Sale of Land

[Anthagop]

What is the name of your state? Massachusetts

I am a Massachusetts resident and sold land in Florida. The land was held since 1981. Outside of the local taxes I did not spend anything on the land. Am I able to add the local taxes property taxes I paid to my cost basis?

 

[davew9128]

No.

 

[Taxing Matters]

What is the name of your state? Massachusetts

I am a Massachusetts resident and sold land in Florida. The land was held since 1981. Outside of the local taxes I did not spend anything on the land. Am I able to add the local taxes property taxes I paid to my cost basis?

No. Real property tax paid is not an addition to basis for federal income tax. It is instead an itemized deduction you can take for the year in which those taxes are paid.

 

[STEPHAN]

Did you not deduct them every year?

 

[davew9128]

I mean theoretically an election COULD have been made to capitalize carrying costs like RE tax, but one wouldn't be on here asking about it if they had the annual election and done so.

 

[Anthagop]

It was getting itemized for a number of years but once my income was less I was just using standard deduction. On a federal basis I am still not owing anything this year from the cap gain based on my income. My concern is I am owing for Massachusetts state tax and was trying to see if I could use as as part of the cost basis.

 

[PayrollHRGuy]

My concern is I am owing for Massachusetts state tax and was trying to see if I could use as as part of the cost basis.

Do you mean, use tax that you have paid as part of the cost basis?

We have a tax lawyer around this will send him a message. @Taxing Matters

 

[Anthagop]

No property taxes that were paid on the land.

 

[davew9128]

It was getting itemized for a number of years but once my income was less I was just using standard deduction. On a federal basis I am still not owing anything this year from the cap gain based on my income. My concern is I am owing for Massachusetts state tax and was trying to see if I could use as as part of the cost basis.

The answer remains no.

 

[Taxing Matters]

My concern is I am owing for Massachusetts state tax and was trying to see if I could use as as part of the cost basis.

Your question is not clear to me. Are you asking about cost basis for MA income tax or federal tax? If your question is whether you can use the real estate taxes paid to increase your basis for federal income tax, the answer is no. But in that case I'm not sure why the fact that you owe MA tax would matter, so maybe I'm missing something here.

 

[LdiJ]

Your question is not clear to me. Are you asking about cost basis for MA income tax or federal tax? If your question is whether you can use the real estate taxes paid to increase your basis for federal income tax, the answer is no. But in that case I'm not sure why the fact that you owe MA tax would matter, so maybe I'm missing something here.

I think that the OP is saying that on a federal level they are at a zero capital gains rate due to being lower income, but at a state level they do owe tax (which could definitely happen in my state as well so I get that) and they were hoping to find some way to reduce the amount of state tax owed, by being able to increase basis.

I am not familiar with MA state tax law, but I suspect that it is similar to the others I am familiar with, and that they can't add the property taxes to basis in MA either. However, a local tax pro could likely answer that question for sure one way or another.

 

[davew9128]

Your question is not clear to me. Are you asking about cost basis for MA income tax or federal tax? If your question is whether you can use the real estate taxes paid to increase your basis for federal income tax, the answer is no. But in that case I'm not sure why the fact that you owe MA tax would matter, so maybe I'm missing something here.

My guess is that on their Federal return, the tax rate comes out to zero. MA has a flat tax rate of 5% on all taxable income (except ST gains), so any taxable gain ends up with a state tax.

That being said, OP seriously, its FIVE FREAKING PER CENT. Move out to California where the tax might be double that.