Yes, but you needed to make that election each year.
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.
Mortgage interest is only deductible to the extent
of other investment income and
not subject to the old 2% of AGI rule, but can
be capitalized. Real estate (property) tax may be deducted on schedule A, under taxes, without regard to the 2% rule.
Prior to 2018, carrying costs could alternatively be deducted as investment expenses, a misc. itemized deduction subject to the 2% of AGI threshold. So, filing an amended return for 2017 is an option.
