Q. Can taxes paid on vacant land I own be deducted on my tax return?
A. Yes.
Unlike mortgage interest, which can only be deducted on your primary or 2nd home, real estate taxes may be deducted on any property you own. But, it is only an itemized deduction. Your total itemized deductions must exceed your standard deduction before you see any benefit.
If the vacant land is being held, as an investment (as opposed to personal use), alternatively, taxpayers can elect to capitalize (add it to your cost basis) the carrying costs of unimproved and nonproductive real property, real property under development or construction and personal property before its installation or use (Regs. Sec. 1.266-1(b)(1)). The election is made with the tax return by its due date, including extension, by attaching a statement. You cannot wait until you sell the property, but must make that election each year. Attach the statement to the return and write “Filed pursuant to section 301.9100-2” on the statement. You may add the carrying costs, incurred in the year of sale, to your cost basis. https://somersetcpas.com/section-266-election-for-investment-property/
