Wisconsin Beth
Distinguished Associate
No, we don't walk away. But when we're holding on to something precious, we run.
Joined: Dec 20, 2010 11:59:36 GMT -5
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Post by Wisconsin Beth on Feb 28, 2011 14:31:15 GMT -5
My husband and I got stuck when doing our taxes. Below is the abbreviated question, written up by DH. Any answers are appreciated. I'm going to post this on the YM board too.
Thanks,
Beth
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In January, my spouse and I received a 2010 1098 interest mortgage statement for vacant land that we purchased.
We have not built a home on it nor do we intend to build a home on it for several years.
Not sure if this information matters but our vacant land loan is through United FCS.
United FCS is a farmer-owned financial services cooperative that
provides credit & financial management services to agricultural
producers and agri-businesses including long-term mortgage loans (for
land and other purchases)
We are not farming the land nor do we intend to do so. United FCS knows this.
We are in the middle of completing our taxes for 2010.
We itemize our deductions.
I believe we cannot take the home mortgage interest deduction for our vacant land for 2010 since we are not building on it.
However, where can we claim this interest on our taxes?
Does this go under investment income?
Also, can we deduct the taxes we paid on this land in the same manner as we deduct the real estate taxes on our home?
Any feedback would be appreciated.
Thanks.
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Post by activeonlooker on Feb 28, 2011 15:24:34 GMT -5
Real estate taxes on the vacant land are deductible just like the taxes on your home. From the facts provided, it appears the land is investment property, resulting in the interest being deductible as investment interest expense. The deduction is limited to investment income - start with form 4952 to calculate the deductible portion that will go to Schedule A.
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Wisconsin Beth
Distinguished Associate
No, we don't walk away. But when we're holding on to something precious, we run.
Joined: Dec 20, 2010 11:59:36 GMT -5
Posts: 30,626
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Post by Wisconsin Beth on Feb 28, 2011 15:59:37 GMT -5
That's how we currently have it filed and it's translating into us owing the IRS.  |
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mwcpa
Senior Member
Joined: Jan 7, 2011 6:35:43 GMT -5
Posts: 2,425
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Post by mwcpa on Mar 1, 2011 6:37:54 GMT -5
I concur with active, at best, in the limited facts laid out, the interest is "investment" interest.
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Wisconsin Beth
Distinguished Associate
No, we don't walk away. But when we're holding on to something precious, we run.
Joined: Dec 20, 2010 11:59:36 GMT -5
Posts: 30,626
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Post by Wisconsin Beth on Mar 1, 2011 8:53:20 GMT -5
I can give additional information, I just don't know what you'd need/want to know.
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MN-Investor
Well-Known Member
Joined: Dec 20, 2010 22:22:44 GMT -5
Posts: 1,981
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Post by MN-Investor on Mar 1, 2011 10:30:26 GMT -5
If the land is held for investment, then the interest deduction cannot exceed income generated from the land. Since you are just holding the land, there is not income generated from it so there is no interest deduction.
If the land is held by you to build on in the future, no interest deduction is allowed since you did not start building a second home on this plot when you bought it.
Therefore, you get no interest deduction for 2010.
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Wisconsin Beth
Distinguished Associate
No, we don't walk away. But when we're holding on to something precious, we run.
Joined: Dec 20, 2010 11:59:36 GMT -5
Posts: 30,626
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Post by Wisconsin Beth on Mar 1, 2011 12:13:30 GMT -5
Ok, thank you everyone. We appreciate the help.
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