03-09-2009, 05:36 AM
I should have mentioned the investment property angle. If it is to be an investment and not part of your primary residence, that's the better way to go.
There is an IRS provision that if you have an adjacent parcel that you use as part of your primary residence, built on or not, that if you sell both you can use your homeowner's exclusion to avoid capital gains. The second parcel has to sell within two years of the home.
If you claim it as an investment property then you wouldn't be able to do that, and would pay tax on any capital gains. That's why we chose not to claim anything but property taxes on ours. That and we got our maximum refund the year we bought it because of the points and interest on the house purchase.
If you don't think you will sell or if you plan to have a rental or something on it, it sounds like treating it as investment property is the way to go.
Disclaimer - John Rabi is the one who knows about the investment deductions. I've never claimed them and it's been three years since I read the rules on them.
There is an IRS provision that if you have an adjacent parcel that you use as part of your primary residence, built on or not, that if you sell both you can use your homeowner's exclusion to avoid capital gains. The second parcel has to sell within two years of the home.
If you claim it as an investment property then you wouldn't be able to do that, and would pay tax on any capital gains. That's why we chose not to claim anything but property taxes on ours. That and we got our maximum refund the year we bought it because of the points and interest on the house purchase.
If you don't think you will sell or if you plan to have a rental or something on it, it sounds like treating it as investment property is the way to go.
Disclaimer - John Rabi is the one who knows about the investment deductions. I've never claimed them and it's been three years since I read the rules on them.