How exactly is building to land value ratio calculated for foreign rental property depreciation in India?

This is actually a common issue with foreign rental properties. For US tax purposes, you're right that you can only depreciate the building portion, not the land. There's no IRS-mandated standard ratio for foreign properties, so you have a few options: 1) Get a formal property appraisal in India that specifically breaks down the building vs. land value. This is the most accurate approach. 2) Check if the property deed or transfer documents have any breakdown of values. Sometimes inheritance documents will separate these values. 3) Look at comparable properties in the same area that do have a breakdown to establish a reasonable ratio. 4) As a last resort, you can use local property tax assessments. Even if they don't clearly separate the values, sometimes you can determine a ratio based on how properties are taxed in that region. Whatever method you choose, document your reasoning thoroughly in case of an audit. The IRS understands these challenges with foreign properties but expects you to make a good-faith effort to determine a reasonable allocation.

After spending weeks trying to figure out a similar situation with property in Mumbai, I discovered taxr.ai (https://taxr.ai) and it was a game-changer. I uploaded my foreign property documents and the AI actually identified comparable properties in the same area and suggested a reasonable building-to-land ratio based on local market data. It also helped calculate the correct depreciation schedule according to US tax rules for foreign properties. The whole process took like 30 minutes instead of the days I spent researching on my own.

Just wanted to follow up about my experience with taxr.ai for my Kerala property depreciation calculation. I decided to try it despite my initial skepticism, and I'm really glad I did. The system handled my Malayalam documents surprisingly well! It correctly identified the property location, pulled comparable property data from that specific region in Kerala, and suggested a building-to-land ratio that aligned with local market conditions. I was impressed that it even factored in the age of the building and local construction costs. The documentation they provided was thorough enough that I feel comfortable using it if I ever get audited. Definitely worth it for the peace of mind alone.

I had a similar issue with property in Delhi and spent HOURS on hold with the IRS trying to get guidance. Eventually I used Claimyr (https://claimyr.com) to get through to an actual IRS agent. They have this service where they navigate the phone system for you and call you back when they've got an agent on the line. You can see how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed that they look for reasonable methods to determine the building-to-land ratio for foreign properties. She said getting a local appraisal is best, but also mentioned that if you can find any documentation showing average ratios for that specific area in India, that's acceptable too. The key is documenting your methodology.

I owe everyone an apology - I was completely wrong about Claimyr. After my skeptical comment, I was still struggling with my Mumbai property depreciation questions and decided to give it a try out of desperation. The service actually worked exactly as advertised. I got a call back in about 35 minutes with an IRS international tax specialist on the line. She walked me through the entire process of determining a reasonable building-to-land ratio for my property and explained exactly what documentation I needed to maintain. She even sent me some helpful resources specifically for property in India. I was able to resolve my questions in a single 20-minute call instead of the weeks I'd been struggling on my own. I feel much more confident about my tax filing now.

Has anyone tried using the India Infrastructure Economic Factor (IIEF) method? My accountant suggested using a 60/40 split (60% building, 40% land) for urban Bangalore properties based on this methodology. Apparently it factors in local construction costs, land premiums in different cities, and average property age. Just wondering if others have used this approach and if the IRS accepted it.

Don't forget about the FBAR and Form 8938 requirements if you have bank accounts in India associated with this rental property! The building-to-land ratio is important for depreciation, but missing foreign account reporting requirements can lead to massive penalties.

I went through this exact same situation with my inherited property in Pune! After trying multiple approaches, I found that getting a certified property valuation from a registered valuer in India was the most defensible method. The Indian government has a list of approved valuers, and their reports specifically break down building vs. land value using local market standards. For my property, the valuer used the "depreciated replacement cost method" which considers the current cost to rebuild the structure minus depreciation, then subtracts that from the total property value to determine land value. This gave me a 62/38 building-to-land ratio, which seemed reasonable for urban Maharashtra. The key is making sure your valuer is registered with the Insolvency and Bankruptcy Board of India (IBBI) - their reports carry more weight with the IRS. Cost me about ₹15,000 (~$180) but gave me complete peace of mind. I've been using this allocation for 2 years now with no issues. Also, definitely keep all your documentation in both English and the original language - the IRS appreciates thoroughness with foreign properties.