Capitalizing Property Taxes when Land is adjacent to Principal Residence

Brenda, thanks for joining the community! Just curious, is your taxpayer hitting the ceiling on the $10K of schedule A taxes and that is why you want to capitalize the taxes?  I think generally, yes, you may elect to capitalize the taxes on the lot, but the first step is always to determine the nature of the property (ie: residence, investment, farm, rental, business, etc).

1. This sounds like investment property, where property taxes would be deductible on Schedule A as real estate taxes up to $10K, or capitalized.  Carrying charges include taxes you pay to carry or develop real estate. You can choose to capitalize carrying charges if they are otherwise deductible.
2. If the residence is a second home, the property taxes would be deductible on Schedule A as real estate taxes up to $10K, or capitalized. OR, if taxpayer collects rent from Mom-in-law, the property would be Rental, and the property taxes would be deductible on Schedule E, or capitalized.

For more, see Carrying Charges on page 24, Pub 535:  https://www.irs.gov/pub/irs-pdf/p535.pdf

Thank you for choosing PTO!