I bought a house in 2004 for $88,500 including the land. I am now renting it this year and am confused on what to list for the 'Total basis for the property' and the 'Basis for the land' in H&R Block Tax Cut software. I didn't know it would be so confusing. I have no idea what the land is worth so I don't know what to put. Any help would be greatly appreicated.
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If you can, find out what a vacant lot (of the size of yours) in that area would have sold for back in 2004. Otherwise make a *best guess* as something is better than nothing. My feeling is that the land would fall in the $5k
- $8k range. If it's worth the cost (and it reeally isn't) you could hire an appraiser to crunch the numbers.
-- Paul Thomas, CPA snipped-for-privacy@bellsouth.net
One possible source is your real estate tax bill. It may allocate your valuation between land and improvements. You could then apply that ratio to your purchase price. Not that you asked, but you'd be wise to abandon TaxCut for this year and hire a preparer. The bulk of the fee would be deductible on your 2007 Schedule E, and once everything is set up, the later years run pretty smoothly.
-- Phil Marti Clarksburg, MD
You need to segregate the cost as the land cannot be depreciated ___________________________________
It's expensive to get an actual real estate appraisal, which could be used here, so I'd take the quick and dirty approach. Look at your property tax bill, and see what percentage of the total assessed value is the land. Use that percentage to determine cost basis of the land.
-- Art Kamlet ArtKamlet @ AOL.com Columbus OH K2PZH
You would typically have an appraisal. Short that, your local tax appraising district will have the assessed value for the land and improvements stated separately. You could use that ratio to split them out. It is ironic because the HRB commericial touting its audit defense says "ask the box".
I usually use 20% for land since that is what the insurance company commits to who is willing to pay 80% of the purchase price if the property is total destroyed. This has prevailed at audits. Of course if the rental unit is an upstairs condo with only the bottom of a stairway on the ground and an outdoor parking space, a lower % for land could be justified. I once saw a new rental property of 4 units assessed by Los Angeles County at $100 for the building and $249,900 for the land. I offered to buy the building and move it to my house. The client wouldn't take the offer. What do assessors know anyway? Linda Dorfmont E.A., CFP, CSA
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