Question about how depreciation is calculated

[Account Closed]

Hello,

I have a simple beginner question about depreciating a building. If I purchase a property for $335k, and according to the county website the value of the property is $290,900 with the building having a value of $247,300 (85% of the value of the property). When calculating depreciation do I use $247,300 as the value of the building? Or, so I use 85% of $335K ($284,750)? I hope this makes sense. Thanks. 

[Ashish Acharya]

@Account Closed , 

You would use 85% of the 335k. 

Also, dont forget to add other costs to your depreciable basis of the house such as:

1) if any improvements were done to the house

2) The following items are some of the settlement fees or closing costs you can include in the basis of your property.

• Abstract fees (abstract of title fees).
• Charges for installing utility services.
• Legal fees (including title search and preparation
• of the sales contract and deed).
• Recording fees.
• Surveys.
• Transfer taxes.
• Owner's title insurance.
• Any amounts the seller owes that you agree to pay, such as back taxes or interest,
• recording or mortgage fees,
• charges for improvements or repairs,
• and sales commissions.

Settlement costs do not include amounts placed in escrow for the future payment of items such as taxes and insurance.

3) if there were other costs incurred to acquire the house such as if you spend money for tax advice, tickets to fly to look at the house( or milage)  and such also gets added to the basis

Good luck