Q. I have owned a vacant lot for 37 years and paid property taxes each year but did not get a deduction of the tax on my tax return. When I sell the lot can the taxes I have paid but not deducted for 37 years be added to the basis of the property?
A. No.
Real estate tax is/was only deductible as an itemized deduction. If you used the standard deduction, in the past, then you wouldn't have gotten any benefit.
However, If the property was classified as investment property, as opposed to personal use property, alternatively, taxpayers can elect to capitalize (add it to your cost basis) the carrying costs of unimproved and nonproductive real property (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 cannot amend prior year returns to claim capitalization.
