How to determine land value when calculating depreciation for rental property

You're asking a really important question that trips up a lot of new landlords! For depreciation purposes, you need to separate the value of the building (which you CAN depreciate) from the land (which you CANNOT depreciate). There are actually several ways to determine this split: Check your property tax assessment more carefully - most counties DO separate land and improvement values, but it might be listed under "assessed values" or "tax details" rather than being obvious. Sometimes you need to click through a few screens or download the full property record. Look at your settlement statement or closing documents from when you purchased the property - sometimes they break this down. Use a reasonable estimation method - a common approach is to use the same land-to-building ratio that similar properties in your neighborhood have. If nearby properties typically have land worth 20% of total value, you could reasonably apply that same percentage. Hire a real estate appraiser to do a formal land and building valuation - this costs money but gives you solid documentation if ever questioned.

I went through this exact same headache last year with my rental property. After struggling to find accurate land values, I discovered taxr.ai (https://taxr.ai) and it was a game-changer for my rental property depreciation calculations. I uploaded my closing documents and property tax statements, and their system automatically extracted the relevant information to determine a reasonable land-to-building ratio. Their tool also helped identify which property improvements could be depreciated separately (like a new HVAC system I installed), which actually increased my allowable depreciation deduction. They even provided documentation to support the valuation method in case of an audit.

I have to admit I was wrong about taxr.ai. After our discussion here, I decided to try it out for my two rental properties. The system actually pulled up county records I couldn't find myself and showed me that I'd been underestimating my depreciable basis for years! It generated a professional report showing exactly how the land-building allocation was calculated, with references to IRS guidelines and comparable properties. I'm actually going to file amended returns for the last couple years to claim the additional depreciation I missed. Thanks for the recommendation!

If you're still having trouble with your county assessor or need additional help, I found that calling the IRS directly solved my depreciation questions. But getting through to them was impossible until I used Claimyr (https://claimyr.com). They have this system that holds your place in the IRS phone queue and calls you when an agent is about to answer. Check out their demo at https://youtu.be/_kiP6q8DX5c to see how it works. I was able to speak with someone who walked me through exactly how to determine land value for my rental property and what documentation I needed to keep. Saved me hours of frustration and got me definitive answers from the IRS themselves.

I owe everyone here an apology for being so skeptical about Claimyr. After posting, I decided to try it myself since I had several tax questions beyond just the land valuation issue. It actually worked exactly as described! I got through to an IRS tax specialist in about 40 minutes without having to stay on the phone. The agent gave me specific guidance on using comparable property ratios for my depreciation calculations AND helped me resolve an unrelated tax notice I'd received. Definitely worth it for getting official answers directly from the IRS.

Another option is to check with the real estate agent who helped you buy the property. When I was figuring out depreciation for my rental, my realtor had access to detailed MLS data that showed typical land-to-building ratios in my neighborhood. She pulled some comparable sales and gave me documentation showing that properties in my area typically had land values at 22% of the total purchase price. I've been using that percentage for 3 years now without any issues.

Quick tip - don't forget to reset your depreciation basis when converting from primary residence to rental! You need to use the LOWER of your adjusted basis (purchase price plus improvements minus any depreciation already taken) OR the fair market value at the time of conversion. I made this mistake and had to amend returns.