Vacant land is still subject to property tax.
Property Tax Assessments
Your county's assessor office will calculate a value for your vacant land investment just like it would for any other piece of property in the county and you will pay taxes based on that value. Since it is vacant land, it should have a significantly lower assessed value than a comparable lot that is improved, meaning that you will at least pay lower taxes. Bear in mind that if the property is in California, the protections in Proposition 13 apply. Your assessed value cannot go up more than 2 percent per year and the base state property taxes is fixed at 1 percent.
Paying Property Taxes
Regardless of whether you are earning from your property, you must still pay your property taxes. In California, if you do not pay your taxes, you will
be subject to penalties and, after a five-year period, will likely lose your property in a tax auction. One excellent way to remember when your California taxes are due is "No Darn Foolin' Around," since N, D, F, and A represent the months in which payments are due. The first installment is due on Nov. 1, but doesn't become delinquent until Dec. 11. The second installment is due on Feb. 1 and becomes delinquent on April 11.
Tax Treatment of Property Taxes
When you own land for investment purposes, you report your income and expenses to the IRS on Schedule E. While you have no income on your vacant land, the IRS lets you tabulate all of your operating expenses, including your property tax. You can then use those expenses to offset your profit on other pieces of investment property.
Tax Treatment of Passive Activity Losses