Profile picture for mikeg2010

Question about calculating deprecation

I bought a rental property in 2011 and it was rented immediately. I am now doing taxes for 2011 and have a question on calculating deductible depreciation for 2011. I bought the property in foreclosure for 90,000. I need to reduce the land value from 90k. The appraisal district says the appraisaled value of the house is $126,280 of which the land value is 25,000, leaving the depreciable homesite value to be 101280.

Now do I simply reduce 25k from 90k (65k) to calculate my depreciation or is there some kind of formula or logic that is to be applied in such a scenario?

I just feel that its unfair to appraise this at such high value when its truly not reflecting the market value and its wayyyy off. I tried disputing last year to no avail.
  • February 05 2012 - US
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Answers (4)

Profile picture for hpvanc
Contact the IRS.  Here are the links to contact information.

Telephone Assistance

Contact My Local IRS Office

If you still don't understand it after talking to the IRS, you will need to consult with a CPA.  You will still need to understand it before you sign your tax return.
  • February 05 2012
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Since the depreciation is a deductible non cash expense, you probably benefit from using the higher value. You need a tax adviser's help. Or, you can file it, and hope it isn't revised, or disallowed. Worst case it causes an audit.
  • February 05 2012
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Profile picture for mikeg2010
That's my question though. What is the value of the structure? Is it 90k-25k or do I need to calculate it based on the current land value % ratio.... something like this:

Appraised Structure Value: $101280
Appraised Land Value: 25000
Appraised Land Value %: 19.8

Purchased Land Value: $17820 (19.8% of $90k)
Purchased / Depreciable Structure Value: $72180

Thanks in advance
  • February 05 2012
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Profile picture for lharrington
You have to depreciate the actual value of the structure, not including the land value over 28.5 years.  (Divide Value of Structure by 28.5)
  • February 05 2012
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