Assessed Value --> Depreciation
Ok, only serious readers who want a real challenge, read on ...
Bought my property this year for 80K, put 20K remodel in before renting, so 100K cost basis at date of usage.
When entering my turbotax info, it asks for the assessed value of land and improved property from my tax bill. I do not have a bill yet, but on the recording document at the county it says my assessed land value is 10K and my assessed improvements were 60K when I bought it for 80K.
So turbotax calculated 10/70 = 14.3% as my land ratio and 60/70 = 85.7% as my building ratio.
So then when calculating depreciation turbotax took on 85.7% of the 100K as depreciable, or only 85.7K.
I thought it would have been my original price of 80K, less land of 10K, plus 20K remodel = 90K.
This is essentially coming from the assessed valuation being under the purchase price, and so part of that 20K I spent on the remodel ends up increasing the value of the land.
Do I just solve this by using 80K - 10K (land) as the value of the structure.
Kevin
blueford:
I think the true question is do I enter what the county says the assessed structure is worth, only 60K. Or do I use the purchase price less the 10K assessed land value to get the structure value. 80K - 10K = 70K.
kevin
blueford,
The original purchase price was only $80K. So I would take (80K X 85.7%) + 20K for the depreciable improvements and use 80K X 14.3% for the non-depreciable land value.
Kevin,
Your mistake with TurboTax was entering $100K as the purchase price of the property. Change that to $80K, then add a $20K improvment to your depreciable asset schedule. TT Premier has a user friendly interview process that steps you through all of this painlessly.
NewKid - I agree, thanks, I just was not sure if the extra 10k that I paid above the total assessed value should be split between land and structure, or just stick it all toward structure.