Question

Property tax deduction on investment vacant land ABOVE the $10k SALT limit?

Forum|Forum|5 years ago
February 13, 2021
3 replies
0 views

Hello. I own vacant land for investment purposes. I have read several articles that property tax paid on vacant investment land is deductible ABOVE the $10,000 SALT limit. Where on TurboTax can I enter investment vacant land property tax as a deduction ABOVE and beyond the $10,000 SALT limit. Thank you.

TurboTax Premier Online

JohnB5677

Yes, property taxes paid on vacant land are deductible if you itemize your deductions.

This will be posted to:

Deductions and Credits
Your Home
Property (Real Estate) Taxes
Yes, Did you pay property or real estate taxes in 2020?
Enter the property taxes you paid in 2020

As you stated the SALT (State and local taxes) deduction is limited to $10,000 for 2018.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

D

DixiePabloAuthor

Hi, I have read that property tax for investment land can be deducted ABOVE the $10k SALT limit (I am at the $10k SALT limit via property tax on my home as well as state income tax).

Where on TurboTax can this deduction - above the $10k limit - be entered?

JohnB5677

There is a bill that has been passed by congress that would increase the SALT value to $20,000. The senate will now have to consider it.

Key points of bill 218-206

The “Restoring Tax Fairness for States and Localities Act” would eliminate the $10,000 limit on state and local tax deductions for 2020 and 2021.
On Thursday, the House narrowly voted to pass the bill, 218-206, largely along party lines. The measure is unlikely to make it through the Senate.
This bill calls for increasing the SALT-cap to $20,000 for married couples filing jointly in 2019, as well as raising the highest marginal tax income tax rate to 39.6%.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

DaveF1006

Be sure when you read these articles, they are from credible sources. Please read some of the comments in this Turbo Tax link. My position is that it is vacant land, not income producing, and held as a capital asset for investment purposes. This is a property tax on personal real estate that is subject to the Salt restriction.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

M

MikeinSC

I discussed this with two practicing CPA's who are with large firms, both agree it is not subject to the $10,000 limit and a Schedule A other tax deduction.

How to get it to work in TT is the question.

C

Cynthiad66

Individuals who own vacant land generally do not receive any income from the land and also are not entitled to any business deductions related to it. The real estate taxes paid on vacant land, before the passing of the Tax Cuts and Jobs Act, were an itemized deduction on Schedule A.

Taxes paid on investment property should be reported as “Other Taxes” on Line 6 of Schedule A, Form 1040. One note of caution, however, is that taxes are not a deduction for Alternative Minimum Tax purposes. Depending on the situation, including these additional tax deductions may not result in any less Federal Income Tax being owed. In those situations consideration should be given to making an election under Section 266 to capitalize the taxes paid to the basis of the property, thus reducing the amount of capital gain once the property is sold.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

J

juck40

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?

M

Mike9241

under IRC 266 and REG 1.266-1 an anuual election was required to treat the taxes as part of the capital cost.

A taxpayer who 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 with the original return.
The election requires a statement in the taxpayer's return describing the property and the expenses to which the election applies.

at best if you have not yet file the 2022 return you could make the elction for the 2022 taxes (prior year's are lost).