DarkRange55
Enlightened
- Oct 15, 2023
- 1,256
Not buildings. Land. Land is almost always not depreciable (it doesn't wear out. A mine technically can be when it's finished). The equipment, ect. So the question of the day is, can a plot of land be depreciated if it had something like a nuclear waste spill? Something where there is no possible way to clean it?
The value would go to near zero and property taxes would fall to near zero as well. If the land becomes worthless then you write it off.
Land is almost always not depreciable (and most accountants would tell you it's never), (normally, land does not depreciate because it has a permanent use. It doesn't wear out), but land improvements such as roads, parking, fences, sidewalks or landscaping, ect. must be depreciated because they have limited use life may and be written off over periods of 10, 15 or 20 years depending on the specific nature of the asset.
However, for tax purposes, certain land owners are allowed to deplete the value of the land with something called depletion when they are extracting oil or minerals from the land. Sometimes land has three values, the Mineral Rights (underground oil, gas, or say estimated underground Gold reserves), the surface area for building(s), and possibly the sky above the property (or it's view) / air rights, that has value. (Water rights can count as a fourth since they generally are not included in mineral rights).
Mineral extraction for oil allows for a 15% tax deduction on gross receipts of gas receipts from the source land, so essentially an incentive to be taxed on 85% of gross receipts, less expenses in most cases for oil and gas.
Contaminated land owned might just have an offsetting liability for cleanup cost, so it might have a negative value on the books, so no depreciation needed.
If we restore the land after use like a nuclear power plant, oil extraction, or coal mining, then we should estimate the amount and
add it to the acquisition costs of the amount and liabilities. And then, we should depreciate the amount over the expected period.
The value would go to near zero and property taxes would fall to near zero as well. If the land becomes worthless then you write it off.
Land is almost always not depreciable (and most accountants would tell you it's never), (normally, land does not depreciate because it has a permanent use. It doesn't wear out), but land improvements such as roads, parking, fences, sidewalks or landscaping, ect. must be depreciated because they have limited use life may and be written off over periods of 10, 15 or 20 years depending on the specific nature of the asset.
However, for tax purposes, certain land owners are allowed to deplete the value of the land with something called depletion when they are extracting oil or minerals from the land. Sometimes land has three values, the Mineral Rights (underground oil, gas, or say estimated underground Gold reserves), the surface area for building(s), and possibly the sky above the property (or it's view) / air rights, that has value. (Water rights can count as a fourth since they generally are not included in mineral rights).
Mineral extraction for oil allows for a 15% tax deduction on gross receipts of gas receipts from the source land, so essentially an incentive to be taxed on 85% of gross receipts, less expenses in most cases for oil and gas.
Contaminated land owned might just have an offsetting liability for cleanup cost, so it might have a negative value on the books, so no depreciation needed.
If we restore the land after use like a nuclear power plant, oil extraction, or coal mining, then we should estimate the amount and
add it to the acquisition costs of the amount and liabilities. And then, we should depreciate the amount over the expected period.
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