Percent building value fo
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Percent building value fo (by Walky [AZ]) Sep 21, 2021 1:14 AM
       Percent building value fo (by Robert J [CA]) Sep 21, 2021 1:49 AM
       Percent building value fo (by Bonanza [NC]) Sep 21, 2021 6:54 AM
       Percent building value fo (by Vee [OH]) Sep 21, 2021 10:11 AM
       Percent building value fo (by Pmh [TX]) Sep 21, 2021 6:09 PM
       Percent building value fo (by Ray-N-Pa [PA]) Sep 21, 2021 8:22 PM

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Percent building value fo (by Walky [AZ]) Posted on: Sep 21, 2021 1:14 AM

My new accountant is depreciating based on the public records land value and building value. Seems like not the best way, and not the way my previous account did it. How do you depreciate your properties

Percent building value fo (by Robert J [CA]) Posted on: Sep 21, 2021 1:49 AM

We go by the IRS rules, not what an account may hold true. Here in Prime Los Angeles real estate the structure is 85% and land is only 15%, depreciated over a 27.5 year period for residential and 39 year for commercial property..

Percent building value fo (by Bonanza [NC]) Posted on: Sep 21, 2021 6:54 AM

Minimize the land cost, maximize the PP and LI to accelerate the depreciation (if that's your goal).

Search for raw land in your town. 1 acre lot here is going for 20,000 +/= . Use whatever comps you can to show that the land is cheap (since you can't depreciate it) and thus you have your justification for the IRS. Print 5 or 6. Take an average. Keep it in a file.

So if you have a SFH on 1/2 acre then the land value would be 10,000. Lets say the house is 150,000. Cost segregate it out.

Take 5-6% for personal property - appliances, carpeting, shelving, fixtures, etc.

Take 7-9% for land improvement - concrete drive, landscaping, outdoor lighting, etc.

The rest is the building.

Land 10K - no depreciation

PP 7.5K - depreciated over 5 years

LI 12K - depreciated over 15 years

House whatever's left - depreciated over 27.5

The accountant doesn't tell you what the depreciation values are. You tell the accountant what they are based on your knowledge of real estate and investing. If left to the accountant they will make it easy on themselves and take the land value from the tax department and 27.5 the rest of it. (Use the tax dept land value if it is lower than your comps)

see IRS publication 527

Under MACRS, property that you placed in service during 2020 in your rental activities generally falls into one of the following classes.

5-year property. This class includes computers and peripheral equipment, office machinery (typewriters, calculators, copiers, etc.), automobiles, and light trucks.

This class also includes appliances, carpeting, and furniture used in a residential rental real estate activity.

Depreciation is limited on automobiles and other property used for transportation and property of a type generally used for entertainment, recreation, or amusement. See chapter 5 of Pub. 946.

7-year property. This class includes office furniture and equipment (desks, file cabinets, and similar items). This class also includes any property that doesnít have a class life and that hasnít been designated by law as being in any other class.

15-year property. This class includes roads, fences, and shrubbery (if depreciable).

Residential rental property. This class includes any real property that is a rental building or structure (including a mobile home) for which 80% or more of the gross rental income for the tax year is from dwelling units. It doesnít include a unit in a hotel, motel, inn, or other establishment where more than half of the units are used on a transient basis. If you live in any part of the building or structure, the gross rental income includes the fair rental value of the part you live in.

Percent building value fo (by Vee [OH]) Posted on: Sep 21, 2021 10:11 AM

My understanding is you only depreciate the building value on the 27 year basis.

Percent building value fo (by Pmh [TX]) Posted on: Sep 21, 2021 6:09 PM

find another accountant. depreciation schedules are based on what you bought for & added. public records (tax appraisals) are irrelevant. you do need to split out land & property improvements (the house). land is not subject to depreciation. find another accountant. best if a registered agent like we have.

Percent building value fo (by Ray-N-Pa [PA]) Posted on: Sep 21, 2021 8:22 PM

I use the ratio method from the purchase price. The percentage that is land is cut out and the remaining balance is depreciated - unless you can itemize the items. Depending on how big of a purchase, it might be cost effective to hire someone to componentize the parts of the building to accelerate the depreciation

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