down on your tax bill one way or another.

Why does TurboTax need this information?

The numbers on the tax bill are "NOT" used by TurboTax to figure any tax liability or tax deduction. It's used to figure what percentage of your overall cost that you "actually paid" for the property, is allocated to the land.

For example,if you paid $250,000 for your property, nowhere on your sales paperwork does it show a breakdown of what was paid for land, and what was paid for structures on the land.

If on your property tax bill it shows a tax value of $20,000 for the land and $80,000 for the structure, that's a total tax value of $100,000. So 20,000 divided by 100,000 equals 0.2 meaning the land value is 20% of it's total tax value.

So if you paid $250,000 for the property, 250,000 times 0.2 equals 50,000 indicating that of the total $250,000 you paid for the property, $50,000 is what you paid for the land. Therefore in the asset entry screen for that specific asset you enter $250,000 in the "cost" box, and $50,000 in the "cost of land" box.

The program will do the math "for you" to depreciate the $200,000 you paid for the structure over whatever period of time applies, depending on the asset classification of that structure.

[pressmdp]

Best way to allocate land would be to use the assessment records and allocated based on appraised value.

In the event you believe the cost per square foot or the total cost of land is improper use a cost per foot to allocated 

[JimboBigbelly]

I'm afraid that your tax bill won't tell you the value of the land.  Both Assessment and Appraisal are fictitious.  And certainly Zillow is perhaps the most fictitious of all.  The value was established the last time money changed hands.  That is the real value.  In California, we divide the sell price by 2 to get the real value of the land, and building.  We depreciate the building over the 27.5 years on Schedule E.  We did this and 4 years later we were audited by the IRS, and this was never an issue, and after 3 weeks of meetings and reviews with receipts, the depreciation or valuation was not an issue, but a repair that was made was determined to be a capital improvement, not a repair, and I owed $300 + $37 penalty.  Your tax dollars at work.  I haven't been audited since.

You should visit a CPA in your state and take his input on this issue.  Pay him a couple hundred bucks to get the right answer.

[MT951]

The term land value is somewhat ambiguous. There are different types of value; to name two: Fair Market Value and Assessed Value.

You can call your County Tax Collector or TAX Assessor and they will be able to tell you the current assessed value. 

[Carl]

What state/city/county is the property in? Most likely it is broken down - but just not the way you may expect.

Understand that the property tax bill values are "NOT" used for determining any values for tax purposes. It's used "only" to determine what percentage of your cost basis gets allocated to the land. That's it. nothing more. Nothing less.

[electronabs]

How about 25% of the purchase price (not current market value)? I saw that in several links for Michigan. Is that an acceptable number to use?

[TeresaM]

The value of the land is not included in a depreciation calculation because there will not be wear and tear to devalue it, the way that happens with a building. 

Land value is often listed on your County or City Assessment which is used for assessing Property Tax but not always. If you need help with that, contact your assessor's office. Or a local Real Estate Broker might also be able to help. The relative value of the land will vary depending on its location.