new construction rental ADU depreciation

[lllbby]

I built a new ADU for rental. The main house is our primary residence and the ADU rental sqft is 25% of the total square footage. In terms of asset depreciation for the ADU rental unit, shall I use the construction cost or 25% * (ADU construction cost + main house value without land value)?

[PatriciaV · Accepted solution]

The ADU is a separate Rental Property. The total construction cost of the ADU is your depreciable basis. You could allocate a percentage of the land value to the ADU. But land isn't depreciated and it's unlikely you would sell the ADU separately from your residence. Also, keeping the cost and expenses of the ADU separate from your personal residence will make your accounting easier in the future.