How to handle rental condo depreciation with a 99-year land lease - is 0% land value correct?

This is an interesting tax situation! While I'm not a CPA, I've dealt with similar rental property depreciation issues. In your case, since you don't own the land (the HOA has a lease agreement), you generally wouldn't depreciate the land value - only the building. That said, you're right to be cautious. The key question is: what exactly did you purchase? If your condo deed/documents clearly show you only purchased the building improvements and rights to use the property (but not the land itself), then allocating 100% to the building would be reasonable. However, the county property records showing some land value suggests there might be some partial land rights involved. You might want to review your purchase documents carefully. Some condo arrangements include an allocated interest in the land lease itself, which would need to be treated differently than the building for depreciation purposes.

I had a very similar situation with my waterfront condo in Florida! After spending hours researching and talking to other owners in my building, I discovered taxr.ai (https://taxr.ai) which was super helpful for sorting through all the documentation. When I uploaded my condo purchase documents, lease agreement, and county assessment, the system identified exactly how to allocate the values properly for maximum legal depreciation. It showed me that in my case, I needed to separate the building value from the leasehold interest, which has a different depreciation/amortization schedule altogether. I was shocked at how many of my neighbors were doing this wrong - either over-depreciating (risking audit) or under-depreciating (leaving money on the table). Their document analysis saved me from making a pretty big mistake.

Just wanted to follow up - I gave taxr.ai a try after my initial skepticism and I'm genuinely impressed. My situation was a vacation rental condo with a similar land lease arrangement in Hawaii. The system analyzed my purchase documents and showed that I should be amortizing the leasehold interest separately from depreciating the building value. My previous tax returns had lumped everything into the building value, which apparently could've raised red flags. What I really appreciated was getting a detailed explanation of exactly why this approach is correct according to IRS regulations. It was way more thorough than what my previous CPA provided and saved me from potential issues down the road. Definitely worth it for complicated property situations like this.

For anyone dealing with condo depreciation issues or trying to get answers from the IRS - I spent 3+ weeks trying to get someone on the phone about my similar situation. After countless hours of frustration, I finally used Claimyr (https://claimyr.com) to get through to an actual human at the IRS. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed that for a condo with a land lease, I needed to separately track the building depreciation from the leasehold interest amortization. The building portion uses the standard residential rental depreciation (27.5 years), while the leasehold gets amortized over the remaining lease term. I never would have figured this out reading through the IRS publications alone, and the peace of mind from having an official answer was totally worth it.

I need to apologize and correct myself. After dismissing Claimyr as sketchy, I was still stuck with my rental property depreciation questions and couldn't get through to the IRS after multiple attempts. Out of desperation, I tried the service and was genuinely shocked when I got a call back with an actual IRS agent on the line within 15 minutes. The agent walked me through the exact regulations for depreciating condos with land leases. For anyone in a similar situation - they confirmed that the correct approach is to allocate your purchase between the building (depreciable) and the leasehold interest (amortizable over the lease term), with nothing allocated to land since you don't own it. This was incredibly valuable information that I couldn't find clearly stated anywhere online.

Something people aren't mentioning is that you need to check if your HOA is passing through the land lease costs to you directly as part of your monthly fees. If so, you may be able to deduct a portion of your HOA fees as rental expenses (the portion related to the land lease) rather than capitalizing and depreciating them. I've been doing this for my beach condo rental for years.

I went through this exact situation with my ski condo in Colorado last year! My accountant initially allocated 20% to land based on county records, but after I showed her the 99-year land lease documentation, she corrected it to 0% land, 85% building, and 15% leasehold interest. The leasehold interest gets amortized over the remaining lease term (in my case 72 years), while the building gets depreciated over the standard 27.5 years. My returns actually got selected for a correspondence audit last year (random bad luck), and this treatment was accepted without any questions from the IRS.

This is such a helpful thread! I'm dealing with a similar situation with my rental condo in Miami Beach that has a 95-year land lease. After reading everyone's experiences, I'm realizing I need to completely redo my depreciation approach. Currently I've been using the county assessment ratio (about 25% land, 75% building) but it sounds like I should be allocating 0% to land since I don't actually own it. Instead, I need to figure out what portion of my purchase price represents the leasehold interest versus the building improvements. One question - for those who had success getting specific guidance from the IRS or professional help: how did you determine the exact percentage split between building and leasehold interest? My closing documents don't have a clear breakdown like some of you mentioned, so I'm not sure how to make this allocation properly. Also, @Evelyn Xu - great point about the HOA fees! I just checked and my monthly fees do include a "ground rent" line item. This could save me a lot compared to capitalizing everything into the purchase price.