Escrow fees are "expenses of sale" and can be added to your cost basis. There is a place, in TurboTax (TT) to enter expenses of sale. It will come up, in the interview after entering basis.
Real estate taxes are "carrying costs". Until you put it to use as your primary or second home or as rental property, or sell it, you have an investment property. The carrying costs (e.g. repairs, insurance & utilities) of investment property are not deductible, staring with tax year 2018. Real estate (property) tax may be deducted on schedule A, under taxes, without regard to the old 2% rule.
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.
Mortgage interest is only deductible to the extent of other investment income and not subject to the 2% of AGI rule, but can be capitalized.
@Hal_Al Thank you for the details in your answer. We have had carrying costs on a vacant lot since 2002 and were never told that we had to file an election in the past. According to what we just learned now, we are going to file an election for section 266 this year for property taxes and other miscellaneous carrying costs and submit it with our 2019 return in a couple days.
When I searched online more regarding section 266, it doesn't mention anywhere else that we need to write “Filed pursuant to section 301.9100-2”, which you mentioned above. Do we need to say that? From what I can find, it looks like section 301 is written at the top of an election only if filing an election for past years?
@Hal_AlThank you for the details in your answer for capitalizing and filing an election. Do we need to say "Filed pursuant to section 301.9100-2”, which you mentioned above? From what I can find, it looks like section 301 is written at the top of an election only if filing an election for past years? In a couple days, we will file our 2019 tax return with an election saying "For tax year 2019, taxpayer hereby elects under Code Section 266 and IRS Regulations 1.266-1 to capitalize, rather than deduct, property taxes on the <address> vacant lot."