france9595

I am currently working through capital gains calculations for the sale of a UK property. What % of the cost do I attribute to land and buildings for the recapture/ depreciation calculations? I think in the US this is on the assessors report but that doesn't exist in the UK at the time of purchase. Would 25% land 75% buildings be a fair value
Thank you for your help!

Glasgow Girl

Using a 75% figure for property based in a city or the suburbs of a major city would likely be accepted, and 80% otherwise. If the property was first rented prior to 2018, the depreciation recapture would be 1/40 of that value for every year the property was rented and subject to US taxes, and 1/30 if first rented in 2018 or afterwards.

Depreciation recapture only applies to rental properties. You should have been claiming this as an annual expense throughout the rental period, but it sounds as if you have not been doing so (otherwise you would already have determined the property/land split). You will nevertheless have to pay tax on the total depreciation you should have been claiming. Capital gains will be calculated as the sales price plus the total depreciation that should have been taken minus the cost basis. The amount that should have been depreciated will be taxed at your marginal income tax rate (capped at 25%). Any remaining profit will be taxed at normal capital gains rates. You can correct for any depreciation not previously claimed by using Form 3115. I don’t know much about that other than it is a complicated form and there are rules and restrictions on what you can claim retrospectively but a good CPA could help with that and will likely save you enough in taxes to pay their fee many times over.

france9595

Thank you for your reply. Yes, I think I'll put down 75% buildings/ 25% land (it's a city property).