Property tax on Land held for investment under TCJA

[Happy Camper]

Taxpayer has a few parcels of land being held for investment. No income is generated on the properties and TP would not be considered a developer. How should the property taxes & interest be deducted on the tax return? Before TCJA, you could deduct the property taxes on Sch A-now it appears to be limited by SALT. (I read an article on Nolo.com that says investment property is not subject to SALT but my software disagrees & I could find no other support for that contention). It doesn't seem like it should go on Sch E as there is no income and Sch C appears to be reserved for Dealers/developers.

Is the only choice, deducting the property tax as investment expense-limited to the amount of investment income? What about mortgage interest? Sch A or investment expense?

Appreciate the input of anyone who has encountered this since the new tax law came into effect!

[Maude Lebowski]

It's not ideal and only works for unimproved land, but see "Election to Capitalize Interest & Taxes" on Page 4-14 of The Tax Book.

[Kram BergGold]

taxes either deduct on A or capitalize
interest investment interest on A or capitalize.

[sandigi]

Here are a couple examples of the wording I use on the election. You have to attach it every year to the tax return.

Example 1: Form 1040 1 property

SECTION 266 ELECTION

FOR TAX YEAR 2018,, TAXPAYER HEREBY ELECTS UNDER CODE SECTION 266 AND IRS REGULATIONS 1.266-1
TO CAPITALIZE, RATHER THAN DEDUCT, PROPERTY TAXES ON THE WILDWOOD LANE VACANT LAND

LEE COUNTY, FLORIDA
2017 PD 01/22/18 $1192.91
2018 PD 12/26/18 $1263.95




Example 2: Form 1065: 2 properties

Election to Capitalize Taxes and Carrying Charges
Pursuant to IRC Section 266, the Partnership hereby elects to
capitalize the following taxes and carrying charges incurred for the
tax year ended 12-31-2018.

Description of Expenditure: LAND WILDWOOD LANE 0040 PROP TAX
Amount: 591
Date Paid or Incurred: 11-23-2018

Description of Expenditure: LAND WILDWOOD LANE 004B PROP TAX
Amount: 589
Date Paid or Incurred: 11-23-2018



My client has no mortgage so you would just have to change the wording and include interest.