The Internal Revenue Service lets you subtract all your expenses from the gross income you earn on your investment property to find your taxable profit or your loss. With investment land, it’s very common to experience a loss, since you have incur expenses in carrying it but you may not be earning any income. There are three potential ways that you can claim that loss to reduce your taxes either now or in the future.
Investment or Farm
Before determining how to use your loss, it’s important to determine whether your investment land is land or farmland. If you don’t use it for farming or if you rent it to a farmer at a flat rate that is not tied to its production, it’s considered investment property. It’s also investment property if you rent it to a farmer on a crop or livestock sharing arrangement where your payments vary based on production but you don’t get involved in any of the work or decisions in actually farming the land.