Level 3

Question

I realized i've been using the wrong depreciation basis on my rental property?

Forum|Forum|4 years ago
April 18, 2022
2 replies
6 views

I’ve used those government assessed

small tax cards that arrived in my mail to determine my basis. To make things simple they said the land was worth 100,000 and the building was worth 70,000. So I’ve been depreciating 70,000 as the basis for a few years now.

I just found out I could’ve used the original purchase price of the unit? let’s say that was $200,000.

So I’m confused.. what’s my depreciation basis?

Is it 200,000 aka my original purchase price?

or is it 200,000 minus the land 100,000 = 100,000?

Or what the tax card said = 70,000?

I’ve been using 70,000, but if it’s wrong, do I need to amend the last 3 years or can I just fix it going forward in my current tax year? I am so overwhelmed.. have i committed a massive blunder by understating my depreciation basis?

This topic has been closed for replies.

J

jeffmcpa2010

Level 10

You will need to file a 3115 to make your correction.

https://www.irs.gov/forms-pubs/about-form-3115

File this form to request a change in either:

an overall method of accounting or
the accounting treatment of any item.

You are requesting to change the accounting treatment of your rental property.

Your post sounds like you may be doing this for yourself.

Whether or not it is for your personal return, I would not try to complete the 3115 myself. I would find a tax professional experienced in this form to complete it for you and help you through the process, It is complex and you don't want to screw it up.

D

dkukoAuthor

Level 3

Wow! this form looks complicated.. ill have to get a tax pro to help me... so it has to be this form? Going back 3 years and amending the depreciation basis is not a valid option?

J

jeffmcpa2010

Level 10

If you had the property in service only in the last 3 (2019,2020,2021) years amending would probably work. If before 1-1-19, you would need to go the 3115 route I believe.

Just-Lisa-Now-

Intuit Community Champion

you still need to break out the land portion of the property, that doesnt get depreciated.

Look at your actual property tax bill, whats the land to dwelling ratio of the total property value?

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

D

dkukoAuthor

Level 3

thank you for the replies.

im looking at the bill, i have the actual numbers now the above ones were just a generalization.

it says land: 140,000

improvements: 146,800

for a total of 286,800

the original purchase price was 350,000

would my basis be 210,000? (350k minus 140k)

i originally used 146,800 as my basis. I've committed a massive blunder?

rbynaker

Level 13

Has this always been a rental property? Or was it once your personal residence and then you started renting after you moved out?

Sign up

Login with SSO

Let's get you signed in

Login with SSO