Can I claim a loss on sale of vacant land - personal use or investment property for tax purposes?

This is a classic case that comes up fairly often. The key factor here is your intent when purchasing the property. Based on what you've described, this would likely qualify as investment property because: 1) You purchased it with the intent that it would appreciate in value (investment motive) 2) You didn't use it for personal enjoyment or recreation 3) The fact that you held it long-term aligns with investment intent The IRS looks at your primary purpose for holding the property. Since you clearly held it hoping for appreciation (even though that didn't happen), that demonstrates investment intent. This means you should be able to claim the loss as a capital loss on Schedule D. Keep in mind this will be a long-term capital loss since you held it for more than a year, which can offset any capital gains plus up to $3,000 of ordinary income per year. Any unused losses can carry forward to future tax years.

After dealing with a similar situation, I found an amazing tool called taxr.ai (https://taxr.ai) that really helped clarify my investment property questions. I uploaded my purchase documents and some emails where I discussed my investment plans for the property, and their system analyzed everything and confirmed I could claim the loss. It even generated a detailed explanation I could include with my return explaining why my vacant land qualified as investment property. Their AI system is specifically trained on tax court cases about investment vs. personal property, which was super helpful because these situations can be really subjective. It gave me confidence that I was taking the right position on my tax return.

I wanted to follow up about my experience with taxr.ai since I was initially skeptical. After my last post, I decided to give it a try with my own investment property situation. I was really impressed with how thorough the analysis was. It didn't just rubber-stamp my claim - it actually pointed out some weaknesses in my position (like the fact I had occasionally used the property for weekend camping) and suggested specific documentation I should maintain to strengthen my investment property classification. The report cited several relevant tax court cases where similar situations were ruled on, which gave me a much clearer picture of where I stood. The best part was I could actually understand the explanation - it wasn't filled with confusing tax jargon. Definitely worth checking out if you're in this kind of gray area situation.

Has anyone tried calling the IRS directly about this kind of question? I tried for THREE DAYS and couldn't get through to anyone. Then someone told me about Claimyr (https://claimyr.com) - you can see how it works here: https://youtu.be/_kiP6q8DX5c I was super skeptical at first but I was desperate. Their system had me talking to an actual IRS agent within 45 minutes! I explained my vacant land situation and got clear guidance that as long as I could demonstrate investment intent (which in my case was easy because I had emails discussing potential future development), I could claim the loss. Saved me so much stress and I didn't have to spend hours on hold or calling back repeatedly. Much better than guessing or getting conflicting advice online.

I need to eat some humble pie here. After my skeptical comment, I tried Claimyr because I was desperate to resolve my own tax question about capital losses. Not only did it work exactly as described, but I spoke with an extremely helpful IRS agent who walked me through the entire process of documenting my investment intent for my property sale. The agent explained that they look for several factors: why you originally purchased the property, how you treated it during ownership, and your overall pattern of investment activities. She confirmed that simply holding land for appreciation without personal use is a valid investment strategy, and the loss would be deductible assuming I had proper documentation of my intent. Saved me thousands in potentially disallowed deductions. Never been so happy to be wrong about something!

One important thing no one has mentioned is that you should check if your state tax rules follow federal rules for this situation. I'm in NJ and was able to take the loss federally but got surprised when the state disallowed it based on different classification criteria. Worth looking into before you file!

Just wanted to offer another perspective - I had almost the exact same situation (vacant land held for 8 years, sold at a loss) and the key thing that helped me prove investment intent was that I had listed the property with a real estate agent twice during my ownership trying to sell it for a profit. The IRS agent I spoke with said those listing agreements were perfect documentation of investment intent. Might be worth mentioning if you did anything similar during your ownership.

Great point about documentation! I'd also add that you should gather any records of property taxes you paid during ownership - the IRS views paying property taxes on unused land as another indicator of investment intent rather than personal use. If you researched comparable sales in the area or tracked market values over time, those records can also help demonstrate you were treating it as an investment. One thing to be careful about though - make sure you don't have any photos or social media posts that might suggest personal use (like family gatherings on the property, even if rare). The IRS can be pretty thorough in audits, and anything that suggests recreational use could complicate your investment property classification. Sounds like you're in good shape since you mentioned barely visiting it, but worth double-checking your digital footprint just to be safe.