Posted by Jimmy on February 02, 2005 at 09:18:00:
here’s how this works.
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ignore the assessed value. it is not relevent in determining your depreciable basis. Assuming you purchased the property, take your cost number and tweak it. see below. if you acquired the property by means other than purchase,the rules are different. get back to me and I can help.
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Take your total cost, and subtract off a reasonable value for the land. The land is not depreciable.
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If your purchase included appliances, subtract off a reasonable amount for these appliances, given their age and condition. This stuff can be depreciated over 5 years, which will help you get more depreciation earlier in the game. This means frig, stove, dishwasher,w/d, ceiling fans, water heaters, window AC units, wall heaters, whatever.
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I also will make an allocation to carpet and flooring, again based on its age and condition. Same 5-year deal here.
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There are probably other things you are purchasing which could qualify for the 5 year rule. I usually stop with appliances and flooring. But there are accounting firms out there who specialize in identifying items which qualify for speedier depreciation. On a large commercial deal, this process can be worth thousands of dollars to the purchaser, and is worth the exercise.
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If the two units are pretty much the same, then divide whatever basis remains by two. Half is your personal residence, and is not depreciable. The other half is depreciated over 27.5 years. I believe you can elect to use an accelerated method, instead of straight-line. Check with your preparer. I usually don’t do this, because I have to recapture the “excess” depreciation as ordinary income should I sell the property later for a gain.
That ought to get you started.
Good Luck