I believe this is a case of "it depends". You stated the lot is 12 acres. Have all 12 acres been developed and are being utilized for your Sniffspot? If so, I believe the total property taxes may be deductible against the rental income. If not, are you planning on utilizing all 12 acres for Sniffspot in the future? Currently, if aIl 12 acres are not being used for Sniffspot, I believe you need to allocate the acreage used for Sniffspot to the acreage as a whole for the property tax deduction and report the income and expense on Schedule E as a rental property.
If you have plans to expand to the full 12 acres if they are not currently being used, and you have a development plan in place for the remaining unused land, if necessary by municipal code, the remainder property taxes may be considered as part of the development costs for future expansion; and while land can never be depreciated, land improvements may be under the right circumstances.
@pspadoni
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