How to Figure Out the Land Allocation of a Condo with Multiple Owners

Do your own cost segregation, they said.

It'll be easy, they said.

So you're trying to calculate your depreciation deductions correctly, and suddenly you hit a wall...

How much of what you paid for your condo is actually the land underneath it?

It's one of those questions that sounds simple until you realize you own a unit in a building with thirty other people, and nobody's exactly carved up the dirt with property lines.

Calculating your land allocation isn't nearly as complicated as it seems. I'm going to walk you through exactly where to find the numbers and how to do the math. But I also want to be straight with you about something else: just because you can figure out your land allocation doesn't mean you should do your own cost segregation study.

There's a big difference between understanding the concept and creating audit-proof documentation.

Let me show you how this works, and then you can make an informed decision about what makes sense for your situation.

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Why Land Allocation Even Matters

Before we get into the nitty-gritty, let’s take a moment to understand the reason behind this whole process. The IRS has a very clear rule:

You cannot depreciate land.

Land doesn't wear out, doesn't become obsolete, and theoretically lasts forever.

But that building sitting on top of it? That absolutely wears out over time, which is why you get to depreciate it.

So when you're calculating your depreciation deductions you need to know exactly what portion of your purchase price represents land.

Get this wrong and the IRS could come knocking.

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What You Actually Own When You Buy a Condo

When you bought your condo, you didn't just buy the physical space inside your four walls. You actually bought two distinct things, and understanding this is the key to figuring out your land allocation.

First, you own what's called a fee simple interest in your individual unit. That's the actual interior space, the drywall, the fixtures, everything you see when you walk through your front door.

Think of it as owning the "air space" of your unit.

But second, (this is the part people often miss) you also own an undivided fractional interest in all the common elements. That includes the land, the foundation, the exterior walls, the roof, the lobby, the hallways, the pool, and everything else that makes the building function as a whole. You don't own a specific chunk of land or a particular section of the roof. Instead, you own a percentage of all of it together with all the other owners.

That percentage is spelled out in your condo declaration or bylaws, and it's usually based on your unit's square footage compared to the total building square footage.

Sometimes developers get creative and factor in other elements like floor level or view quality, but square footage is the standard approach.

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Where to Actually Find Your %

Now that you understand what you're looking for, let's talk about where to find it. There are three main places to look for land allocation, and I recommend you check all of them to make sure everything lines up.

1. Start with your property tax records. This is usually the easiest place to begin because most county assessors already do this calculation for you. They'll value the entire land parcel that the condo building sits on, then they'll break that down and allocate a portion to each unit owner based on their ownership percentage. Pull up your tax bill and look for the land versus improvements split. In many cases, that's all you need.

2. Next, grab your condo declaration. This is the master document that was recorded when the building was first converted to condominiums, and it spells out exactly what percentage of the common elements you own. Look for terms like "undivided interest" or "percentage of ownership." This document should match up with what the county assessor is using, but it's worth verifying.

3. If those first two sources aren't clear or don't match, you might need to bring in an appraiser or a cost segregation specialist. They can calculate your land allocation using accepted valuation methods and your ownership percentage. This is especially important for higher-value properties where getting the allocation right means thousands of dollars in deductions.

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Here is a Hypothetical Example

Nothing clarifies this like actual numbers, so let me give you a scenario.

Say the county assessor has valued the entire land parcel under your condo building at $1,000,000.

The total building contains 100K square feet, and your unit is 2k square feet. That means you own 2% of the common elements, including the land.

Your allocated land value is simply:

1M x 2% = $20,000

That twenty grand gets carved out of whatever you paid for your condo and labeled as land. Everything else (the remainder of your purchase price) represents improvements that you can depreciate.

Here's what this looks like in practice. If you bought your unit for $300,000, $20K of that is land (non-depreciable), and $280K is improvements (depreciable).

That $280K can then be broken down further through cost segregation to accelerate your deductions even more, but the land allocation is where you find your depreciable basis.

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Making Sure This Stands Up to Scrutiny

The IRS isn't going to take your word for it if they audit you. You need documentation, and you need to be consistent. Keep copies of your assessor records, your condo declaration, and any appraisals you commission. Put them in a file specifically for this property so you're not scrambling to find them three years from now.

Use the same allocation method every single year. Don't switch methodologies based on what gives you a better number in any given tax season. Consistency shows good faith and makes your position much more defensible.

And honestly, for properties where the numbers are big enough to matter, invest in a engineering-based cost seg study. Yes, it costs money upfront, but it creates audit-proof documentation and typically gets you more deductions than you'd find on your own.

The return on investment is usually massive.

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The Bottom Line

Land allocation in a condo isn't something you guess. It's based on your documented ownership percentage of the common elements, and that number comes from real sources (your tax records, your condo declaration, or a professional appraisal).

Getting this right from the beginning means you're staying within IRS guidelines. That's the sweet spot we're always aiming for, allowing you to take every deduction you're entitled to, but making sure you can back up your claims.

That's how you play this game smart.

Thinking about a cost segregation study for your condo investments?

Browse trusted providers in the FindCostSeg Directory and connect with certified professionals who can guide you through the process.