The Internal Revenue Code allows you to claim deductions for several categories of taxes, including real estate taxes. As long as the real estate tax meets the requirements, it doesn't matter whether the land is raw or developed when it comes to claiming a deduction on Schedule A.
Qualifying Real Estate Taxes
On Schedule A, you can deduct the real estate taxes you pay on any property you're not holding for business purposes. These include local, state and even foreign real estate taxes. However, these taxes must be charged equally against all land in the jurisdiction and be based on the assessed value of the land.
Service Charges Nondeductible
If the property tax on your raw land is actually a service charge, you can't include that amount on Schedule A. Service charges include fees for specific services, such as for trash collection or sewer usage or for services that improve your property, such as constructing new sidewalks. You are allowed, however, to deduct property taxes you paid to repair improvements already installed on the property. For example, if your city charged you a property tax to repair all the sewer lines running under your raw land, that fee would be deductible.
Paid During the Year
You're only allowed to deduct the real estate taxes on Schedule A if you paid them during the calendar year. If you're paying straight to the taxing authority, such as a state government, it's easy to tell when the payment was made. However, if you pay through an escrow account, check with your lender to find out when the taxes were actually paid. For example, say you have a mortgage on the land and your lender requires you to pay into a holding account with which the lender pays the taxes. If you put the money in the escrow account in December 2013, but the bank doesn't pay the tax until January 2014, you claim the deduction on your 2014 return.
You can't use Schedule A and deduct the real estate taxes paid on your raw land unless you use Form 1040 for your return and you itemize. Itemizing means you're giving up your standard deduction, which ranges from $6,100 if you're single to $12,200 if you're married and filing jointly. You're only better off if the sum of your itemized deductions -- which includes state and local income taxes, mortgage interest and charitable contributions -- exceeds your standard deduction.
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