Individuals who own vacant land generally do not receive any income from the land and also are not entitled to any business deductions related to it. The real estate taxes paid on vacant land, before the passing of the Tax Cuts and Jobs Act, were an itemized deduction on Schedule A.
Taxes paid on investment property should be reported as “Other Taxes” on Line 6 of Schedule A, Form 1040. One note of caution, however, is that taxes are not a deduction for Alternative Minimum Tax purposes. Depending on the situation, including these additional tax deductions may not result in any less Federal Income Tax being owed. In those situations consideration should be given to making an election under Section 266 to capitalize the taxes paid to the basis of the property, thus reducing the amount of capital gain once the property is sold.
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