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Rental Property "Enter your property tax info", which year is it asking?

Hi, 

I am entering a rental property. It ask the following questions

1 "Enter your property tax info", for example, land and improvement values. For land and improvement values, is it 2023 or 2024? Should I use the value of value year of 2023 and tax year of 2024, or should I use the value of value year of 2022 and tax year 2023?

 

2 What was the fair market value of Issaquah Rental? It was my primary residence for a few years. So is it asking the  FMV at the time of purchase or 2023 or Now?

Thank you.

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3 Replies
PatriciaV
Expert Alumni

Rental Property "Enter your property tax info", which year is it asking?

1) Use the property tax statement for the year you converted the personal property into a rental. This question relates to the allocation of your property basis between the residence and the land. It's best to use the assessed value that corresponds to the conversion date.

 

2) According to IRS Pub 551 Property Changed to Business or Rental Use

If you hold property for personal use and then change it to business use or use it to produce rent, you must figure its basis for depreciation. An example of changing property held for personal use to business use would be renting out your former main home.

 

The basis for depreciation is the lesser of the following amounts.

  • The FMV of the property on the date of the change, or
  • Your adjusted basis on the date of the change.


The best source for the Fair Market Value (FMV) on the date of the change would be a local real estate agent who can provide comparable sales. This is good evidence for the value of your home on that date.

 

Your adjusted basis is the original purchase price plus any improvements (upgrades or additions) that you have made. Historical property tax records may provide the price you paid for the home. Improvement costs would come from your personal financial records.

 

In most cases, your adjusted basis would be less than the FMV, so that is the basis you would use for your Rental Property.

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Rental Property "Enter your property tax info", which year is it asking?

Thank you. For question 2), turbo tax is asking "Fair market value", does it mean I should just add the estimated value from Redfin or Zillow at 2023? Turbotax did say "This info can be found on online valuation tools like Redfin or Zillow or from an appraiser" 

It did not ask me find cost basis myself. My question was should I use the FMV of 2023 or the FMV at the time of the time of purchase

PatriciaV
Expert Alumni

Rental Property "Enter your property tax info", which year is it asking?

Enter the FMV or your adjusted basis (whichever is lower) as of the date of the change, not the date of purchase.

 

Yes, any reasonable source for the valuation is acceptable. Keep good records.

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