Tax implications of owning empty land in a different state - do I need to file nonresident return?

Thanks for your response! I've also been told by a friend that some states have different rules specifically for property owners. They mentioned something about "minimum tax" requirements in certain states even if there's no income. Is this accurate or just another tax myth? Also, would the property tax I paid be deductible on my federal return?

Your friend is partially correct - a small number of states do have unusual provisions for property owners, but these are exceptions rather than the rule. Most states follow the standard practice of only requiring nonresident returns when there's income generated. Property taxes you paid may be deductible on your federal return, but only if you itemize deductions using Schedule A rather than taking the standard deduction. With the increased standard deduction under current tax law, many taxpayers find itemizing isn't beneficial unless they have significant deductible expenses. You'll need to run the numbers both ways to see which gives you the larger deduction.

How accurate is this service? I'm skeptical of AI tax tools since the tax code is so complicated. Did you have a human review anything or was it all automated? I'm in a similar situation but with property in Montana.

Does this service help with determining if there are any special tax situations for specific states? I own land in three different states and each one seems to have different rules about what constitutes "doing business" there.

The accuracy was impressive - everything it told me matched what a CPA later confirmed. It uses AI for the initial analysis, but there's clearly expert knowledge built into the system since it cited specific state regulations and court precedents relevant to my situation. Yes, it actually specializes in multi-state tax situations. It can analyze the specific rules for each state where you own property and explain the different thresholds for what constitutes "doing business" or having a tax presence. It gave me state-specific guidance for all the documentation I should maintain for each property.

How exactly does this work? Do they just call and wait on hold for you? Seems too good to be true since I've spent literal hours trying to get through to my state tax office.

This sounds like a scam. Why would I pay someone else to make a phone call I could make myself? And how would they even get through any faster than I could? The state tax departments are understaffed no matter who calls them.

They use a system that dials continuously and navigates through all the phone menus automatically. Once they get a human on the line, they call you and connect you directly to that person. No more waiting on hold or getting disconnected after 45 minutes. I was definitely skeptical too initially. The difference is they have technology that continuously redials and stays on hold indefinitely, which most of us can't do with our personal phones. Their system is basically designed to outlast the hold times that frustrate normal callers. I was connected to someone at the Tennessee tax department after they'd apparently been trying for about 2 hours - time I didn't have to waste myself.

How does the state know whether you're holding it as an investment vs just owning it? Are there different forms we need to file initially that indicate intention? I bought land in Wyoming last year but haven't really decided what to do with it yet.

There's no form where you declare your intentions upfront, but how you treat the property on your federal tax return can create a paper trail. If you're deducting expenses related to the property as investment expenses on Schedule A, that's essentially declaring it's an investment property. The state typically won't know your intentions unless you're audited or until you sell the property. That said, it's important to be consistent in how you treat the property for tax purposes. If you're claiming investment-related deductions, you should be ready to substantiate that it was indeed held as an investment.

When you sell land in another state, you'll typically need to file a nonresident return in that state to report the gain from the sale. Florida actually has no state income tax, so you're lucky there! You'll report the sale on your Ohio return as well, but should get a credit for any taxes paid to the other state (though in this case, there won't be any Florida tax). Remember that if you've owned the land for more than a year, it's a long-term capital gain which is taxed at lower rates federally. Also, if you've been deducting property taxes or other expenses, those affect your cost basis.

You may still need to file a Florida information return even though there's no tax - check with Florida's Department of Revenue. Some states require documentation of the transaction even if no tax is due. For federal taxes, you'll report the capital gain on Schedule D and Form 8949. If the land was a personal asset (not investment property), you can't deduct a loss if you sell for less than you paid. But if it's investment property, you can deduct losses. Also remember that selling costs like legal fees, transfer taxes, and realtor commissions can be subtracted from your sale proceeds, potentially reducing your taxable gain.

Thanks for the detailed explanation! I'll check on the Florida information return requirement. The land was definitely an investment so good to know about the loss deduction option (though I'm expecting a modest gain). I hadn't considered adding the selling costs to reduce the gain - that's really helpful!