rental depreciation calculation

[chessplaya]

i have a property i purchased in 2023 for 180,000 plus 6,000 in closing costs.

the land is valued at 55000 and improvements are 15000.  When entering this information in TT, it's telling me that my depreciable cost basis is 39502.  That doesn't make sense to me.

shouldn't it be something more along the lines of (180k + 6k ) - 70k (land + improvements) = 116,000

then dividing that by 27.5?

~4218 each year

I cannot understand the formula TT is using to give me 39502.  Additionally, i'm using TT premium which claims i should have access to product specialist and all i can do is post to the community.  

[ThomasM125]

I did what you explained and received a similar result, so I deleted that entry and entered it again and got a more reasonable result, with the annual depreciation being closer to the $4,218 you would expect annually. It will be a little smaller in the first year, as seen here.  I suggest you do the same. 

Also, when you mention improvements, if they are not land improvements, but things like remodeling expenditures, you should add them to the cost of the house, not the land, as they are depreciable as part of the house.

[chessplaya]

thanks for the reply.  The improvements part are list on the tax bill.  These aren't improvements i've made.  

This is my first time using this community forum, if you're an employee, and you were able to reproduce, can this be filed as a bug.  I will try to delete (which i find to be so tedious) and re-enter the data to see if it fixes it.

[AmeliesUncle]

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@chessplaya wrote:

the land is valued at 55000 and improvements are 15000. 

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On the real estate assessment, "Improvements" means the ENTIRE building (and some other non-land items).

You are saying that if you had paid $70,000, the land was $55,000 and the building was $15,000.  Then the program is prorating/multiplying that based on your purchase price of $186,000.