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efbusse
New Member

Interest on vacant land

I bought vacant land last year and would like to know if the interest is deductible and or all the cost associate with buying the vacant land.. survey and closing cost
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view2
New Member

Interest on vacant land

When land is being purchased for investment purposes.  You can deduct the interest only to the extent you have investment income.  In other words, if you have capital gains from the sale of stock, interest income, or other investment income you can deduct you investment interest expense only up to the amount of your  investment income.

Reg §1.266-1(b)(1)(i) provides that a taxpayer which owns unimproved and unproductive real estate can elect to capitalize annual taxes, interest on a mortgage, and other carrying charges. The election must be made annually. The election requires a statement in the taxpayer's return setting forth the description of the property and the expenses to which the election applies. In addition, if the property produces income in a given year, the election is not available

The deduction for most income-producing expenses is subject to a 2% limit that also applies to certain other miscellaneous itemized deductions. The amount deductible is limited to the total of these miscellaneous deductions that is more than 2% of your adjusted gross income.

Roll carry charges into land basis; increases the basis and reduces gain on sale maybe more beneficial.

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view2
New Member

Interest on vacant land

When land is being purchased for investment purposes.  You can deduct the interest only to the extent you have investment income.  In other words, if you have capital gains from the sale of stock, interest income, or other investment income you can deduct you investment interest expense only up to the amount of your  investment income.

Reg §1.266-1(b)(1)(i) provides that a taxpayer which owns unimproved and unproductive real estate can elect to capitalize annual taxes, interest on a mortgage, and other carrying charges. The election must be made annually. The election requires a statement in the taxpayer's return setting forth the description of the property and the expenses to which the election applies. In addition, if the property produces income in a given year, the election is not available

The deduction for most income-producing expenses is subject to a 2% limit that also applies to certain other miscellaneous itemized deductions. The amount deductible is limited to the total of these miscellaneous deductions that is more than 2% of your adjusted gross income.

Roll carry charges into land basis; increases the basis and reduces gain on sale maybe more beneficial.

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