Got a 1098 for my vacant land with a mortgage. Can I deduct this interest on taxes?

Thanks for explaining! So if I'm understanding right, I probably can't deduct much since the land doesn't generate income? What if I have other investment income like from stocks - can I deduct the mortgage interest against that?

Yes, that's exactly right. If the vacant land doesn't generate income, your ability to deduct the interest is limited. The good news is that yes, other investment income like dividends, interest, capital gains, and even passive income from other rental properties can count toward your "net investment income" for this purpose. The IRS treats this under the "investment interest expense" rules, where your deduction is limited to your net investment income for the year. Any excess interest expense can be carried forward to future tax years, so you don't lose it completely if you can't use it this year.

I've never heard of that service. Does it handle complicated situations? Like what if you have both investment and personal properties with multiple mortgages?

Sounds interesting but I'm skeptical. How is this different from regular tax software? I use TurboTax and it asks about investment properties too.

It definitely handles complex situations. I have both rental properties and this vacant land, and it walked me through each property separately. The system is specifically designed to handle unusual tax scenarios that regular tax software might oversimplify. The biggest difference from regular tax software is it actually explains the underlying tax rules as you go, not just asking yes/no questions. With my vacant land, it showed me exactly which part of the tax code applied and explained why my investment income mattered for calculating the deduction. It's more like having a tax professional explain things than just filling out forms.

Wait, how does this actually work? I thought it was impossible to get the IRS on the phone without waiting for hours. Are they just constantly calling until they get through?

Sorry but this sounds like BS. Nobody gets through to the IRS that fast. I've tried countless times and always get disconnected after holding forever. What's the catch with this service?

It's actually quite simple - they use an automated system that navigates the IRS phone tree and holds your place in line. When an agent picks up, the system calls your phone and connects you directly to the agent. No need to sit on hold yourself! The catch is that there isn't really one. They just solved a frustrating problem with technology. The IRS phone systems are designed to handle a limited number of callers, so they often just disconnect people when the queues get too long. Claimyr's system is persistent enough to stay in line until an agent is available, which is why it works when trying on your own often doesn't.

Are property taxes always deductible for investment property? I thought there were limits on SALT deductions now?

The SALT (State And Local Tax) deduction limit of $10,000 only applies to personal deductions on Schedule A. When you have an investment property, the property taxes are considered a business expense and go on Schedule E, which isn't subject to the SALT limitation. This is actually one of the advantages of investment property - those property taxes are fully deductible against your investment income, not limited like they would be for your personal residence.

Yes! Make sure you get a professional appraisal right when you make the conversion. I didn't do this and it was a NIGHTMARE trying to establish the value years later when I sold. The IRS questioned everything because I didn't have good documentation from the time of conversion.

Thanks for the tip! I'll definitely get an appraisal done. That makes a lot of sense - I wouldn't have thought about documenting the value at the exact time of conversion.

That's a really good point I hadn't considered. I do have some documentation from when I purchased it about the development planned in the surrounding area and how property values were projected to increase. Would this kind of thing help establish investment intent?

Absolutely! Documentation about projected development in the area, property value trends, and perhaps any inquiries you've made about potential uses (even if you didn't act on them) all help establish investment intent. I'd also recommend keeping a simple file with periodic notes about your investment strategy for the property - like if you considered renting it for agricultural use, looked into potential development opportunities, or researched how similar properties in the area have appreciated. These contemporaneous records carry a lot of weight if questions ever arise.

This is really helpful information about holding period and intent! I'm curious about the timing aspect - if I start getting serious about building (like getting quotes from contractors or researching permits) but haven't actually filed anything yet, does that trigger the conversion? Or is it only when I take official action like actually applying for permits? I want to make sure I'm handling the transition properly from a tax perspective, especially since I've been taking the investment interest deductions. Don't want to mess up the timing and create issues with the IRS later.

Great question! The IRS generally looks at when you take "definitive steps" toward personal use rather than just preliminary research. Getting quotes and researching permits is usually considered due diligence and doesn't automatically trigger conversion. The conversion typically occurs when you take concrete, committed actions like actually filing permit applications, signing construction contracts, or beginning site preparation work specifically for your personal residence. Even then, some tax professionals argue the conversion happens when you actually start using it as your personal residence rather than when construction begins. The key is being consistent in your treatment and having clear documentation of when your intent definitively changed from investment to personal use. I'd recommend consulting with a tax professional as you get closer to that transition point, since the timing can significantly impact your tax situation - especially regarding any depreciation recapture if you've been claiming depreciation on the land improvements.

This is excellent advice about keeping an investment journal! I wish I had started doing this from the beginning. The survey tip is particularly smart - I never would have thought about timing that expense to get the investment deduction rather than treating it as a personal cost later. Do you have any other examples of expenses that are better to incur while the property is still classified as investment? I'm thinking things like soil tests, environmental assessments, or utility feasibility studies might fall into this category too. It seems like there could be several items that serve both investment analysis purposes and future personal use planning.