AboutHelen P. O`Planick, EA Expertise I am a tax professional, with experience in individual taxation. I would prefer not to answer questions about non-resident aliens or corporate taxation. Please do not ask me state related questions, unless the state is Pennsylvania. There are 42 taxing states and 42 TOTALLY different sets of state tax law.
Experience I have been preparing tax returns almost all my life. I have been in professional practice for 25 years and I am enrolled to practice before the Internal Revenue Service.
Organizations National Association of Enrolled Agents
Publications I am a prior Money Magazine Tax Test taker and have been quoted extensively in all media including monthly periodicals and books by tax authorities.
Question QUESTION: How do I determine the depreciation basis on an investment home? The home was formerly my main residence but I've moved and am now renting it out. I know that I can use the depreciation deduction on my taxes on a straigh-line basis but am unsure how to determine how much is allocable to land vs. improvements and what number I'm basing it on (assessed value, original purchase price, value at time of rental)? Thanks!
ANSWER: Your basis for depreciation is the lesser of fair market value at the time it was turned into a rental or your cost. As for the land, you have to determine what the land value is based on the above as you cannot depreciate land.
Helen, EA in PA
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QUESTION: So, I use my original purchase price, but then I have to determine how much of that is attributable to land vs. improvements. Is there a systematic way of doing that (ex: 85% of cost attributable to improvements)? Also, what is the straight line number (is it 27.5 years or 39, I can't recall). Thanks again.
Answer As long as the house has appreciated in value, yes, you use your original price. As for the allocation, you need to check tax records etc to see how much the land was worth. There is no set percentage.
If it is a residential rental, it is 27.5 years for depreciation.
