Are Real Estate Taxes on Raw Land Deductible on Schedule A?

Property tax is deductible on buildings and lots.

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Property tax is deductible on Schedule A, regardless of whether you are paying it on a house, a condo or raw land. If you itemize your deductions and hold the raw land for personal use, as opposed to holding it for farming or investing purposes, the Internal Revenue Service allows you to use Schedule A to deduct the property tax. The only limitations on whether nor not you can deduct the taxes on your land are the same limitations that affect other itemized deductions, such as the Alternative Minimum Tax and the Pease limitations.

The Property Tax Deduction

As a part of your broader ability to write off taxes that are imposed by your state, county or city, the IRS allows you to deduct property taxes. The IRS's rule as to whether or not a property tax is deductible is that it must be charged at a similar rate on every property in the jurisdiction of that taxing authority. As long as the property tax meets that requirement, regardless of the contents of the property, you can write off the portion of the tax that is a tax, as opposed to the portion that goes to pay for special assessments.

Schedule A or E

Where you write off your raw land's property tax also depends on why you own it. If the raw land is yours and you hold it for personal reasons, you would write off your taxes with your other personal deductions on Schedule A. Holding for personal reasons includes planning to build a new home on it some day, or using it as a buffer between your house and a neighbor's. If you hold the land for investment or for farming purposes, you'll need to report the property taxes as an expense on Schedule E or F, where you can use them to offset your rental or farming income, respectively.

The Alternative Minimum Tax

If you are subject to the Alternative Minimum Tax, you will lose your ability to deduct all of the property taxes on your personal properties, including your raw land. The AMT is a second tax system that was originally designed to prevent the wealthiest Americans from using deductions to avoid paying any income taxes. When you pay the AMT, you get a special large exemption and a special flatter tax rate, but you lose the ability to claim just about every itemized deduction, as well as your personal exemptions.

The Pease Limitation

High-income taxpayers that do not get ensnared by the AMT can lose a portion of their property tax write-off through the Pease limitation, which returns to the tax code in the 2013 tax year. The Pease limitation, named for the congressman who first proposed it in 1990, gradually reduces the value of some itemized deductions for some taxpayers. For the 2013 tax year, the limitation will impact single filers with adjusted gross incomes of $250,000 or higher, and married filers with adjusted gross incomes of $300,000 or higher. While the limitation doesn't affect every deduction, it does limit deductions including property taxes, mortgage interest and charitable donations.