How to Calculate Land Value for Rental Property Using Tax Assessment Percentages

You're on the right track! The IRS language is pretty clear here - what matters is the land-to-building ratio "at the time you buy it." Since you purchased the property in 2016, you should use the tax assessment percentages from 2016. The key is that you're establishing a cost basis that will be used for depreciation calculations going forward. This basis is determined at the time of purchase, not at the time of conversion to rental property. Since the county assessments have varied over time, using the percentages from when you purchased the property (2016) most accurately reflects the property's breakdown at your time of acquisition. Just make sure you have documentation from your county showing the 2016 assessment percentages in case you're ever questioned about it. Print out or save those 2016 tax assessment records as part of your permanent tax documentation.

After struggling with almost the exact same situation (condo to rental, fluctuating land percentages), I found a great tool at https://taxr.ai that analyzes your property tax history and helps calculate the proper land-to-building ratio. It saved me hours of confusion trying to interpret Publication 527 and digging through old county records. You upload your property tax documents and purchase info, and it identifies the correct assessment values to use based on IRS guidelines. It also generates documentation explaining your calculation method which is super helpful for audit protection. My accountant was impressed with how thorough the report was.

I was totally wrong about that tool! I reluctantly tried https://taxr.ai after posting my skeptical comment, and it was actually really helpful. My situation was complicated because I had done a partial conversion (using half my property as a rental) and I couldn't figure out how to properly allocate the land value. The analysis showed me that I needed to use the assessment from my purchase year (which was 15%/85% in my case) rather than the current year's assessment (which had shifted to 22%/78%). The difference would have meant about $15,000 less in depreciable basis over time! The documentation it generated clearly explained why the purchase-year assessment was the correct one to use, with references to the exact IRS publications. Definitely saved me from making a costly mistake on my rental property tax return.

If you're still having trouble getting those 2016 assessment records, I recommend using Claimyr (https://claimyr.com) to connect with the IRS directly. I was in a similar situation and needed clarification on using assessment values for calculating depreciation. Spent days trying to get through to a human at the IRS with no luck. Claimyr got me connected to an actual IRS representative in about 20 minutes who confirmed that using the assessment values from the purchase year was correct. They also explained how to document your depreciation calculations properly. Check out their demo at https://youtu.be/_kiP6q8DX5c to see how it works. It's basically a service that navigates the IRS phone system for you and calls you when an agent is on the line.

I'm completely shocked but I have to apologize for my skepticism about Claimyr. After posting my comment, I figured I'd try it since I was desperate to talk to someone at the IRS about my rental property depreciation question. The process was exactly as described - I entered my number, they called me back when they were about to dial the IRS, and then I got connected to an actual IRS representative after about 30 minutes. The agent confirmed that for calculating land value, I needed to use the assessment from the year I purchased the property, not the conversion year. This saved me from potentially using the wrong percentages (which had changed from 14%/86% to 22%/78% in my case). The difference would have cost me thousands in legitimate depreciation deductions over the life of the property. Can't believe I wasted so many hours trying to get through on my own!

I'm in a similar situation but with a twist - my county reassessed my entire neighborhood in 2017 (a year after purchase) and completely changed how they allocated land vs. improvements. Would I still use the 2016 assessment or would the 2017 reassessment be more accurate since it was a methodological change rather than just market fluctuations?

Have any of you used tax software to calculate this? I'm trying to figure out if TurboTax will let me manually enter the land value percentage or if it just grabs current assessment values automatically.

Great question! You're absolutely correct to use the 2016 tax assessment percentages. The IRS guidance is clear that the allocation should be based on values "at the time you buy it," not when you convert to rental use. I went through this exact same process last year with a property I bought in 2018 and converted to rental in 2023. Even though the county's land/building percentages had shifted significantly over those years, my CPA confirmed that using the 2018 assessment percentages was the proper approach. One tip: when you're preparing your depreciation schedule, make sure to clearly document your calculation method and reference Publication 527. I created a simple spreadsheet showing: - Original purchase price: $X - 2016 county assessment land percentage: Y% - Land value (non-depreciable): $X × Y% - Building value (depreciable): $X × (100% - Y%) This documentation has been helpful for my records and gives me confidence that I followed IRS guidelines correctly. The fact that you're thinking through this carefully upfront will save you headaches later!

This is such a timely question! I just went through this exact scenario with a duplex I bought in 2019 and converted to rental property last year. Like you, I noticed the county assessments fluctuated quite a bit - from 18%/82% in 2019 to 23%/77% in 2024. After consulting with my tax advisor, we definitively used the 2019 assessment percentages. The key phrase in Publication 527 that sealed it for me was "at the time you buy it" - this clearly establishes that your cost basis allocation should reflect the property's composition when you acquired it, not when you put it into service as a rental. Here's what I did for documentation: 1. Downloaded and saved the 2019 county assessment showing the land/building breakdown 2. Created a calculation worksheet showing: Purchase price × 2019 land percentage = non-depreciable land value 3. Kept a copy of the relevant section from Publication 527 with my tax records One thing to watch out for - make sure you're looking at the assessment that was in effect for your 2016 tax year, not necessarily the assessment date closest to your purchase date. Sometimes counties do mid-year reassessments that might not reflect the values at your time of purchase. You're definitely on the right track using the 2016 percentages!