Hello Brandon this is one of the best videos on the tax treatment of closing costs. Also my first video by your team and really enjoyed it. Well done! I have a small complication I would like to add and get your thoughts on presentation of values in the Balance Sheet. I think you will also like it :-). Purchased rental property for $400K. Latest 2021 Tax appraisal by the City indicates land value for $100K and building value for $200K, total $300K. On the B/S can I use Land as $100K and depreciable building as $300K OR would I have to use the percentage of 33.33% and compute Land as $133K and building as $267K? I feel I should be able to use the land value as $100K as the appreciation in value is largely due to the increase in building costs and labor that are attributable to the building valuation. The total loan I have taken is $550K. It is a FHA 203K rehabilitation loan for the property + renovation of an unused rental unit. The renovation of the existing but unused unit will not be completed until the end of a year from purchase. Given that the unused unit exists, the property tax assessment already includes this rental unit in the computation even though it is not habitable. Hence can I add the total estimated renovation value of the additional unit to my B/S in year one OR do I wait until after the unit is completed? If I can add the value of the renovated unit after construction is complete in year two how do I readjust my B/S values including depreciation on the building portion both going back and forward? Appreciate your insights. Thanks.
What about if you placed the property as a rental from personal use? Let's say property was purchased in 2016 but placed as a rental property in 2022, will prepaids (F) still be added as an expense on schedule E for tax year 2022 or no because those were expenses for 2016 and not 2022?
thank you very much! if the buyer is paying portion of the agent commissions, would they depreciate that fee as part of the building in 27.5 years OR can expense it in the year? I assume it would be part of the building depreciation?
This was a great video! Thank you. I’m a new investor with my first property. Taking a deep dive for knowledge. Do you have a link to the follow up video you mentioned? I can’t seem to find it. Thank you in advance.
My wife and I are preparing to sell our first property that we held for 12 years as a rental. I liked your video from a buyer's perspective, but do you have one that discusses closing costs from a seller's perspective? I have gone online to look at closing cost estimates, as well as what I will owe Uncle Sam for my 2021 taxes. I am especially interested in understanding how increased property values affect the depreciation I have claimed over the past 12 years tax returns.
Closing costs from a seller's perspective are generally straightforward in that you have broker fees and potential seller credits. You may have property tax adjustments, but other than that we don't see a whole lot in the seller column. Estimating your tax bill is another beast in and of itself. Here's a Tax Smart Daily video I did on the topic: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-VFqIr0GQKSk.html
Can or should you use tax assessment to calculate the land? It does show the value of the building and value of the land. Or should you use the appraisal? Which of course I don't have.
If you had an appraisal done, that would be the preferred choice. But otherwise, the county tax appraisal info is an acceptable way to calculate the land value. You use that improvement to total value ratio and multiply that by your total actual cost of the property to find the portion that you depreciate.
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