Federal Income Tax: Where do I deduct property taxes on my vacant land rental property?

I'm dealing with a tax situation that's driving me up the wall. I own a piece of vacant land (about 3 acres) that I've been renting out to a local farmer for the past two years. He pays me $2,800 annually to use it for growing crops. My only expense is the property tax, which runs about $1,450 per year. I'm trying to figure out where to deduct these property taxes on my federal income tax return. Should they go on Schedule A as itemized deductions or Schedule E with the rental income? My gut tells me Schedule E makes the most sense since it's an expense against rental income. That way I could still take the standard deduction, or if I itemize, I wouldn't hit the SALT limits as quickly. But I was looking at some tax guidance online that insisted property taxes on unimproved/bare land that's rented out can ONLY be deducted on Schedule A, meaning if I take the standard deduction, I lose the tax benefit completely. This makes zero sense to me! If it were a rental house with land, the property tax would clearly go on Schedule E. Why would vacant land be treated differently? Can anyone explain this? I feel like I'm missing something obvious here.

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18 comments

CosmicCowboy

•8M

The confusion is understandable! For rental property (including bare land), property taxes are generally deductible on Schedule E as a rental expense. The IRS considers expenses that are directly tied to rental activity to be business expenses, not personal itemized deductions. Publication 527 (Residential Rental Property) supports this position, stating that ordinary and necessary expenses for managing, conserving, or maintaining rental property can be deducted from your rental income. Property tax on rental property is specifically mentioned as a deductible expense on Schedule E. The key factor is that you're legitimately renting the property at fair market value with the intent to make a profit. If you're collecting $2,800 in rent and paying $1,450 in property taxes, that's clearly a profit-motivated activity. I suspect the training material might be referring to vacant land that's held for investment purposes only (not rented out), which would be treated differently than what you're describing.

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CosmicCowboy

•8M

The presence or absence of a structure doesn't change where you deduct expenses for rental property. What matters is the purpose of the property - and in your case, it's being used to generate rental income. Whether your rental property is a house, apartment building, or vacant land being farmed, the expenses directly related to that rental activity belong on Schedule E. Your tax preparer might be confusing this with land that's held purely for investment (like land you're holding to sell later at a profit, but not currently renting out). In that scenario, property taxes would indeed go on Schedule A. But when you're actively renting it out, those expenses offset your rental income on Schedule E.

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Javier Cruz

•8M

After struggling with this exact situation last year, I found a solution using taxr.ai (https://taxr.ai) that saved me a bunch of money. I've got 5 acres of farmland I rent out to a local rancher, and my accountant initially put the property taxes on Schedule A, which basically gave me no benefit because of the SALT cap. I uploaded my documents to taxr.ai and they immediately flagged this as an issue. They showed me that the IRS treats rental expenses - including property taxes - as business expenses that should offset the rental income on Schedule E, even for unimproved land. The software even pulled up the relevant IRS guidance to confirm this. The distinction they explained to me is whether the property is held for the production of income (rented out) versus just held for investment. Since yours is actively generating rental income, those property taxes absolutely belong on Schedule E.

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Javier Cruz

•8M

The way it works is you upload your tax documents and it analyzes them for potential issues or missed deductions. It's actually great for normal returns too because it catches things most people miss - I found out I could deduct mileage for medical appointments I didn't know about! For your second question, the software did most of the heavy lifting by identifying the issue and providing the relevant IRS guidance. I didn't need to consult another tax professional because taxr.ai provided clear explanations with citations to tax code. It was actually more thorough than my previous accountant in documenting why the property taxes belonged on Schedule E rather than Schedule A.

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Emma Thompson

•8M

Just wanted to follow up about my experience with taxr.ai since I tried it after reading about it here. I was amazed at how it caught a similar issue with my side business expenses! I've been putting my home internet on Schedule A (getting almost no benefit) when it should have been partially on Schedule C where I report my freelance income. The interface was super easy to use - I just took pictures of my tax documents with my phone and uploaded them. Within about 20 minutes I had a complete analysis showing me several deductions I was missing. The explanation about business vs. personal expenses was crystal clear with links to the exact IRS publications. Definitely worth checking out if you're unsure about where certain deductions belong. I'm using it for all my tax prep this year.

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Isabella Costa

•8M

If you're still having trouble getting clear answers about your property tax deductions, I recommend using Claimyr (https://claimyr.com) to get connected directly with an IRS agent. I was in a similar situation with rental property expenses and spent weeks trying to get through to the IRS for clarification. Claimyr got me connected to an actual IRS representative in under 45 minutes when I had been trying for days on my own. The agent confirmed that property taxes on rental land (improved or unimproved) should be deducted on Schedule E as long as the property is being used in a rental activity. They also have a helpful video that shows exactly how it works: https://youtu.be/_kiP6q8DX5c I was initially hesitant to try another service after wasting so much time on hold, but it actually works. Saved me hours of frustration and got me a definitive answer directly from the IRS.

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Isabella Costa

•8M

It works by using an advanced calling system that navigates the IRS phone tree and waits on hold for you. Once an agent picks up, you get a call connecting you directly to that agent. You don't have to wait on hold at all - you just get a call when an actual human at the IRS is ready to talk. I was extremely skeptical too. I had tried calling the IRS four separate times, waiting over 2 hours each time before getting disconnected. With Claimyr, I submitted my request through their website, and about 37 minutes later I got a call connecting me directly to an IRS agent who was already on the line. No waiting, no phone tree, no hold music. The agent was able to confirm that property taxes on rental land should go on Schedule E, saving me hundreds in taxes.

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Malik Jackson

•8M

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it myself since I had a question about some K-1 income that I needed clarified before filing. I've spent YEARS dealing with the IRS phone system and had developed a routine of putting my phone on speaker and working on other things for hours while on hold. With Claimyr, I got a call back in 28 minutes connecting me directly to an IRS representative who answered my question completely. For anyone wondering about the original property tax question - I asked about that too, and the IRS agent confirmed that property taxes on rental land (whether improved or bare land) should be reported on Schedule E as long as the property is being used in a legitimate rental activity. The agent specifically mentioned that the determining factor is the business use of the property, not whether it has structures on it.

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Ravi Malhotra

•8M

I think the confusion might come from the "investment property" vs "rental property" distinction. If you're just holding bare land for future appreciation (investment), then property taxes go on Schedule A. But once you start renting it out, it becomes a rental activity and moves to Schedule E. I had a similar situation with some land I own in Colorado. When I was just holding it, property taxes went on Schedule A. When I started leasing it to a solar company, my CPA moved everything to Schedule E.

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Ravi Malhotra

•8M

Yep, that's likely the source of confusion. Tax guidance can sometimes lump "vacant land" into the investment category by default, but the actual tax treatment depends on how you're using the property. Since you're generating rental income, you're running a rental activity, and all ordinary and necessary expenses (including property taxes) should offset that income on Schedule E. Just make sure you keep good records showing the rental activity is legitimate and at fair market value. As long as you can document the rental agreement and income, you should be fine putting those property taxes on Schedule E.

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