How to File the Sale of Vacant Land With the IRS

Empty land is for sale.
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Real estate is what the IRS calls a capital asset. If you sell a vacant lot you bought as an investment, you report the result of the sale as a capital gain or loss, rather than regular income. If you bought the land for personal use, you report any gains from the sale but not any losses. You fill out Form 8949 for each capital sale and then report the results on Schedule D. Send the forms in when you submit your 1040.

Short or Long

If you own the property for a year or less, you report the result of the sale as a short-term gain or loss. Above a year, it's long-term. That's significant, because long-term tax rates are better. Usually you calculate your gain or loss by subtracting the cost of the property from the sales price. If you have a loss, you subtract it against your capital gains.

Deducting Losses

If your deductible losses for the year are more than your gains, you can subtract up to $3,000, at the time of publication, against your ordinary income. You do this on the front of your 1040, which is also where you report a net capital gain. If your net capital loss is greater than $3,000, you have to carry the excess over to subsequent years and deduct it from gains and income then. You list the carryover amount on Schedule D.

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